Mail Stop 6010
October 28, 2005
Via Facsimile and U.S. Mail
Mr. Jeffrey Halloran
President and Chief Executive Officer
Phantom Fiber Corporation
144 Front Street, Suite 580
Toronto, Ontario, Canada M5J 2L7
Re: Phantom Fiber Corporation
Form 10-KSB for the year ended December 31, 2004
Filed April 15, 2005
File No. 1-15627
Dear Mr. Halloran:
We have reviewed your filing 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
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 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 year ended December 31, 2004
Item 8A. Controls and Procedures, page 12
1. You state that your "system of disclosure controls and
procedures
is designed to provide reasonable assurance that information,
which
is required to be disclosed, is accumulated and communicated to
management in a timely manner." Please revise to state clearly,
if
true, that your principal executive officer and principal
financial
officer concluded that your disclosure controls and procedures are
effective at that reasonable assurance level. Please note this
comment also applies to your Form 10-QSB as of June 30, 2005.
2. We note that management has reviewed the system of disclosure
controls and procedures and has concluded that they are "operating
in
an effective way to ensure appropriate and timely disclosure." It
does not appear that your certifying officers have reached a
conclusion that your disclosure controls and procedures are
effective. Please revise to address your officers` conclusions
regarding the effectiveness of your disclosure controls and
procedures. Please note this comment also applies to your Form
10-
QSB as of June 30, 2005.
3. If you elect to continue to include language after your
conclusion
regarding your disclosure controls and procedures, please revise
to
ensure that the language is consistent with the full definition of
disclosure controls and procedures as set forth in Rule 13a-15(e)
of
the Exchange Act. Please note this comment also applies to your
Form
10-QSB as of June 30, 2005.
Consolidated Statements of Operations, page F-3
4. Please tell us why you believe your classification of interest
income as revenues and interest expense as operating expenses is
appropriate. As appropriate, please revise the filing to present
interest income and interest expense as separate components of
other
income (expense).
Note 2. Summary of Significant Accounting Policies, page F-7
(d) Revenue Recognition, page F-8
5. We note that you generate revenue from software licensing fees
and
related service revenues. Please tell us and revise this note to
disclose how you meet each of the criteria for revenue recognition
outlined in SOP 97-2. Discuss how you allocate revenue amounts
between the elements of your software arrangements. Demonstrate
to
us that you have vendor specific objective evidence of the fair
value
of the undelivered elements in your software arrangements.
Exhibit 31.1 and 31.2
6. We note that the certifications filed as Exhibits 31.1 and 31.2
were not in the proper form. The required certifications must be
in
the exact form prescribed. The wording of the required
certifications may not be changed in any respect, except for the
modifications temporarily permitted to be made to the fourth
paragraph of the certification required to be filed as Exhibit
31.1
pursuant to Part III.E of Release No. 8238. Accordingly, please
file
amendments to your Forms 10-KSB as of December 31, 2004 and 10-QSB
as
of June 30, 2005 that includes the entire filings together with
the
certifications of each of your current CEO and CFO in the form
currently set forth in Item 601(b)(31) of Regulation S-B.
* * * *
As appropriate, please respond to these comments within 10
business days or tell us when you will provide us with a response.
Please furnish a cover letter with your response that keys your
responses to our comments and provides any requested information.
Detailed cover letters greatly facilitate our review. Please
understand that we may have additional comments after reviewing
your
amendment and 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 and
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 David Burton, Staff Accountant, at (202)
551-
3626 or me at (202) 551-3643 if you have questions regarding this
comment. In this regard, do not hesitate to contact Michele
Gohlke,
Branch Chief, at (202) 551-3327.
Sincerely,
Kevin L. Vaughn
Reviewing Accountant
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Mr. Jeffrey Halloran
Phantom Fiber Corporation
October 28, 2005
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