Mail Stop 7010
May 9, 2006
via U.S. mail and facsimile
Richard E. Trewhella
Corporate Controller & Treasurer
Glassmaster Company
P.O. Box 788
Lexington, SC 29071
Re: Glassmaster Company
Form 10-KSB for the fiscal year ended August 31, 2005
Forms 10-QSB for period ended December 4, 2005 and March
5,
2006
File No. 0-2331
Dear Mr. Trewhella:
We have reviewed your response letters dated May 2, 2006 and
May 3, 2006, and have the following additional comments. Where
indicated, we think you should revise your document or revise your
document in future 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.
General
1. We note your letter dated May 3, 2006, regarding your request
to
remove the OTCBB Delinquency Notification from your record. As
discussed in a call on May 8, 2006, your request should be
discussed
with the NASD. Please also be advised that Regulation S-T
requires
the filing of Form 12b-25 on EDGAR. In addition, please also be
advised that your second quarter 10-QSB appears on EDGAR with a
filing date of April 25, 2006, which is one day past the five day
extension deadline, had your Form 12b-25 been timely filed on
EDGAR.
2. Where we have asked in our comments below for you to disclose
information in future filings, please specifically confirm that
you
will do so, as part of your response.
Form 10-KSB for the year ended August 31, 2005
Management`s Discussion and Analysis, page 6
Review of Operations, page 6
3. We have reviewed your response to comment 1 in our letter dated
April 4, 2006. You indicate that a large portion of business has
moved overseas. In future filings, please quantify and disclose
the
impact this move has had for each period presented or will have on
your results of operations, financial position, and cash flows.
Liquidity and Capital Resources, page 9
4. We note your response to prior comment 2 in our letter dated
April
4, 2006. We requested the remaining amounts available under your
credit lines, not the maximum amounts available under your credit
lines. Based on your disclosure, we note that the maximum amounts
available under your two credit lines are $2.5 million and $1.15
million. However, we also note your disclosure that you had
amounts
outstanding as of March 5, 2006 of $2.6 million and $0.9 million.
Accordingly, please tell us and disclose in future filings, the
remaining amounts available under your credit lines.
5. We have reviewed your response to comment 4 in our letter dated
April 4, 2006. We are re-issuing the first, third and fourth
bullets
of our original comment, given your response did not address our
inquiries. That is:
* In note 6, please clearly identify the appropriate debt as
convertible.
* Tell us how you are accounting for these various features,
specifically your conversion feature and how you considered the
guidance in SFAS 133, EITF 00-19, EITF 98-5 and EITF 00-27.
* Please also provide us with a copy of your subordinated
convertible
debenture indentures and tell us whether this contract is a
material
contract that should be filed as an exhibit pursuant to Item
601(b)(10) of Regulation S-B. In this regard, it does not appear
to
be filed as an exhibit to your Form 10-KSB or your Form 10-QSB.
Item 14. Controls and Procedures, page 11
6. We have reviewed your response to comment 5 in our letter dated
April 4, 2006. However, we note these revisions have not been
appropriately applied to your second quarter Form 10-QSB.
Therefore,
in future filings, please expressly indicate in your disclosure
that
the date as of when the evaluation made by your principal
executive
officer and principal financial officer is the date as of the end
of
the period covered by each report. Furthermore, please expressly
disclose that, if true, your disclosure controls and procedures
were
effective to ensure that information required to be disclosed by
you
in the reports that you file or submit under the Exchange Act is
recorded, processed, summarized and reported, within the time
periods
specified in the SEC`s rules and forms, and that your disclosure
controls and procedures are also effective to ensure that
information
required to be disclosed by you in the reports you file or submit
under the Exchange Act is accumulated and communicated to your
management, including your principal executive and principal
financial officers, or persons performing similar functions, as
appropriate to allow timely decisions regarding required
disclosure.
7. We have reviewed your response to comment 6 in our letter dated
April 4, 2006. However, we note these revisions have not been
appropriately applied to your second quarter Form 10-QSB.
Therefore,
in future filings, please expressly disclose any change in your
internal control over financial reporting identified in connection
with the evaluation required by paragraph (d) of Exchange Act
Rules
13a-15 or 15d-15 that occurred during the last fiscal quarter that
has materially affected, or is reasonably likely to materially
affect, your internal control over financial reporting.
Certifications, page 12-14
8. We have reviewed your response to comment 7 in our letter dated
April 4, 2006. However, we note these revisions have not been
appropriately applied to your second quarter Form 10-QSB.
Therefore,
please amend your Form 10-KSB for the year ended August 31, 2005,
and
your subsequent Forms 10-QSB for the quarter ended December 4,
2006
and March 5, 2006 to conform your section 302 certifications
exactly
to Item 601(b)(31) of Regulation S-B. Please also tell us when
you
will file your amended documents.
