June 15, 2005
Zip+4 Code: 20549-0305
Via Fax & U.S. Mail
Environmental Solutions Worldwide, Inc.
David J. Johnson
CEO, President and acting CFO
132 Penn Avenue
Telford, Pennsylvania 18969
Re: Environmental Solutions Worldwide, Inc. (the
"Company")
Form 10-KSB for the Year Ended December 31, 2004
Form 10-QSB for the Quarterly Period Ended
March
31, 2005
File No. 000-30392
Dear Mr. Johnson:
Based upon an examination restricted solely to
considerations of
the Financial Statements, and Management`s Discussion and Analysis
the
staff has the following comments on the above-referenced
documents.
Where indicated, we think you should revise your document 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 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.
Please respond to confirm that such comments will be complied
with, or, if certain of the comments are deemed inappropriate by
the
Company, advise the staff of the reason thereof.
Pursuant to Rule 101(a)(3) of Regulation S-T, your response
should be also be submitted in electronic form, under the label
"corresp" with a copy to the staff. Please respond within fifteen
(15) business days.
Form 10-KSB for the Fiscal Year Ended December 31, 2004
Item 6- Management Discussion and Analysis
Comparison of Year Ended December 31, 2004 to Year Ended December
31,
2003 Results of Operations, page 13
1. You only disclose how changes in material and direct labor
costs
affected cost of goods sold ("COGS") and how changes in shop as
well
as manufacturing related costs affected marketing, office and
general
expenses. Hence, it seems that the only production costs flowing
through inventory and COGS are materials and direct labor, while
shop
and manufacturing related costs are flowing through operating
expenses. As such, please tell us the production costs that are
capitalized to inventory and flow through COGS as inventory is
released.
Significant Accounting Policies and Accounting Standards, page 16
2. Your critical accounting policy disclosure should not duplicate
the
accounting policy disclosures in the notes to the financial
statements. Instead, your critical accounting policy disclosure
should address specifically why your accounting estimates or
assumptions bear the risk of change (e.g., uncertainty attached to
the
estimate or assumption, difficulty in measuring or valuing) and,
to
the extent material, such factors as how you arrived at the
estimates,
how accurate the estimates/assumptions have been in the past. For
example, you should expand your disclosure in the Critical
Accounting
Policies section of MD&A to give the reader and understanding of
the
type of uncertainties that are in place during your revenue
recognition process (such as returns), the significant assumptions
made during your intangible as well as fixed asset impairment
tests,
your procedures for reviewing accounts for receivable impairment
and
last but not least, disclosures regarding how you account for
research
and development costs. Please refer to the guidance in Section V
of
FR-72 (Release No. 33-8350).
Item 7- Financial Statements
Note 2- Significant Accounting Policies, page F-7
3. Due to the fact that you have incurred and will continue to
incur
significant research and development costs, please include
disclosures
indicating your accounting policy for these costs.
Earnings per Common Share, page F-8
4. Please revise to disclose your calculation of weighted average
shares. Your calculation should disclose the number of
outstanding
options, warrants and shares issuable upon conversion of
outstanding
convertible debt or preferred stock that could potentially dilute
basic earnings per share in the future, but that were not included
in
the computation of diluted earnings per share for the periods
presented in your financial statements because their impact was
anti-
dilutive for the periods presented in your financial statements.
Refer to the requirements of paragraph 40 of SFAS No. 128.
Income Taxes, page F-8
5. Please amend your filing to include all the disclosures
required by
paragraphs 43 through 49 of SFAS 109, as applicable and if
significant. At a minimum, we believe that the disclosures
specified
in paragraph 43 of the above referenced statement should be
provided.
Note 7- Redeemable Class A Special Shares, page 11
6. You state that the holder can redeem the shares at $583
thousand
dollars and that the maximum value upon which you are liable is
the
value of the net assets of BBL. In earlier documents you stated
that
there were 700 thousand Class A special shares redeemable at a
fixed
price of $454 thousand. If this is not the case, explain how you
have
valued these shares on your December 31, 2004 balance sheet.
Please
revise or advise as appropriate.
Note 8 - Convertible Debentures, page F-11
7. We see that you issued warrants in conjunction with the
debentures
and that you appropriately allocated a portion of the proceeds to
those warrants. Please advise us as to the fair market value of
your
common shares at the issuance date. In addition, as you did not
record a beneficial conversion feature in connection with the
debentures, please confirm that you followed the accounting
guidance
in EITF 00-27, Part II, Issue I.
Other:
8. Based on your 2004 and 2003 financial results as well as the
accumulated deficit balance of $11.561 million, provide support
for
your conclusion that your intangible assets have not been
impaired.
Please also provide us with the major assumptions used in your
impairment analysis.
9. In view of your discussion of warranty matters on page 8, it
appears that related footnote disclosures may be required pursuant
to
the requirements of FIN 45, paragraph 14. Please revise or
advise.
Form 10-QSB for the Quarterly Period Ended March 31, 2005
10. We note that there was a significant increase in your
inventory
balances on March 31, 2005. However, as you have not disclosed
the
reason for the change within your March 31, 2005 filing, please
provide us with a detailed explanation for increases in the
balance
from December 31, 2004 and March 31, 2004.
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.
You may contact Juan Migone at (202) 551-3312 or Margery Reich at
(202) 551-3347 if you have questions regarding comments on the
financial statements and related matters. Please contact the
undersigned at (202) 551-3211 with any other questions.
Sincerely,
David R. Humphrey
Branch Chief-Accountant
Via facsimile: David J. Johnson- CEO, President and acting CFO
(905) 695-5013
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David J. Johnson-CEO, President and acting CFO
Environmental Solutions Worldwide, Inc.
June 15, 2005
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