SEC Comment Letter for GATEWAY DISTRIBUTORS LTD (CIK 0001062760) — May 19, 2005
GATEWAY DISTRIBUTORS LTD (CIK 0001062760)
Date: May 19, 2005 · CIK: 0001062760 · Accession: 0000000000-05-024684
AI Filing Summary & Sentiment
File numbers found in text: 000-27879
Letter
Mail Stop 4561 VIA U.S. MAIL AND FAX (702) 312-3590 Mr. Richard A. Bailey Chief Executive Officer and Chief Financial Officer Gateway Distributors, Ltd. 3220 Pepper Lane, Suite 14 Las Vegas, NV 89120
Re: Gateway Distributors, Ltd. Form 10-KSB for the year ended December 31, 2004 File No. 000-27879
Dear Mr. Bailey:
We have reviewed your filing and have the following comments. We have limited our review to only your financial statements and related disclosures and will make no further review of your documents. As such, all persons who are responsible for the adequacy and accuracy of the disclosure are urged to be certain that they have included all information required pursuant to the Securities Exchange Act of 1934. In our comments, we ask you to provide us with supplemental information so we may better understand your disclosure. After reviewing this information, we may or may not raise additional comments.
Please understand that the purpose of our review process is to assist you in your compliance with the applicable disclosure requirements and to enhance the overall disclosure in your filing. We look forward to working with you in these respects. We welcome any questions you may have about our comments or on any other aspect of our review. Feel free to call us at the telephone numbers listed at the end of this letter.
Form 10-KSB for the year ended December 31, 2004
Financial Statements and Notes
Balance Sheet, page F-2
1. Please explain to us in sufficient detail, the nature of your goodwill, trademarks and formulas and how you account for these assets subsequent to their acquisition in accordance with SFAS 142. Also, tell us which assets are definite-lived and indefinite-lived intangibles.
Note 1, Organization, History and Business Activity, pages F-8 - F-9
2. Please advise us of, and clarify in future filings, how and why you simultaneously sold your interest in and subsequently purchased all of the assets of TRSG Corporation on December 31, 2002.
Note 2, Summary of Significant Accounting Policies, page F-9
3. Please advise us of, and disclose in future filings, your impairment policy and the factors you considered in evaluating your intangible assets, including product development, goodwill and trademark and formulas, for impairment. In a supplemental response, please also include your consideration of the following impairment indicators:
a. Recurring substantial net loss from operations and net loss before income taxes;
b. Recurring negative operating cash flow from operations and your dependency on the issuance of common stock and multiple stock splits in order to meet your cash flow requirements;
c. Increasing accumulated deficit.
Note 7, Purchase of Real Estate and Transportation Equipment, pages F-14 - F-16
4. Please tell us the date you initially acquired as well as the fair value and book value of each of the properties involved in the exchange and how you recorded the exchange in your financial statements. Also, please tell us your basis in accounting for recording the transfer at cost. In this regard, do you consider this to be an exchange of productive assets that are of the same general type, that perform the same function or are employed in the same line of business? Refer to APB 29 and EITF 01-2.
5. Since it appears that your 50% portion, representing the incremental interest you acquired, of the fair value and net equity of properties received exceeds the fair value of properties transferred, tell us what other consideration you gave up to acquire these assets. If no other consideration was given, please further explain to us the circumstances of this transfer and why an unrelated third party would enter into such a transaction.
Note 10(i), Other Stock Issued for Services Provided, pages F-20 - F-
6. We note that you issued 48,010 shares of restricted common stock to certain officers during 2004 and assigned a value of $33,142. Please further explain to us why you could not estimate the fair value of your restricted stock and your basis for the value you did assign. Also, tell us how you considered the guidance in paragraphs 23 and 24 of APB 25 in your accounting treatment. Finally, please clarify the circumstances under which you issued 15,673 of unrestricted stock including to whom they were issued, and the basis for that valuation.
7. We note that you issued 4.2 million shares of preferred stock to certain officers during 2004. Please further explain to us why you could not estimate the fair value of your preferred stock and your basis in GAAP for assigning a value of approximately $0.001 per share. In your response, please include a summary of the terms and rights associated with your preferred stock and explain the nature of the restrictions.
Note 13, Forgiveness of Debt, page F-21
8. In a supplemental response, please explain in sufficient detail the nature of these liabilities and your basis for recognizing this as forgiveness of debt income. Also, tell us how you considered the applicable state escheat laws when making the determination that this is "forgiveness of debt" rather than unclaimed property. Refer to paragraph 16 of SFAS 140.
Note 14, Search for and Development of Products, Product Lines and Joint Ventures, page F-22
9. Please explain in sufficient detail the types of costs you incur for product development. In addition, tell us how you considered the guidance in SFAS 2 in accounting for these costs.
* * * *
We urge all persons who are responsible for the accuracy and adequacy of the disclosure in the filings reviewed by the staff to be certain that they have provided all information investors require for an informed decision. Since the company and its management are in possession of all facts relating to a company`s disclosure, they are responsible for the accuracy and adequacy of the disclosures they have made.
In connection with responding to our comments, please provide, in writing, a statement from the company acknowledging that
* the company is responsible for the adequacy and accuracy of the disclosure in the filings;
* staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filings; and
* the company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.
