Mail Stop 7010
October 19, 2005
Mr. Michael T. Adams
Chief Executive Officer
IFT Corporation
15402 Vantage Parkway East #322
Houston, TX 77032
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. Adams:
We have reviewed your response and have the following
additional 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 the amendment to your Form 10-K should not
incorporate by reference Part II, Item 8 - Financial Statements
and
Supplementary Data. The amendment should include the complete
text
set of Part II, Item 8, including the financial statements and
notes
to the financial statements.
Item 7 - Management`s Discussion and Analysis of Financial
Condition
and Results of Operations, page 9
Discontinued Operations, page 13
3. We have reviewed your response to comment four. Please provide
us
with a detail of the $600,622 accrual, describe the underlying
contingencies and basis for the accrual. Please also provide us
with
additional information to help us understand the appropriateness
of
the timing of the reversal.
Item 15, Exhibits and Financial Statement Schedules: (a)2
Financial
Statement Schedules, page 16
4. We have reviewed your response to comment six. Please also
disclose the amount of charges to and deductions from your
valuation
accounts, including your allowance for doubtful accounts, for each
period presented. See Rules 5-04 and 12-09 of Regulation S-X.
Item 8 - Financial Statements
Consolidated Balance Sheets, page F-4
5. We have reviewed your response to comment 11. Please provide
us
with additional information to help us understand why the accruals
for litigation as of December 31, 2004 and 2003 are appropriately
presented as non-current liabilities.
Consolidated Statements of Cash Flows, page F-10
6. We have reviewed your response to comment 15. Please provide
us
with a reconciliation, including your calculations, of the changes
in
accounts payable and accrued expenses reflected on the restated
statements of cash flows to the amounts reported on the restated
balance sheets for all periods presented.
Note 1 - Summary of Significant Policies, page F-12
General
7. We have reviewed your response to comment 16. Your response
appears to indicate that you include shipping costs in the
warranty
costs, freight and other cost of sales line item; however, your
proposed revision 16(a) states that you include shipping costs in
the
selling, general, and administration line item. Please clarify
the
line item in which you include your shipping costs. Please also
disclose the amount of your inspection and warehousing costs, as
well
as your shipping costs if they are included in the selling,
general,
and administration line item.
8. We have reviewed your response to comment 17. It is unclear
whether the 2004 adjustment of $539,000 is related to your
discontinued operations. If so, it is also unclear why 2003 has
not
been recast to reflect the warranty accrual excluding discontinued
operations. If not, please tell us the basis for the change in
estimate for pre-existing warranties. Please also tell us the
basis
for the change in estimates for pre-existing warranties in 2003.
Goodwill and Purchased Intangible Assets, page F-13
9. We have reviewed your response to comment 18. Please provide
us
with a quantitative analysis performed in accordance with
paragraphs
19 and 20 of SFAS 142 supporting your conclusion that goodwill
related to the Infinity acquisition was not impaired as of
December
31, 2004 and June 30, 2005. Please identify each of the
significant
assumptions used in your analysis and explain the basis for each
such
assumption. Please further note that SFAS 142 does not require
impairment to be permanent as a condition of recognition.
Revenue Recognition, page F-13
10. We have reviewed your response to comment 19. Please revise
your
disclosure to clarify the circumstances in which products are not
shipped FOB shipping point and your revenue recognition policy in
such cases. If true, please also clearly state that returns are
not
permitted under your sales arrangements, including sales to
stocking
distributors.
If your practice is to accept returns for customer service
reasons,
please disclose the circumstances under which you have accepted
sales
returns in the past. Please also tell us in your response all
returns, including sales amounts, accepted by you from stocking
distributors during the periods presented in your Form 10-K and
the
subsequent interim period.
Net Loss per Common Share, page F-14
11. We have reviewed your response to comment 21. Please note
that
nonvested stock to be issued to a director under a stock-based
compensation arrangement is considered an option for purposes of
computing diluted EPS. Such stock-based awards shall be
considered
to be outstanding as of the grant date for purposes of computing
diluted EPS even though their exercise may be contingent upon
vesting. Those stock-based awards are included in the diluted EPS
computation even if the director may not receive or be able to
sell
the stock until some future date. Please refer to paragraph 20 of
SFAS 128 and revise your earnings per share computations
accordingly.
Allowance for Doubtful Accounts, page F-14
12. We have reviewed your response to comment 22. It is unclear
why
the adjustment to the allowance for doubtful accounts was
appropriately recognized during the fourth quarter of 2004 and
whether the recorded amount of the allowance as of December 31,
2003
and 2002 was appropriate. Please provide us with additional
explanation, including a detailed rollforward of the allowance for
all periods presented, which separately identifies additions to
the
allowance related to current sales, deductions related to write-
offs
and adjustments. Narrative explanation should accompany the
rollforward as needed to help us understand the appropriateness of
your accounting.
Note 3 - Discontinued Operations, page F-16
13. We have reviewed your response to comment 25. If true, 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. Based on your
responses to prior comments 17, 25 and 27 it is unclear whether
this
is the case. If not, please amend your filing to comply with
paragraph 46 of SFAS 144.
