SOL V. SLOTNIK, P.C.
11 EAST 44TH STREET-19TH FLOOR
NEW YORK, NEW YORK 10017
TEL. (212) 687-1222
FAX (212) 986-2399
January 21, 2010
United States Securities and Exchange Commission
Division of Corporation Finance
100 F Street N.E.
Washington, D.C. 20549-4631
ATTN: Mr. Rufus Decker, Accounting Branch Officer
and Mr. Jeffrey Gordon, Staff Accountant
Mail Stop 4631
RE: N-Viro International Corporation
Form 10-K for the year ended December 31, 2008
Forms 10-Q for the periods ended March 31, 2009, June 30, 2009 and September 30,
2009
File No. 0-21802
Dear Mr. Decker and Mr. Gordon:
This letter is a response to your letter of comments dated December 14,
2009 (the "Letter") concerning the Annual Report on Form 10-K for the year ended
December 31, 2008 (the "2008 Annual Report") of N-Viro International Corporation
(the "Company" or "N-Viro"). This letter also addresses certain comments in the
Letter directed to the Company's quarterly reports on Forms 10-Q for the periods
ended March 31, 2009, June 30, 2009 and September 30, 2009 (the "2009 Quarterly
Reports").
The Letter stated in relevant part on page 3:
"Please respond to this comment 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 response to our
comment and provides any requested information."
Please be advised that as I informed each of you in separate telephone
conversations at the end of December 2009 (with Mr. Decker) and earlier this
month and again today (with Mr. Gordon), the Company has prepared the requested
amendment to the 2008 Annual Report. A copy of the proposed language is set
forth below later in this letter. The Company will file the amendment as soon
as it has satisfied certain outstanding obligations to its accountants so that
they can review the amendment and give their consent as an exhibit to the
filing. In order to avoid unnecessary duplication of filings and expense the
Company will file the amendments for the Forms 10-Q as soon as the staff has
indicated there will be no further comments on the proposed amendment to the
Form 10-K. The remainder of this letter constitutes the Company's reply to the
substantive comment in the Letter.
The item number below corresponds to the item number in the Letter. For
convenience we have reproduced the text of each comment and provided the
Company's response immediately below the text. We also have included the
specific language for Item 9A(T) the Company will file in the amendment.
United States Securities and Exchange Commission
January 21, 2010
Page 2
FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2008
----------------------------------------------
Item 9A(T) - Controls and Procedures
- ------------------------------------
Evaluation of Disclosure Controls and Procedures
- ------------------------------------------------
1. Please amend your Form 10-K for the year ended December 31, 2008 and your
subsequent Forms 10-Q to state the conclusions of your principal executive and
financial officers regarding whether your disclosure controls and procedures are
effective or not effective. See Item 307 of Regulation S-K. Please also remove
your disclosure implying that the cost-benefit relationship of possible controls
and procedures is part of your effectiveness assessment. While cost-benefit may
be a reason a company has disclosure controls and procedures that are not
effective, it is not something that should be considered in concluding that
disclosure controls and procedures are effective.
REPLY: The Company has added language stating the conclusions of its
principal executive officer and principal financial officer regarding the
effectiveness of its disclosure controls and procedures. The Company also has
removed the disclosure implying that the cost-benefit relationship of possible
controls and procedures is part of the Company's effectiveness assessment.
The specific language for the amended Item is set forth below in its
entirety.
ITEM 9A(T). CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
"We maintain disclosure controls and procedures (as defined in Rule
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) that are
designed to ensure that information required to be disclosed in our Exchange Act
reports is recorded, processed, summarized and reported within the time periods
specified in the Commission's rules and forms, and that such information is
accumulated and communicated to our management, including our principal
executive officer and principal financial officer, as appropriate, to allow
timely decisions regarding required disclosures. In designing and evaluating
the disclosure controls and procedures, management recognized that any controls
and procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control objectives.
"As of the end of the period covered by this report, management carried out
an evaluation, under the supervision and with the participation of our principal
executive officer and principal financial officer, of our disclosure controls
and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange
Act). Based upon the evaluation, out principal executive officer and principal
financial officer concluded that our disclosure controls and procedures were
effective at a reasonable assurance level to ensure that information we are
required to disclose in the reports that we 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.
