Mail Stop 7010
September 2, 2005
Mr. Charles R. Weeks
Chief Financial Officer
IFT Corporation
718 South Military Trail
Deerfield Beach, FL 33442
RE: Form 10-K for the fiscal year ended December 31, 2004
Forms 10-Q for the quarters ended March 31 and June 30,
2005
Form 8-K/A filed April 27, 2005
File No. 1-31354
Dear Mr. Weeks:
We have reviewed these filings and have the following
comments.
If you disagree with a comment, 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 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-K FOR THE YEAR ENDED DECEMBER 31, 2004
General
1. Where a comment below requests additional disclosures or other
revisions, please show us your proposed revised disclosure in your
response. With the exception of the comments below that
specifically
request an amendment, all revisions may be included in your future
filings.
2. Please note that each amendment to your Form 10-K or Forms 10-Q
must include updated certifications in the exact form specified by
Item 601 of Regulation S-K.
Item 7 - Management`s Discussion and Analysis of Financial
Condition
and Results of Operations, page 9
Liquidity and Capital Resources, page 11
3. Please disclose your commitments for capital expenditures as of
December 31, 2004, including a description of each material
commitment. In addition, please disclose how you anticipate
funding
these commitments. See Item 303(a)(2) of Regulation S-K.
Discontinued Operations, page 13
4. Please tell us more regarding the 2002 adjustment to eliminate
the
reserve related to your discontinued operations, including the
nature
of the contingency and the amount of the adjustment.
Contractual Obligations, page 14
5. Please revise your table of contractual obligations to include
the
estimated interest payments on your debt. Because the table is
aimed
at increasing the transparency of cash flow, we believe these
payments should be included in the table. Please also disclose
any
assumptions you made to derive these amounts.
Item 15. Exhibits and Financial Statement Schedules: (a)2
Financial
Statement Schedules, page 16
6. Please tell us where you have provided the disclosures required
by
Schedule II related to your allowance for doubtful accounts and,
if
applicable, your reserves for note receivable, or revise your
disclosure accordingly. Please note these disclosures are
required
for all periods presented.
Item 8 - Financial Statements
Report of Independent Registered Accounting Firm, page F-2
7. We note the statement that the audits were conducted in
accordance
with the standards of the Public Company Accounting Oversight
Board,
"except as discussed in the following paragraph." Please obtain a
revised report from your independent accountant which states, in
clear and unqualified language, that the audits were conducted in
accordance with the standards of the Public Company Accounting
Oversight Board. Please file an amendment to your Form 10-K for
the
year ended December 31, 2004 that includes the revised report from
your independent accountant.
8. Please also note that an explanatory paragraph included to
describe the uncertainty about an entity`s ability to continue as
a
going concern should be presented after the opinion paragraph.
See
paragraph 12 of SAS 59. The revised opinion from your independent
accountant included in your amended Form 10-K should conform to
this
requirement.
Consolidated Balance Sheets, page F-4
9. You currently only disclose the 2003 allowance for doubtful
accounts on the face of your balance sheet. If you choose to
present
the allowance for doubtful accounts on the face of your balance
sheet, please present the amounts of the allowance for both years.
10. Please present goodwill separately from any other intangible
assets on the face of your balance sheet. Please also revise the
title of the goodwill line item to avoid its confusion with other
intangibles. See paragraphs 42 and 43 of SFAS 142.
11. Please amend your filing to present the Reserve for Litigation
line item consistently for all periods presented. The reserve for
litigation as of December 31, 2003 is included in the Accounts
Payable and Accrued Expenses line item. It is also unclear why
you
have referenced the reserve for litigation line item to note 3.
Further, while the tabular detail in note 7 currently includes the
litigation reserve for both periods, only the 2003 balance is
included in Total Accounts Payable and Accrued Expenses. Please
revise as appropriate.
12. Given that the $5,670,000 due to a related party is due upon
demand, it appears it should be reflected as a current liability
as
of December 31, 2004. We note that you have reflected it as
current
in the comparative December 31, 2004 balance sheets included in
your
2005 Forms 10-Q. Please amend your Form 10-K for the year ended
December 31, 2004 to present the related party loan as a current
liability as of December 31, 2004.
Consolidated Statements of Stockholders` Equity, page F-7
13. You currently have presented statements of stockholders`
equity
for the two years ended December 31, 2004. Please note that you
are
required to present statements of stockholders` equity for each
period for which an income statement is required, which would be
each
of the three years ended December 31, 2004. See Rule 3-04 of
Regulation S-X. Please amend your Form 10-K to include this
required
information.
