Mail Stop 4561
March 10, 2006
By U.S. Mail and Facsimile to (212) 997-4242
John Sifonis
President
Trulite, Inc.
Three Riverway
Suite 1700
Houston, Texas 77056
Re: Trulite, Inc.
Amendment No. 1 to Registration Statement on Form 10-SB
Filed February 23, 2005
File No. 0-51696
Dear Mr. Sifonis:
We have reviewed your amendment and have the following
comments. 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 information so we may better understand your disclosure.
After
reviewing this information, we may or may not raise additional
comments.
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 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.
Item 1 - Description of Business, page 2
1. In the interests of clarity and simplicity, please revise and
reorganize the Business section. We suggest the following
organization:
- - Begin with a broad summary discussion of the company`s business,
including its current products and the markets for its products;
- - next include a brief discussion of the history of the company,
i.e., the founding of Trulite Technology and the merger with
Trulite,
Inc.;
- - provide a brief overview of the current status of the alternate
fuel industry, in particular the development of hydrogen fuel cell
products;
- - provide a general discussion of the company`s products, followed
by
a more detailed discussion of the development of those products,
then
an in-depth discussion of the HydroCell and the Kitty Hawk
products;
- - discuss the current status of your projects, including all sales
to
date;
- - then proceed with your discussions of such matters as market
opportunities, business plan and strategies, and strategic
relationships.
- - Include a separate discussion regarding funding, including
government awards and private funding.
- - Use subheadings wherever possible.
2. In your discussion of your relationship with Synexus, please
clarify what fuel cell stack and control technology is, and
describe
as clearly as possible the separate contributions of each company
to
the final products.
3. In your Product discussion, please clarify the relationship
between the HydroCell and the KittyHawk. That is, does the
HydroCell
act as a component of the KittyHawk? If so, can they be marketed
separately? Or are they strictly separate products?
4. Please revise to clarify all technical terms and jargon. We
note,
for example, "control block and cartridge" on page 5. Perhaps a
brief visual sketch of these products would be useful.
5. We also note such terms as "beta unit" and "proof of concept
prototype" and "functioning demonstration unit." In your
discussion
of the development of your products, please carefully define and
distinguish these stages. In particular, explain clearly how far
away you are from a fully tested, fully commercial product.
6. You state on page 8 that the HydroCell can store a "large
amount
of energy" in a compact package. Yet on page 5 you state that it
is
capable of producing only 25 watts of power for several hours.
Please clarify. Is this adequate power for typical users in the
pipeline and well head markets?
7. On page 10 you refer to "long periods of storage or
inactivity."
Please define this phrase as precisely as possible as well as any
similar descriptions. We note, for example, the phrase "in the
near
future" at the bottom of page 14 regarding technical limitations
on
MCEL`s products.
8. At the top of page 4 you refer to "unpatented technology."
Does
this refer to your own developed technology? Yet you refer on
page
10 to five provisional patents, and on page 26 you refer to your
reliance on numerous patents. Please clarify the current status
of
your intellectual property.
9. In discussing cost on page 8, you stress the inexpensive nature
of
this product. Yet in a risk factor on page 23 you discuss the
risk
that you may not be able to develop a high-volume, low-cost
production capability. Please revise to clarify the cost of
production and cost-effective nature of this product in the short
as
well as the long term.
10. In your discussion of market opportunities beginning on page
10,
please clarify whether you have done any market studies or have
any
other clear basis for your belief that your product will appeal to
these selected markets.
11. On page 12, in your discussion of strategic relationships, you
state that the term encompasses a wide range of relationships.
Consequently, please avoid the term as much as possible and
instead
describe each relationship in specific terms. In particular,
clarify
the nature of the "partnerships" with Case Western Reserve and
Texas
A&M. How did they come about, and what are the general
responsibilities of each party?
12. We note your response to our prior comment no. 15. If the
company chooses not to exercise its option to purchase Synexus,
will
the company not be entirely dependent on Synexus? Describe the
company`s contingency plans, if any.
13. In discussing your competition on page 14, please clarify the
current development status of your competitors` products.
14. Please also revise this discussion to take into account the
"significant competition" you discuss in the risk factor on page
26.
Reports to security holders, page 15
15. You are a 1934 Act registrant required by your bylaws to hold
annual meetings. Consequently, you are currently required to
deliver
annual reports to security holders; see the Proxy Rules. Please
revise.
Management`s Discussion and Analysis, page 15
16. We note on page 17 a reference to "our last private
placement."
Please revise this section and the Recent Sales section as
necessary
so that the details coincide. In particular, revise this
disclosure
to eliminate the suggestion that there have been several recent
private placements.
Critical Accounting Policies, page 18
17. Please refer to our previous comment 23. In your response you
indicated that you had made the changes requested, however, your
accounting policies for share based payments are not included.
Please revise to include your accounting policies for share based
payment. Alternatively, tell us why you believe such disclosures
would not be required.
Risk Factors, page 21
18. Please revise your risk factor section throughout to use
language
specific to the company and its products. As an example only, we
note on page 23, under the subheading "We expect that some of our
products..." the phrase "certain of our fuel source products must
be
integrated...." Reference could instead be made to the specific
needs of your specific products. Use quantification wherever
possible, for example on page 22 regarding the need for additional
capital.