Consolidated Statement of Cash Flows, page 20
9. We have reviewed your response to comment 8 in our letter dated
April 4, 2006. In light of the materiality of this
misclassification, when you amend your 2005 Form 10-KSB and your
Forms 10-QSB for fiscal 2006, in response the comment above,
please
restate your statement of cash flows to reflect the
reclassification
of the payments for the renewal fees to financing activities.
In addition, please be advised that you are required to disclose
the
information listed under Item 4.02(a) of Form 8-K within four days
of
your conclusion regarding the nonreliance of previously issued
financial statements due to the error in your statement of cash
flows.
Further, we remind you that when you file your amended Form 10-KSB
and Forms 10-QSB, you should appropriately address the following
with
respect to the error in your statement of cash flows:
* an explanatory paragraph in the reissued audit opinion,
* full compliance with SFAS 154, paragraphs 25 and 26,
* fully update all affected portions of the document, including
MD&A,
* updated Item 14 disclosures in Form 10-KSB and Item 3
disclosures
in Forms 10Q-SB should include the following:
o a discussion of the restatement and the facts and
circumstances
surrounding it,
o how the restatement impacted the CEO and CFO`s original
conclusions regarding the effectiveness of their disclosure
controls
and procedures,
o changes to internal controls over financial reporting, and
o anticipated changes to disclosure controls and procedures
and/or
internal controls over financial reporting to prevent future
misstatements of a similar nature.
Refer to Items 307 and 308(c) of Regulation S-K.
* updated certifications.
Note 8 - Income Taxes, page 27
10. We have reviewed your response to comment 13 in our letter
dated
April 4, 2006. Please confirm you will disclose your rate
reconciliation in future filings.
11. We have reviewed your response to comment 14 in our letter
dated
April 4, 2006. In future filings, please disclose the following
in
your management`s discussion and analysis:
* the reasons for the change in your deferred tax asset valuation
allowance.
* why the estimated amount of the gain in South Carolina
associated
with your tax planning strategy changed from the prior year to the
current year.
* how you estimated the taxable gain associated with your tax
planning strategy, including any assumptions that are reasonably
likely to change.
12. We have reviewed your response to comment 15 in our letter
dated
April 4, 2006. You refer us to Schedules A and B for the amounts
and
expiration dates of your NOL`s segregated by year and
jurisdiction.
Please provide said schedules as a correspondence file on EDGAR.
In addition, please confirm you will disclose this information in
future filings.
Note 13 - Business Segments, page 30
13. We have reviewed your response to comment 16 in our letter
dated
April 4, 2006. You state that all information your chief
financial
officer receives is disclosed in the 10-KSB as well as the
quantitative analysis and that you conform to SFAS 131 paragraphs
15
and 17. This statement does not adequately address the points
listed
in our comment. Therefore, we are re-issuing the original
comment.
Also, please tell us who your chief operating decision maker is.
Refer to paragraph 12 of SFAS 131. It is unclear why your CFO, as
opposed to your CEO, would be your chief operating decision maker.
In addition to fully responding to our original comment, we remind
you that we expect you to:
* explain to us in detail how you have applied paragraphs 10 and
17
of SFAS 131, and
* provide us with copies of the actual reports received by your
chief
operating decision maker, who may or may not be your chief
financial
officer.
Note 15 - Purchase of Business Assets, page 32
14. We have reviewed your response to comment 17 in our letter
dated
April 4, 2006. We re-issue the second bullet of our original
comment. That is, please tell us the factors you considered in
concluding that no intangible assets such as trademarks, customer
relationships, or goodwill required recognition under paragraphs
39
and 43-45 of SFAS 141.
Form 10-QSB for the period ended December 4, 2005
Management`s Discussion and Analysis, page 9
Results of Operations, page 9
15. We note your response to prior comment 20 in our letter dated
April 4, 2006, which states that there were no changes in other
income and other expense on a gross basis. However, we note that
other income and expense - net increased from $144 for the three
months ended December 5, 2004, to $230 for the three months ended
December 4, 2005. Further, we note that other income and expense
- -
net increased from $144 for the three months ended March 6, 2005,
to
$172 for the three months ended March 5, 2006. Accordingly, as
previously requested in our letter dated April 4, 2006, and as
previously agreed to in your letter dated March 10, 2003, please
tell
us and disclose, in future filings, the reasons for the changes in
other income and, separately, in other expense, from period to
period.
* * * *
As appropriate, please amend your filing and respond to
these
comments within 10 business days or tell us when you will provide
us
with a response. Please furnish a letter that keys your responses
to
our comments and provides any requested information. Detailed
response letters greatly facilitate our review. Please file your
response letter on EDGAR. Please understand that we may have
additional comments after reviewing your responses to our
comments.
You may contact me at (202) 551-3255, if you have questions
regarding comments on the financial statements and related
matters.
Sincerely,
Nili Shah
Accounting Branch Chief
Mr. Richard E. Trewhella
Corporate Controller & Treasurer
Glassmaster Company
May 9, 2006
Page 6
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-7010
DIVISION OF
CORPORATION FINANCE