Note 5 - Machinery and Equipment, page F-17
14. We have reviewed your response to comment 27. It appears that
you had approximately $437,000 in machinery and equipment related
to
RSM Technologies, Inc. as of December 31, 2003. This amount
should
be presented separately from your other machinery and equipment on
the face of the balance sheet, since the amount relates to
discontinued operations. See paragraph 46 of SFAS 144. Please
revise your presentation in your amended Form 10-K. Please also
ensure that any other assets and liabilities related to RSM
Technologies, Inc. are identified and presented as being related
to
discontinued operations during 2003 and 2004.
Note 11 - Commitments and Contingencies, page F-22
15. We have reviewed your response to comment 32. Please provide
us
with a detail of your litigation reserve as of December 31, 2004
and
2003. For each component, tell us the factors you considered in
determining that the contingency met each of the two criteria of
paragraph 8 of SFAS 5 for accrual as a liability.
Note 13 - Securities Transactions, page F-24
16. We have reviewed your response to comment 33. The basis for
your
recognition of income related to the receipt of your shares is
unclear. Please specify the accounting literature supporting your
accounting, including specific references supporting both
valuation
and recognition in income. Please also tell us how this income
has
been reflected on the statement of operations. Additionally,
please
tell us how the related grant was reflected on the statement of
operations when originally issued and the amount of the related
expense recognized.
Note 16 - Concentrations of Credit Risk, page F-29
17. We have reviewed your response to comment 34. Please provide
us
with a copy of your written agreement with Euler Hermes. Please
file
this agreement as an exhibit to your correspondence file on Edgar.
Also, please tell us how you intend to classify the expense of the
premium on the statement of operations, the cash inflows and
outflows
related to the agreement on the statement of cash flows, and the
receivables subject to the agreement at the expiration of the
allowed
collection timeframe on the balance sheet.
Note 18 - Selected Quarterly Financial Data, page F-29
18. Please disclose in this footnote the amount and nature of any
adjustments that are material to the results of the fourth
quarter.
Your disclosure should include, at a minimum, discussion related
to
your 2004 fourth quarter adjustment to the allowance for doubtful
accounts. See Item 302(a)(3) of Regulation S-K.
FORM 10-Q FOR THE PERIOD ENDED JUNE 30, 2005
Note 11 - Business Segment Information, page 9
19. We have reviewed your response to comment 40. It appears that
your Texas, Florida and Arizona operations may constitute
operating
segments pursuant to paragraph ten of SFAS 131. If you do not
consider this to be the case, please tell us in detail why not.
Please also clarify how decisions regarding the allocation of
resources are made without evaluating geographic results
separately
given the different markets and customers served by these units.
Please provide us with additional information to help us
understand
how this is done. Also, tell us what consideration you gave to
the
possibility that the chief operating decision making function is,
in
part, shared by your Vice-President of Operations.
Also, please address each of the issues in this comment with
respect
to the commercial/industrial and retail market divisions as well.
20. Please also provide us with a copy of the operating results
information provided to your directors at the most recent board
meeting.
21. If you believe that either geographic units or customer-
defined
divisions represent operating segments, but that they meet the
criteria discussed in paragraph 17 of SFAS 131 for aggregation,
please provide us with the analysis you performed in reaching this
conclusion, including a comparison of long-term average gross
margins.
22. At a minimum, you should separately disclose your revenues
from
roofing, concrete, wall, and equipment product categories for each
period presented in accordance with paragraph 37 of SFAS 131.
Item 2 - Management`s Discussion and Analysis of Financial
Condition
and Results of Operations
Results of Operations, page 11
23. We have reviewed your response to comment 41. You should
discuss, as well as quantify, business changes between periods in
line items in your future MD&A. Please show us what your revised
MD&A will look like for the quarter ended June 30, 2005.
FORM 8-K/A FILED APRIL 27, 2005
Notes to Pro Forma Consolidated Financial Statements, page PF-4
24. We have reviewed your response to comment 50. It appears that
you have estimated the fair value of the assets acquired to be
equal
to the book value of the assets acquired plus the $60,000 deferred
tax asset eliminated in pro forma adjustment E. It is unclear why
including the value of the deferred tax asset is appropriate.
Please
revise or advise.
25. We have reviewed your response to comment 51. Paragraph 39 of
SFAS 141 states that an asset shall be recognized apart from
goodwill
if it is capable of being separated from the acquired entity and
sold, transferred, licensed, rented, or exchanged, regardless of
whether there is an intent to do so. As noted in paragraphs A18
and
A28 of Appendix A to SFAS 141, customer lists and product
formulations may meet the separability criteria set forth in
paragraph 39 of SFAS 141. Please provide us with your assessment
of
whether the acquired customer lists and product formulations meet
the
requirements for separability in paragraphs 39, A18 and A28.
If the acquired customer lists and product formulations meet the
requirements for separability, please clarify whether the acquired
intangibles have been properly valued and determined to be
immaterial
or their fair value has not been accurately determined. If you
have
determined their value to be immaterial, please provide us with
your
determination of their fair value, including explanations of each
material assumption supporting your valuation. If you have not
accurately determined the fair value of the acquired intangibles,
please do so and revise your filing to separately recognize the
identifiable intangible assets apart from goodwill, as required by
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.
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. Michael T. Adams
IFT Corporation
October 19, 2005
Page 1 of 8
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-7010
DIVISION OF
CORPORATION FINANCE