Room 4561
June 1, 2005
Kelly Hankinson
Chief Financial Officer
Thinkpath, Inc.
201 Westcreek Boulevard
Brampton, Ontario Canada L6T 5S6
(905) 460-3040
Re: Thinkpath, Inc.
Form 10-KSB: For the Fiscal Year Ended December 31, 2004
Filed April 15, 2005
Form 10-QSB: For the Quarterly Period Ended March 31,
2005
Filed May 23, 2005
File No. 001-14813
Dear Ms. Hankinson,
We have reviewed your filing and have the following
comments.
Please be as detailed as necessary in your explanation. In some
of
our comments, we may ask you to provide us with information so we
may
better understand your disclosure. After reviewing this
information,
we may 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 Fiscal Year Ended December 31, 2004
Item 6. Management`s Discussion and Analysis or Plan of Operation
Critical Accounting Estimates and Policies - Revenue Recognition
1. We note your disclosure that as services are provided for
engineering services, revenue is recognized upon the completion of
relevant milestones and costs incurred are reflected as Work in
Progress. Tell us why you believe contract milestones are an
appropriate measure of progress on a contract and how you estimate
the costs to complete. In this regard, confirm that the amount of
payments made due to the achievement of a milestone represents a
proper measure of progress. Indicate how you verify that the
completion of milestones correlates to the percentage of
completion.
Refer to the two methods outlined in paragraph 79 of SOP 81-1 and
indicate whether you use either of these methods to compute income
earned for a period under the percentage-of completion method.
2. Tell us how you apply paragraph 85 of SOP 81-1 that requires a
provision for anticipated losses on contracts to be recorded in
the
period in which the loss becomes evident. In this regard,
describe
your policy for recording anticipated contract losses and indicate
what income statement caption these losses are recorded to.
Item 7. Financial Statements
Note 6. Investment in Non-Related Companies, pg. F-12
3. We note that at December 31, 2004 you wrote off your remaining
investment of $45,668 in Digital Cement. Tell us how you
accounted
for the previous adjustments to fair value of $161,450 and
$300,747,
recorded in other comprehensive income, at the date the shares
were
transferred back to Digital Cement. See paragraph 14 of SFAS No.
115. Indicate why these losses were not realized upon transfer.
In
addition, provide us with a reconciliation of the types of
accounts
included in "accumulated other comprehensive loss" as of December
31,
2004.
Note 7. Goodwill, pg. F-13
4. We note that you completed the SFAS No. 142 impairment test and
concluded that there was no impairment of recorded goodwill
because
the fair value of your reporting units exceeded the carrying
amount
of goodwill. Tell us how you determined the fair value of your
reporting units. Provide us with the impairment test outlined in
paragraphs 19 and 20 of SFAS No. 142. In this regard, we note
that
your market capitalization of the Company`s common stock was
significantly less than your net assets. Reconcile the aggregate
fair value of each reporting unit to your market capitalization
and
substantiate any variances.
5. Tell us how you assigned goodwill to your reporting units and
why
no value was assigned to the IT Documentation segment disclosed in
the segment information on page F-22. See paragraph 30 of SFAS
No.
142.
Note 10. Convertible Debentures, pg. F-14
6. For the convertible debentures issued in 2003 and 2004 you
disclose that the value assigned to the beneficial conversion
features were charged to paid-in-capital and as interest expense
when
issued. Tell us how your accounting complies with Issue 6 of EITF
00-27 which requires beneficial conversion features to be accreted
to
interest expense from the date of issuance to the stated
redemption
date, regardless of when the earliest conversion date occurs.
7. Tell us how you considered paragraph 6 of EITF 98-5 when
calculating beneficial conversion features that limits the value
of
this feature to the amount of proceeds allocated to the
convertible
instrument. It appears that you assigned values to beneficial
conversion features issued in 2003 and 2004 greater than the value
assigned to convertible instrument. Provide an analysis of each
issuance of convertible debentures during 2004 and indicate how
you
allocated the proceeds between the debt and the warrants. This
analysis should also show how the beneficial conversion features
were
determined.
Note 12. Notes Payable, pg. F-16
8. Tell us whether either Roger Walters or Denise Dunne-Fushi are
related parties. See SFAS No. 57. Indicate why both parties
forgave
the amounts due to them. If any of these parties are related, the
gain should be treated as contributed capital and, therefore,
would
not be recognized as a gain in the statements of operations. See
footnote 1 of APB 26.
Note 19. Earnings Per Share, pg. F-23
9. We note that you include the outstanding warrants in your basic
earnings per share. Tell us why you believe that this accounting
policy is proper instead of including them in determining diluted
earnings per share, if any. See paragraph 17 of SFAS No. 128.
* * * * *
As appropriate, please respond to these comments via EDGAR
within 10 business days or tell us when you will provide us with a
response. 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 to be certain that the
filing includes all information required under the Securities
Exchange Act of 1934 and that they have provided all information
investors require for an informed investment 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.
You may contact Steve Williams at (202) 551-3478 if you have
any questions regarding comments on the financial statements and
related matters. Please contact me at (202) 551-3226 with any
other
questions.
Sincerely,
Craig Wilson
Senior Assistant Chief
Accountant
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Kelly Hankinson
Thinkpath, Inc.
June 1, 2005
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