Via Facsimile and U.S. Mail
Mail Stop 6010
January 19, 2006
Mr. Arthur F. Trudel
Chief Financial Officer
Argan, Inc.
One Church Street, Suite 302
Rockville, MD 20850
Re: Argan, Inc.
Form 10-KSB/A for Fiscal Year Ended January 31, 2005
Form 10-QSB for Fiscal Quarter Ended October 31, 2005
Filed December 2, 2005 and December 14, 2005
File No. 001-31756
Dear Mr. Trudel:
We have reviewed your filing and have the following comments.
We
have limited our review to only your financial statements and
related
disclosures and do not intend to expand our review to other
portions
of your document. In our comments, we ask you to provide us with
information so we may better understand your disclosure.
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/A for the Fiscal Year Ended January 31, 2005
Management`s Discussion and Analysis or Plan of Operation
Results of Operations, page 30
1. Your tabular disclosure and the related discussion of your
operations should present the financial information and analysis
of
your historical statements of operations for the fiscal years
ended
January 31, 2005 and 2004 as required by Item 303(b) of Regulation
S-
B. You can supplement that with a discussion of pro forma
amounts.
Please confirm to us that you will comply with this comment in
your
next Form 10-KSB.
Notes to Consolidated Financial Statements
Note 3- Summary of Significant Accounting Policies, page 49
2. Please provide us with additional information regarding your
determination of the expected life of your employee share options
and
address the difference of 5 years versus 10 years for January 31,
2005 and January 31, 2004, respectively. Please refer to
paragraphs
A26 and A27 of SFAS No. 123 (R). Additionally, please quantify the
impact of utilizing the expected life in your pro forma valuation,
should it differ from the actual input utilized for the periods
presented.
Note 4- Acquisitions, page 50
3. Please provide us with additional information detailing the
$2.5
million in non-contractual customer relationships that you
recognized
pursuant to your acquisition of Vitarich Laboratories, Inc.
("VLI").
In so doing, please address your conclusion they constitute an
identifiable intangible asset that meets the separability
criterion
for recognition apart from the actual customer contracts. Please
refer to paragraph 39 of SFAS No. 141 and to EITF No. 02-17.
4. Please provide to us, in a disclosure-type format, the
information
required by paragraph 51(b) of SFAS No. 141 regarding the reasons
for
your recognition of goodwill in connection with the purchase of
VLI.
5. We did not find certain of the disclosures required by
paragraph
45 of SFAS No. 142. Please direct us to it or provide us with the
required information in a disclosure-type format.
Form 10-QSB for the Fiscal Quarter Ended October 31, 2005
Management`s Discussion and Analysis or Plan of Operation
Critical Accounting Policies, page 23
6. We noted that the goodwill in the nutraceutical segment
represents
68% of your consolidated stockholders` equity as of October 31,
2005.
Please provide us with additional information supporting your
conclusion that the $12.4 million of goodwill in the nutraceutical
segment is not impaired at October 31, 2005, particularly given
the
loss from operations for the three and nine months ended October
31,
2005. Additionally, please provide to us a more robust
discussion,
in a disclosure-type format, of the related critical accounting
policy that outlines your evaluation of the impairment of goodwill
and the underlying judgments and assumptions utilized by
management.
Liquidity and Capital Resources, page 31
7. Your cash flow discussion merely repeats amounts disclosed on
the
statements of cash flows. Please provide to us, in a disclosure-
type
format, information that outlines the underlying reasons for
significant changes in line items from period to period; for
example,
cash paid for property, plant and equipment of $955,000.
* * * *
Please provide us the information requested within 10
business
days of the date of this letter or tell us when you will provide a
response prior to the expiration of the 10-day period. Please
furnish
a letter with your responses that keys your responses to our
comments. Detailed letters greatly facilitate our review. You
should
file the letter on EDGAR under the form type label CORRESP.
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 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 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 your letter, 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 Amy Bruckner, Staff Accountant, at (202)
551-
3657 or Lisa Vanjoske, Assistant Chief Accountant, at (202) 551-
3614
if you have questions regarding comments on the financial
statements
and related matters. In this regard, please do not hesitate to
contact me at (202) 551-3679.
Sincerely,
Jim B. Rosenberg
Senior Assistant Chief
Accountant
??
??
??
??
Mr. Arthur Trudel
Argan, Inc.
January 19, 2006
Page 3