"Because of the inherent limitations in all disclosure control systems, no
evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any, will be or have been
United States Securities and Exchange Commission
January 21, 2010
Page 3
detected. These inherent limitations include the realities that judgments in
decision-making can be faulty and that breakdowns can occur because of simple
error or mistake. Additionally, disclosure controls can be circumvented by the
individual acts of some persons, by collusion of two or more people and/or by
management override of such controls. The design of any system of disclosure
controls also is based in part upon certain assumptions about the likelihood of
future events, and there can be no assurance that any design will succeed in
achieving its stated goals under all potential future conditions. Over time,
disclosure controls and procedures may become inadequate because of changes in
conditions, and/or the degree of compliance with the policies and procedures may
deteriorate. Also, misstatements due to error or fraud may occur and not be
detected.
MANAGEMENT'S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
"Our management is responsible for establishing and maintaining adequate
internal control over financial reporting. Our internal control over financial
reporting is designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of consolidated financial statements
for external purposes in accordance with generally accepted accounting
principles.
"Under the supervision and with the participation of our management,
including our Chief Financial Officer and Chief Executive Officer, we conducted
an evaluation of the effectiveness of our internal control over financial
reporting based on the framework established by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) as set forth in Internal Control
- - Integrated Framework. Based on our evaluation, our principal executive
officer and our principal financial officer concluded that our internal controls
over financial reporting were not effective as of December 31, 2008 for the
reasons described below.
"As stated in our Form 10-KSB for the year ended December 31, 2007, we
reported that, based on the assessment of our principal executive officer and
principal financial officer, our internal controls over financial reporting were
not effective as of December 31, 2007. We identified the following material
weakness:
"We lacked personnel in accounting and financial staff to sufficiently
monitor and process financial transactions in an efficient and timely manner.
Our history of losses has severely limited our budget to hire and train enough
accounting and financial personnel needed to adequately provide this function.
Consequently, we lacked sufficient technical expertise, reporting standards and
written policies and procedures. This has resulted in a significant number of
immaterial out-of-period adjustments to our consolidated financial statements.
Specifically, controls were not effective to ensure that significant non-routine
transactions, accounting estimates, and other adjustments were appropriately
reviewed, analyzed and monitored by competent accounting staff on a timely
basis.
"We continue to develop and implement a remediation plan to address the
material weakness. To date, our remediation efforts have included adoption of
an expense reimbursement policy and the hiring of an employee to assist in the
financial area of our business. However, due to our continuing lack of
financial resources to hire and train accounting and financial personnel, we
have not yet fully remedied this material weakness.
"During the quarter ended December 31, 2008, there were no materials
changes in the Company's internal control over financial reporting that have
materially affected, or are reasonably likely to materially affect, the
Company's internal control over financial reporting.
United States Securities and Exchange Commission
January 21, 2010
Page 4
"While we are not aware of any material errors to date, our inability to
maintain the adequate internal controls may result in a material error in our
financial statements. Further, because of its inherent limitations, internal
controls over financial reporting may not prevent or detect misstatements. It
should be noted that any system of controls, however well designed and operated,
can provide only reasonable, and not absolute, assurance that the objectives of
the system will be met. In addition, the design of any control system is based
in part upon certain assumptions about the likelihood of future events. Also,
projections of any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may
deteriorate.
This annual report does not include an audit or attestation report of our
registered public accounting firm regarding our internal control over financial
reporting. Our management's report was not subject to audit or attestation by
our registered public accounting firm pursuant to temporary rules of the SEC
that permit us to provide only management's report in this annual report."
As noted above, the Company intends to file the amendment as soon as
possible. The Company hereby acknowledges that the Company is responsible for
the adequacy and accuracy of the disclosure in their filings; 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.
Please write or call the undersigned at (212) 687-1222 with any comments
the staff may have with regard to this letter or the amendment as proposed.
Thank you.
Sincerely yours,
/s/ Sol V. Slotnik
- -------------------
Sol V. Slotnik, P.C.
Cc: w/encl. Mr. James K. McHugh, Chief Financial Officer