Mail Stop 3-8
April 13, 2005
By Facsimile and U.S. Mail
Mr. Bruce S. MacDonald
Chief Financial Officer
Vermont Pure Holdings, LTD
P.O. Box 536
45 Krupp Drive
Williston, Vermont 05495
RE: Form 10-K, for the year ended October 31, 2004
Filed January 31, 2005
Form 10-Q, for the period ended January 31, 2005
Filed March 17, 2005
File No. 0-31797
Dear Mr. MacDonald:
We have reviewed your filings 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. Where indicated, we think you should revise your
future
filings in response to these comments. If you disagree, we will
consider your explanation as to why our comment is inapplicable or
a
revision is unnecessary. Please be as detailed as necessary in
your
explanation. In some of our comments, we may 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
filings.
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-K FOR THE YEAR ENDED OCTOBER 31, 2004
General
1. Where a comment below requests additional disclosures or other
revisions to be made, these revisions should be included in your
future periodic filings, as applicable.
Item 7. Management`s Discussion and Analysis of Financial
Condition
and Results of Operations
Liquidity and Capital Resources, page 21
2. Please disclose the significant financial covenants under your
loan agreements here and in the footnotes to your financial
statements. Refer to paragraphs 18-19 of SFAS 5.
Critical Accounting Policies, page 24
3. Please consider revising this section to discuss the judgments
and
assumptions involved in your calculation of stock based
compensation
expense under SFAS 123 and to discuss the sensitivity of the
calculated compensation expense to changes in your assumptions.
We
also believe that the significant fluctuations in your volatility
assumption year over year should be discussed herein. We note
that
such discussion will become even more important upon adoption of
SFAS
123R.
Item 9A. Controls and Procedures, page 26
4. Please disclose in future filings the information required by
Item
308(c) of Regulation S-K with respect to changes in your internal
controls over financial reporting. Please also confirm to us
supplementally that there were no changes in your internal control
over financial reporting that have materially affected or are
reasonably likely to materially affect your internal control over
financial reporting that occurred during the last fiscal quarter
covered by the annual report.
Notes to Consolidated Financial Statements
General
5. Please disclose, in more detail, the types of expenses that you
include in the cost of goods sold line item and the types of
expenses
that you include in the selling, general and administrative
expenses
line item. Specifically address whether you include inbound
freight
charges, purchasing and receiving costs, inspection costs,
warehousing costs, internal transfer costs, and the other costs of
your distribution network in the cost of goods sold line item. If
you currently exclude a significant portion of these costs from
cost
of goods sold, please provide cautionary disclosure in MD&A that
your
gross margins may not be comparable to others, since some entities
include the costs related to their distribution network in cost of
goods sold and others like you exclude all or a portion of them
from
gross margin, including them instead in a line item such as
selling,
general and administrative expenses. To the extent the excluded
costs are material to your operating results, quantify these
amounts
in MD&A. If you determine that these amounts are immaterial for
disclosure, please supplementally provide us with your qualitative
and quantitative assessment of materiality for all periods
presented.
6. Please provide the applicable disclosures with respect to your
water cooler and coffee brewer leasing arrangements required by
paragraph 23 of SFAS 13, including a general description of your
leasing arrangements. Also, please revise your revenue
recognition
policy to ensure you address revenues related to these equipment
leasing activities. Show us supplementally how the revised
disclosures will read in future filings.
Note 2. Significant Accounting Policies
Note H. Advertising Expenses, page F-10
7. Please tell us in detail how you meet the criteria in paragraph
33
of SOP 93-7 for capitalization of the cost of Yellow Pages
advertising. In your response, please tell us specifically how
you
considered paragraphs 34-38 of SOP 93-7 in concluding that you
meet
the criteria for capitalization of these costs. Also refer to the
Section I.B. of the Division of Corporate Finance`s "Frequently
Requested Accounting and Financial Reporting Interpretations and
Guidance" issued March 31, 2001 (available on our web site at
www.sec.gov) and address how the costs of Yellow Pages
advertising
meet criteria (a), (b), and (d) discussed therein.
Shipping and handling costs, page F-11
8. Please clarify if you include shipping and handling costs
related
to your Home and Office delivery business as a component of
selling,
general and administrative expenses. Additionally, clarify how
amounts billed to customers for shipping and handling are
classified
related to your Home and Office delivery business. See paragraph
5
and 6 of EITF 00-10.
As appropriate, please respond to these comments within 10
business days or tell us when you will provide us with a response.
Please provide us with a response letter that keys your responses
to
our comments and provides any requested supplemental information.
Please file your response letter on EDGAR. Please understand that
we
may have additional comments after reviewing your responses to our
comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing 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 filing;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; 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 filing or in
response to our comments on your filing.
If you have any questions regarding these comments, please
direct them to Anthony Watson, Staff Accountant, at (202) 942-7781
or, in his absence, to Robyn Manuel at (202) 942-7786, or me at
(202)
942-2905.
Sincerely,
George F. Ohsiek, Jr.
Branch Chief
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April 13, 2005
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