In addition, please be advised that the Division of Enforcement has access to all information you provide to the staff of the Division of Corporation Finance in our review of your filings or in response to our comments on your filings.
You may contact Josh Forgione, at (202) 551-3431, or me, at (202) 551-3403, if you have questions. Please respond to the comments included in this letter within ten business days or tell us when you will provide us with a response. Please file your response on EDGAR.
Sincerely,
Steven Jacobs
Accounting Branch Chief
Show Raw Text
<DOCUMENT>
<TYPE>LETTER
<SEQUENCE>1
<FILENAME>filename1.txt
<TEXT>
May 10, 2005
Mail Stop 4561
VIA U.S. MAIL AND FAX (702) 312-3590
Mr. Richard A. Bailey
Chief Executive Officer and Chief Financial Officer
Gateway Distributors, Ltd.
3220 Pepper Lane, Suite 14
Las Vegas, NV 89120
Re: Gateway Distributors, Ltd.
Form 10-KSB for the year ended December 31, 2004
File No. 000-27879
Dear Mr. Bailey:
We have reviewed your filing and have the following
comments.
We have limited our review to only your financial statements and
related disclosures and will make no further review of your
documents. As such, all persons who are responsible for the
adequacy
and accuracy of the disclosure are urged to be certain that they
have
included all information required pursuant to the Securities
Exchange
Act of 1934. In our comments, we ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may or may not raise
additional
comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
Form 10-KSB for the year ended December 31, 2004
Financial Statements and Notes
Balance Sheet, page F-2
1. Please explain to us in sufficient detail, the nature of your
goodwill, trademarks and formulas and how you account for these
assets subsequent to their acquisition in accordance with SFAS
142.
Also, tell us which assets are definite-lived and indefinite-lived
intangibles.
Note 1, Organization, History and Business Activity, pages F-8 -
F-9
2. Please advise us of, and clarify in future filings, how and why
you simultaneously sold your interest in and subsequently
purchased
all of the assets of TRSG Corporation on December 31, 2002.
Note 2, Summary of Significant Accounting Policies, page F-9
3. Please advise us of, and disclose in future filings, your
impairment policy and the factors you considered in evaluating
your
intangible assets, including product development, goodwill and
trademark and formulas, for impairment. In a supplemental
response,
please also include your consideration of the following impairment
indicators:
a. Recurring substantial net loss from operations and net loss
before
income taxes;
b. Recurring negative operating cash flow from operations and your
dependency on the issuance of common stock and multiple stock
splits
in order to meet your cash flow requirements;
c. Increasing accumulated deficit.
Note 7, Purchase of Real Estate and Transportation Equipment,
pages
F-14 - F-16
4. Please tell us the date you initially acquired as well as the
fair
value and book value of each of the properties involved in the
exchange and how you recorded the exchange in your financial
statements. Also, please tell us your basis in accounting for
recording the transfer at cost. In this regard, do you consider
this
to be an exchange of productive assets that are of the same
general
type, that perform the same function or are employed in the same
line
of business? Refer to APB 29 and EITF 01-2.
5. Since it appears that your 50% portion, representing the
incremental interest you acquired, of the fair value and net
equity
of properties received exceeds the fair value of properties
transferred, tell us what other consideration you gave up to
acquire
these assets. If no other consideration was given, please further
explain to us the circumstances of this transfer and why an
unrelated
third party would enter into such a transaction.
Note 10(i), Other Stock Issued for Services Provided, pages F-20 -
F-
21
6. We note that you issued 48,010 shares of restricted common
stock
to certain officers during 2004 and assigned a value of $33,142.
Please further explain to us why you could not estimate the fair
value of your restricted stock and your basis for the value you
did
assign. Also, tell us how you considered the guidance in
paragraphs
23 and 24 of APB 25 in your accounting treatment. Finally, please
clarify the circumstances under which you issued 15,673 of
unrestricted stock including to whom they were issued, and the
basis
for that valuation.
7. We note that you issued 4.2 million shares of preferred stock
to
certain officers during 2004. Please further explain to us why
you
could not estimate the fair value of your preferred stock and your
basis in GAAP for assigning a value of approximately $0.001 per
share. In your response, please include a summary of the terms
and
rights associated with your preferred stock and explain the nature
of
the restrictions.
Note 13, Forgiveness of Debt, page F-21
8. In a supplemental response, please explain in sufficient detail
the nature of these liabilities and your basis for recognizing
this
as forgiveness of debt income. Also, tell us how you considered
the
applicable state escheat laws when making the determination that
this
is "forgiveness of debt" rather than unclaimed property. Refer
to
paragraph 16 of SFAS 140.
Note 14, Search for and Development of Products, Product Lines and
Joint Ventures, page F-22
9. Please explain in sufficient detail the types of costs you
incur
for product development. In addition, tell us how you considered
the
guidance in SFAS 2 in accounting for these costs.
* * * *
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that
* the company is responsible for the adequacy and accuracy of the
disclosure in the filings;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filings; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filings or
in
response to our comments on your filings.
You may contact Josh Forgione, at (202) 551-3431, or me, at
(202) 551-3403, if you have questions. Please respond to the
comments
included in this letter within ten business days or tell us when
you
will provide us with a response. Please file your response on
EDGAR.
Sincerely,
Steven Jacobs
Accounting Branch Chief
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Gateway Distributors, Ltd.
May 10, 2005
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