Consolidated Statements of Cash Flows, page F-10
14. Your amended Form 10-K for the year ended December 31, 2004
should include a statement of cash flows that reports net cash
provided by or used in operating, investing, and financing
activities, including cash flows related to your discontinued
operations. Please note that if you choose to separately reflect
the
cash flows related to your discontinued operations you must
disclose
the value of such cash flows included within each of the three
categories separately. Such a presentation must also be
consistent
for each period presented. Please refer to paragraph 24 and
footnote
10 of SFAS 95. Please also revise your liquidity discussion in
your
MD&A as appropriate.
15. Please provide us with a reconciliation of the changes in
accounts payable and accrued expenses reflected on the statement
of
cash flows to the amounts reported on the balance sheet for all
periods presented. Please also revise your statement of cash
flows
to present the changes in accounts payable separately from the
changes in accrued liabilities. Please refer to paragraph 29 of
SFAS
95.
Note 1 - Summary of Significant Policies, page F-12
General
16. Please disclose the types of expenses that you include in the
cost of sales line item, the warranty costs, freight and other
cost
of sales line item and the types of expenses that you include in
the
selling, general and administrative expenses line item. Please
also
disclose 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 sales line item or the warranty costs, freight and
other
cost of sales line item. With the exception of warehousing costs,
if
you currently exclude a portion of these costs from cost of sales,
please disclose:
* in a footnote the line items that these excluded costs are
included
in and the amounts included in each line item for each period
presented, and
* in MD&A that your gross margins may not be comparable to those
of
other entities, since some entities include all of the costs
related
to their distribution network in cost of sales and others like you
exclude a portion of them from gross margin, including them
instead
in a line item, such as selling, general and administrative
expenses.
17. Please revise to include the disclosure required by paragraph
14
of FIN 45 for each period presented.
Goodwill and Purchased Intangible Assets, page F-13
18. Please provide us with the analysis supporting your conclusion
that goodwill related to the Infinity acquisition was not impaired
as
of December 31, 2004 and as of March 31 and June 30, 2005. Please
identify each of the significant assumptions used in your analysis
and explain the basis for each such assumption.
Revenue Recognition, page F-13
19. Please revise your disclosure to clarify your revenue
recognition
policy for each significant sales channel, including stocking
distributors. Please also disclose the shipping terms, customer
acceptance or return provisions by channel. Tell us your policy
as
to replacement of goods damaged or lost in transit.
Net Loss per Common Share, page F-14
20. Please disclose the number of antidilutive shares by each type
of
security. See paragraph 40(c) of SFAS 128.
21. Please disclose how you are treating the restricted shares you
have issued in computing both your basic and diluted earnings per
share. See paragraphs 10 and 13 of SFAS 128.
Allowance for Doubtful Accounts, page F-14
22. Please tell us more regarding your fourth quarter adjustment
to
the allowance for doubtful accounts. Please tell us how the
amount
of the adjustment was determined and describe in detail how you
now
determine your allowance for doubtful accounts. Please also tell
us
about the basis for your new methodology.
Recently Adopted Accounting Standards, page F-15
23. You disclose that you adopted the provisions of SFAS 151 in
the
fourth quarter of 2004. However, you have also included SFAS 151
in
the section titled "New Accounting Standards Not Yet Adopted" on
page
F-14. Please revise your disclosure to clarify whether or not you
have adopted SFAS 151.
Note 3 - Discontinued Operations, page F-16
24. We note that "[t]he (loss) of discontinued operations include
allocations of certain of the Company`s expenses to those
operations." Please tell us the allocated amounts for each period
presented. In addition, please tell us how the inclusion of
allocations of corporate expenses is consistent with the
requirement
that results of operations of a component be presented as
discontinued operations only if the operations and cash flows of
the
component have been, or will be, eliminated from the ongoing
operations of the entity as a result of the disposal transaction.
Please refer to paragraph 42 of SFAS 144.
25. Please confirm that the only assets or liabilities of the
disposal group were $663,000 in current liabilities as of December
31, 2004 and no assets or liabilities as of December 31, 2003 or
amend your filing to comply with paragraph 46 of SFAS 144.
26. Please revise your disclosure to comply with the requirements
of
paragraph 20 of SFAS 146, including a rollforward of accrued
severance cost, if applicable.