19. For the sake of clarity, please use bold type or similar
formatting for each risk factor subheading.
20. It appears that the deleted paragraph on page 22 beginning
"The
Company has incurred substantial losses..." should be reinstated
under its own subheading. Please revise.
Security Ownership, page 28
21. Please identify the board members of Contango Capital
Partners.
Directors, Executive Officers, Promoters and Control Persons, page
30
22. We note your response to prior comment 34. However, we are
unable to locate the disclosure regarding the employment
agreements
with Jerry Metz and James Longaker. Please revise or advise.
23. Please identify the position held by Eric Ladd, and include
him
in the list of executives, if appropriate.
Recent Sales of Unregistered Securities, page 41
24. Please disclose the number of purchasers in the private
placement
and provide a specific date for the offering.
Financial Statements
Trulite Technology, LC Financial Statements, page F-2
Note B - Summary of Significant Accounting Policies, page F-7
General
25. Please refer to our previous comment 43. Per review of your
discussion of the two grants discussed on page 2 from The Defense
Threat Reduction Agency and the United States Air Force, it
appears
that grants received totaled $200,000. Please revise your
disclosure
to disclose all material terms of the grant as this revenue is
material to your financial statements. Alternatively, provide
copies
of the grant documents as exhibits to your filing.
Trulite, Inc. Financial Statements, page F-2
Consolidated Financial Statements
Note B - Summary of Significant Accounting Policies, page 7
Use of Estimates, page 8
26. Please revise to disclose management`s estimate of the stock
price volatility used in the valuation of the fair value of
options
granted.
Note C - Business Combinations, page 10
27. Please refer to our previous comment 45. Note that paragraph
7
of EITF 02-5 states that SEC registrants should continue to follow
the guidance in paragraph 3 when determining whether common
control
of separate entities exists even though paragraph 5 states that
the
EITF did not reach a consensus. Therefore, paragraph 3 of EITF
02-5
is applicable to your financial statements. From the schedule you
provided us in Exhibit B of your response, per review of the
Statement of Stockholder`s Equity included in Trulite, Inc.`s
financial statements, and the Investor Rights Agreement filed as
Exhibit 10.16, Trulite Technology LC and Trulite, Inc. are
entities
under common control at the date of combination for the following
reasons:
* Mr. Shurtleff owned the majority of Trulite Technology, LC and
retains the majority voting interest in Trulite, Inc. on July 22,
2004, the date on which the stock was issued to effect the
combination.
* The Investor Rights Agreement, which gives majority voting
interest
to CCP on certain matters, was not entered into until July 28,
2004.
Therefore, purchase accounting is not appropriate for this
transaction as stated in paragraphs 11 and D12 of SFAS 141.
Revise
your financial statements accordingly or provide us more
persuasive
evidence in support of your position.
28. Please refer to our previous comment 44. We note in your
response that preferred stock shares issued in the business
combination were valued in accordance with contemporaneous cash
issuances of those shares and common stock shares issued were
valued
according to a valuation performed by management. Please revise
your
financial statements to disclose the following information:
* Disclose if the contemporaneous cash issuances of the preferred
stock were with related parties. If so, disclose why you believe
that these issuances represent a true fair value of the preferred
stock issued.
* Disclose the methodology used by management to value the common
shares issued in this transaction and disclose the material
assumptions and judgments that were used to complete the
valuation.
29. Please refer to our previous comment 47. If you continue to
believe purchase accounting is appropriate, please revise your
disclosure to state the methodology used and assumptions and
judgments made in connection with estimating the fair value of
your
unpatented technology, specifically disclosing whether or not you
relied on an independent valuation.
30. Please refer to our previous comment 48. If you continue to
believe purchase accounting is appropriate, please revise your
disclosure to describe the specific nature of the unpatented
technology as it relates to your business. The general reference
in
your response to SFAS 141 is not persuasive evidence that this
asset
should be recorded in your statements of financial position.
These
appear to be R&D costs as described in SFAS 2. Furthermore,
based
upon your operating history, there is no evidence that these
amounts
will ever contribute to future revenues in either the near or long
term. Provide us a schedule of the components of this technology
that sets forth, for each component, the amounts accrued in each
quarter. Provide us any other information that supports the
recognition of this asset.
31. Please refer to our previous comment 49. If you continue to
believe purchase accounting is appropriate, please revise your
disclosure to state how you assess the unpatented technology for
impairment and what factors you consider in determining that the
asset is not impaired. We do not understand the basis for
assigning
unpatented, development stage technology an indefinite life.
Further, we do not believe it is appropriate to make such a
determination based on predictions. See our comment above and
tell
us in more detail the nature of the amounts accrued and how you
considered SFAS 2.
* * *
Closing Comments
As appropriate, please amend your registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested supplemental 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.
You may contact Rebekah Moore, Staff Accountant, at (202)
551-
3463 or Paul Cline, Senior Accountant at (202) 551-3851 if you
have
questions regarding comments on the financial statements and
related
matters. Please contact Gregory Dundas at (202) 551-3436 or me at
(202) 551-3698 with any other questions.
Sincerely,
Mark Webb
Legal Branch Chief
cc: David N. Feldman, Esq.
Feldman Weinstein LLP
420 Lexington Avenue, Suite 2620
New York, New York 10170
John Sifonis
Trulite, Inc.
March 10, 2006
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