[LETTERHEAD]
June 15, 2005
United States Securities and Exchange Commission
Division of Corporation Finance
100 F. Street NE
Washington, D.C. 20549
ATTN: Pamela A. Long
Bret Johnson
John Cash
Brigitte Lippman
Lesli Sheppard
Re: Source Direct Holdings, Inc.
Registration Statement on Form SB-2
Originally Filed on May 5, 2005
SEC File No. 333-124669
Ladies and Gentlemen:
We refer you to the letter of the staff of the Commission (the "Staff") dated
May 31, 2005 (the "Comment Letter"), with regard to the registration statement
(the "Registration Statement") referenced above filed by Source Direct Holdings,
Inc. ("Source Direct" or the "Company). This letter is directed to you on behalf
of the Company and contains its responses to the Staff's comments set forth in
the Comment Letter.
By way of information, since the filing of the Registration Statement on May 5,
2005, the Company filed on May 18, 2005, a quarterly report on Form 10-QSB for
the quarter ended March 31, 2005. The Company subsequently filed an amendment to
the quarterly report on June 10, 2005, on Form 10-QSB/A (the "Quarterly
Report"), to correct certain typographical errors and to clarify certain items
in the Management's Discussion and Analysis section. The Company has updated the
financial information in the Registration Statement to reflect the information
included in the Quarterly Report.
For the convenience of the Staff, the Company has included three clean copies
and three redlined copies of the Registration Statement showing changes to the
Registration Statement in response to the Comment Letter and in connection with
the filing of the Quarterly Report. Additionally for your convenience, the
Staff's comments from the Comment Letter
United States Securities and Exchange Commission
June 15, 2005
Page 2
have been restated below and are followed by the Company's responses.
General
1. We note that your officers and directors file Section 16 reports and that
your most recent Form 10-KSB states that your common stock is registered
pursuant to Section 12(g) of the Exchange Act. However we do not see the form
you have filed to register your class of common stock under the Exchange Act.
Please advise.
Response to Comment 1.
The Company has filed an amendment to its annual report on Form
10-KSB/A for the year ended June 30, 2004, to remove the reference to
securities registered pursuant to Section 12(g) of the Exchange Act.
(The filing of the amended annual report was made on June 10, 2005.)
Signature Page
2. If true, please identify Deren Smith as your principal executive officer and
Kevin Arave as your principal financial and principal accounting officer.
Response to Comment 2.
The Company has revised the signature page as requested.
Report of Independent Registered Public Accounting Firm
3. Have your auditors revise their report to include the conformed signature
which exactly matches the name of the audit firm registered with the PCAOB.
Additionally, please review for correctness the footnote reference presented in
the fourth paragraph of their report.
Response to Comment 3.
Mantyla McReynolds has revised the conformed signature to match its
name as registered with the PCAOB. Additionally, Mantyla McReynolds has
revised the final paragraph to refer to Note E rather than to Note D.
The corrected version of the audit report is included with the
financial statements which are a part of the Registration Statement.
4. We note your auditors, Mantyla McReynolds, LLC, are duly registered and in
good standing to practice in Utah. However, Mantyla McReynolds is not currently
licensed in Idaho where your company is located. Tell us why you selected a Utah
based accounting firm to
United States Securities and Exchange Commission
June 15, 2005
Page 3
audit the financial statements of an Idaho based company. Tell us if the audit
was physically performed in Utah or Idaho. Also, confirm to us that the
operations and assets of your company are physically located in Idaho. Please
note that it is your responsibility to provide financial statements audited by
an auditor who meets the requirements of Rule 2-01(a) of Regulation S-X. Tell us
how you have met the requirements of Rule 2-01(a) of Regulation S-X. Also tell
us what consideration you gave to Idaho state laws governing audits of Idaho
companies performed by accountants from other states.
Response to Comment 4.
o By way of background information, when Source Direct, Inc. (an Idaho
corporation), merged with Global-Tech Capital Corp. (a Nevada
corporation and public company) in October 2003, the surviving entity,
whose name was changed to Source Direct Holdings, Inc., was working
with several consultants who recommended that the Company use Mantyla
McReynolds as its independent public accounting firm. The officers of
the Company attempted to locate an accounting firm located in Idaho
Falls, Idaho, to serve as the independent public accounting firm for a
public company but was unable to locate one, and followed the
recommendation of the consultants. The Company has continued to work
with Mantyla McReynolds since the merger.
o Mantyla McReynolds informed the Company that it performed most of the
audit procedures in its office in Salt Lake City, Utah. However,
Mantyla McReynolds performed limited procedures in Idaho consisting of
an observation of the inventory and certain other assets located at
the facility. Further, while in Idaho, Mantyla McReynolds examined
supporting documentation for selected transactions as part of its
testing of liabilities, asset acquisitions and expense detail.
o The Company confirms that its operations and assets are located in
Idaho Falls, Idaho.
o Upon review of Rule 2-01(a), the Company inquired of Mantyla
McReynolds about whether they are "duly registered and in good
standing as such under the laws of the place of his residence or
principal office." They indicate that they currently are and were duly
registered and in good standing during the performance of the audit.
The Company has also contacted the Idaho State Board of Accountancy,
which has told the Company that they require a temporary practice
privilege for out-of-state CPAs who wish to practice in Idaho. The
Board of Accountancy suggested that the Company have its auditors
complete an application and pay the required fee. The Idaho Board of
Accountancy indicated that the qualifications for licensure in Utah
are at least as stringent as they are in Idaho. Mantyla McReynolds
stated that typically they
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June 15, 2005
Page 4
obtain a temporary license when they perform audits out of state.
However, as an oversight, in the case of the Company's audit, the
auditors failed to obtain a temporary practice privilege for Idaho.
Upon realization of this oversight, Mantyla McReynolds promptly
applied for practice privileges in Idaho, and has been notified that
its application for Idaho Practice Privileges was approved.
With respect to the audit for the 2004 fiscal year end, the Idaho
Board of Accountancy Administrative Rule 303 allows an individual to
work up to 10 days performing accounting work without a practice
privilege. This exception applies per person, and not per firm.
Mantyla McReynolds has informed the Company three professionals worked
on the engagement including one individual who worked two days in
Idaho. The remainder of the work was performed in Utah. None of
Mantyla McReynolds' personnel exceeded the 10 day limit, and
accordingly, the exemption under Administrative Rule 303 would appear
to cover the work performed. Additionally, as noted above, with
respect to future work to be performed for the Company, Mantyla
McReynolds has applied for and received practice privileges in Idaho.
Conclusion
Effectiveness of the Registration Statement is critical to the Company. As such,
the Company respectfully requests the Staff to review the response letter as
quickly as possible, with a view to the Commission allowing the registration
statement to go effective as early as June 20, 2005, or as soon thereafter as is
reasonably practical. The Company will file a formal request for acceleration of
effectiveness upon confirmation from the Staff that no further revisions to the
registration statement are required.
Please contact me (801-415-3056) with any additional questions or comments.
Thank you for your assistance in this matter.
Very truly yours,
DURHAM JONES & PINEGAR
/s/ C. Parkinson Lloyd
C. Parkinson Lloyd
cpl/