Note 5 - Machinery and Equipment, page F-17
27. Please provide us with a rollforward of machinery and
equipment
for each of the periods presented. For the disposition of
machinery
and equipment in 2004 please provide us with additional
information
to help us understand the determination of $18,568 loss
recognized,
including the carrying value, gross and net of accumulated
depreciation, of the machinery and equipment disposed of and the
consideration received in addition to the $2,100 in cash reflected
on
the statement of cash flows.
Note 11 - Commitments and Contingencies, page F-22
28. Please disclose how you account for (a) step rent provisions
and
escalation clauses and (b) capital improvement funding and other
lease concessions, which may be present in your leases. Paragraph
5(n) of SFAS 13, as amended by SFAS 29, discusses how lease
payments
that depend on an existing index or rate, such as the consumer
price
index or the prime interest rate, should also be included in your
minimum lease payments. If, as we assume, they are taken into
account in computing your minimum lease payments and the minimum
lease payments are recognized on a straight-line basis over the
minimum lease term, the note should so state. If our assumption
is
incorrect, please tell us how your accounting complies with SFAS
13
and FTB 88-1.
29. Please include the disclosures required by paragraphs 16(c)
and
(d) of SFAS 13 regarding your operating leases.
30. Please tell us how you have accounted for the deposit being
held
by Trammell Crow Company that was applied to the remaining lease
payments due through October 2005.
31. Please provide us with a listing, summarized by major
category,
of the types and amounts of liabilities included in the Accounts
Payable and Accrued Expenses for Discontinued Operations.
32. Please tell us the nature of your litigation reserve and the
basis for its determination as of December 31, 2004 and 2003.
Please
tell us whether this reserve is related to the settlement
discussed
under Legal Proceedings (a) - Ponswamy v. Urecoats Int`l. In this
regard, we note that you cannot determine an outcome for any of
the
outstanding lawsuits discussed in note eleven.
Note 13 - Securities Transactions, page F-24
33. Please tell us more regarding the nature of the adjustments
discussed in note 13(j) and your accounting for them.
Note 16 - Concentrations of Credit Risk, page F-29
34. Please tell us more regarding your new receivables management
arrangement. Please also tell us how you intend to account for
the
arrangement, including the premium paid to the counter-party. In
addition, tell us what consideration you gave to the provisions in
paragraphs nine through 15 of SFAS 140, which discuss sales of
assets
to third parties. Tell us whether the transfers pursuant to the
arrangement constitute sales or financing transactions. Please
also
tell us how you intend to reflect the transfers on the balance
sheet
and classify the related cash flows on the statement of
operations.
Note 17 - Securities Capitalization, page F-29
35. Please tell us how the number of available shares is computed
in
your securities capitalization table. For example, in regards to
Series C preferred stock, it is unclear why only 62,105 shares are
available given that 750,000 shares are authorized and no shares
are
issued and outstanding or reserved.
FORM 10-Q FOR THE PERIOD ENDED JUNE 30, 2005
General
36. Please address the above comments in your interim filings as
applicable.
Item 1 - Financial Statements
Consolidated Statements of Operations, page 5
37. Please provide us with additional information to help us
understand why you did not incur warranty costs, freight or other
cost of sales during the quarter ended June 30, 2005.
Note 2 - Recently Adopted Accounting Standards, page 7
38. Please note that paragraph 69(a) of SFAS 123R requires that
public companies, like you, that do not file as small business
issuers to adopt SFAS 123R as of the beginning of the first
interim
or annual period that begins after June 15, 2005. Your current
disclosure appears to be based on an assumption that paragraph
69(b)
of SFAS 123R applies to all public companies that meet the
requirements to file as small business issuers, which is not the
case. Please revise your disclosure accordingly and confirm that
you
adopted SFAS 123R effective July 1, 2005.
Note 3 - Going Concern, page 7
39. Please show us how you calculated a working capital deficit of
$6,145,041. Please also note that the listed excess of
liabilities
over assets of $3,362,789 is incorrect.
Note 11 - Business Segment Information, page 9
40. Please provide us with additional information to help us
understand your internal structure and tell us about the
information
reviewed by the chief operating decision-maker. Please tell us
whether results are evaluated based on distribution channel such
as
Retail and Commercial/Industrial. Please also describe your
internal
operational and reporting structure and organization.
Item 2 - Management`s Discussion and Analysis of Financial
Condition
and Results of Operations
Results of Operations, page 11
41. Please discuss in greater detail the business reasons for the
changes between periods in revenue, cost of sales, selling,
general
and administrative expenses, and professional fees. In doing so,
please disclose the amount of each significant change in line
items
between periods and the business reasons for it. In circumstances
where there is more than one business reason for the change,
attempt
to quantify the incremental impact of each individual business
reason
discussed on the overall change in the line item. For example, in
relation to revenue, disclose how much of the increase was due to
sales recognized from and after your acquisition of LaPolla,
Infiniti
sales prior to merging with LaPolla, and increases in sales
volumes
for LaPolla products. See Item 303(a)(3) of Regulation S-K and
Financial Reporting Codification 501.04.
FORM 8-K/A FILED APRIL 27, 2005
Selected Unaudited Pro Forma Consolidated Financial Data for
Financial Statements, page PF-1
General
42. The following comments require that you amend your Form 8-K/A
filed April 27, 2005. Please revise your pro forma financial
information, the related notes and the introductory paragraph to
the
pro forma financial information to comply with our comments and
file
the revised pro forma financial information as an amendment to
your
Form 8-K/A.
Pro Forma Consolidated Balance Sheet, page PF-2
43. You disclose that the unaudited pro forma balance sheet and
statement of operations of IFT and LaPolla give effect to the
acquisition by IFT of LaPolla as if it had occurred on December 1,
2004 and November 1, 2003. Please note that your pro forma
balance
sheet should be as of December 31, 2004 for IFT and October 31,
2004
for LaPolla and reflect the acquisition as if it occurred on
December
31, 2004. Please see Rules 11-02(c)(1) and 11-02(b)(6) of
Regulation
S-X.
44. Please tell us why you believe recording the deferred tax
asset
of $60,000 in the purchase accounting for LaPolla is consistent
with
paragraph 38 of SFAS 141. Please revise or advise. If you
continue
to believe the asset is appropriate, please provide us with a
calculation of the value of the asset consistent with paragraph 38
of
SFAS 141 and paragraph 30 of SFAS 109.
45. It is also unclear why your pro forma financial statements
indicate that $60,000 of LaPolla`s accumulated deficit is being
acquired. Please revise to eliminate LaPolla`s accumulated
deficit
in the pro forma financial statements.
46. In the pro forma column inventory and deferred tax benefit
appear
to be switched. Please revise accordingly.
Pro Forma Consolidated Statement of Operations, page PF-3
47. Your pro forma statement of operations should reflect the
transaction as if it occurred at the beginning of the fiscal year
presented, which is January 1, 2004. Please refer to Rule 11-
02(b)(6) of Regulation S-X. We note that your presentation of
LaPolla`s results of operations for the twelve months ended
October
31, 2004 is consistent with Rule 11-02(c)(3) of Regulation S-X.
48. Please revise your pro forma statement of operations to
exclude
discontinued operations. Please refer to Instruction 1 to Rule
11-
02(b) of Regulation S-X.
49. Please revise your pro forma statement of operations to
consistently present interest expense in the interest expense line
item. In this regard, the interest expense line item for IFT
reflect
no interest expense, while the interest expense for the year ended
December 31, 2004 was $391,912.
Notes to Pro Forma Consolidated Financial Statements, page PF-4
50. Please revise pro forma adjustment C to record the assets
acquired at their estimated fair value rather than book value.
Please also tell us how your estimate of fair value was
determined.
Please refer to paragraph 35 of SFAS 141.
51. We note in the last note to the financial statements filed as
exhibit 99.1 that the assets purchased include product
formulations
and customer lists. Please tell us what consideration you gave to
the value of these and other identifiable intangible assets.
Please
refer to paragraph 39 of SFAS 141 and paragraphs A10 through A28
of
Appendix A to SFAS 141.
* * * *
Please respond to these comments and file the requested
amendments 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
information. Detailed letters greatly facilitate our review.
Please
file your supplemental response on EDGAR as a correspondence file.
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 filings reviewed by the staff to
be
certain that they have provided all information required under the
Securities Exchange Act of 1934 and 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 their 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 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 Jeffrey Gordon, Staff Accountant, at (202) 551-3866
or, in his absence, Scott Watkinson, Staff Accountant, at (202)
551-
3741.
Sincerely,
Rufus Decker
Accounting Branch Chief
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Mr. Charles R. Weeks
IFT Corporation
September 2, 2005
Page 1 of 11
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-7010
DIVISION OF
CORPORATION FINANCE