WASTE TECHNOLOGY CORPORATION
Tel: (904)355-5558
(800)231-9286
Fax: (904)358-7013
April 14, 2006
Nili Shah
Accounting Branch Chief
Securities and Exchange Commission
1 Station Place, N.E., Stop 7010
Washington, D.C. 20549
Re: Waste Technology Corp.
Form 10-KSB for the fiscal year ended October 31, 2005 File No. 0-14443
Ladies and Gentlemen:
We are writing in response to your letter dated April 6, 2006 regarding your
review of the above referenced filing of Waste Technology Corporation (the
"Company").
Management's Discussion and Analysis, page 8.
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1. We note your current disclosure only discusses the factors that led to
changes in sales and net income year over year. In future filings,
please expand your MD&A to discuss the factors that contributed to any
material changes in gross margins and operating expenses. In this
regard we note that your margins have significantly fluctuated over the
past several years. Furthermore, we note that you previously agreed to
provide this disclosure in your letter dated April 9, 2003.
Response to Comment 1.
We note your comment and will include in future filings expanded MD&A
explanations for factors that contribute to significant changes in
gross margins and operating expenses. We would expect to revise our
MD&A in future filings as follows:
Gross margins declined from 20.9% in fiscal 2004 to 19.1% in 2005. The
change in gross margin was the result of higher material costs,
primarily steel, and a 30% increase in dealer sales which include
dealer discounts. The lower gross margin in fiscal 2003 included a
write-down of slow moving inventory of $250,000.
Note(i) Revenue Recognition, Page F-7
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2. We note from your disclosure on page 5 that you provide repair
services. Please tell us and include in future filings your revenue
recognition policy for repair services. We remind you that you
previously agreed to provide this disclosure in your letter to us dated
April 9, 2003.
Response to Comment 2.
5400 Rio Grande Avenue P.O. Box 6922 (zip 32236)
Jacksonville, Florida 32254 www.waste.tech.com
We note your comment and will include in future filings our policy on
service revenue. We would expect to supplement our disclosure in future
filings as follows:
The Company recognizes revenue from repair services in the period in
which the service is provided.
Note 7 Commitments and Contingencies, Page F-10
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3. In your disclosure under legal proceedings on page 7, you disclose that
an estimate of the potential range of loss cannot be made relating to
the legal action filed in March 2005. Please tell us how you made this
determination given that you know the plaintiffs are seeking damages of
$820,000 through March 21, 2005 and an additional $91,550 per month
from that day forward.
If you should conclude the amount of loss or a range of losses can be
reasonably estimated, tell us how you considered paragraph 8 of SFAS 5.
Furthermore, in future filings, please provide the required disclosures
of paragraphs 9 and 10 of SFAS 5 as part of your audited footnote for
commitments and contingencies.
Response to Comment 3.
We determined the range of potential loss was estimated to be from $0
to the amount of damages included in the complaint. In consultation
with our legal counsel we were unable to determine a more definite
amount. We stated what damages the plaintiff was seeking in the
disclosure of our potential liability.
As reported in our 10-QSB for the quarter ended January 31, 2006, Note
9 Legal Proceedings, in February 2006 the court granted the Company's
motion for summary judgement related to the breach of express warranty
and dismissed the Company from the lawsuit. Our legal counsel believes
that the plaintiff will appeal the Judgement of Dismissal. We will
continue to update our filings based on the current progression of
facts.
Our counsel has indicated that the plaintiff's success in winning an
appeal will be difficult. In any event, we will make our best effort to
disclose the potential loss related to this or any other lawsuits
appropriately.
The Company acknowledges that it is responsible for the adequacy and
accuracy of the disclosure of the Company's filings. We also
acknowledge that comments or changes to disclosure in response to
comments of the staff of the Securities and Exchange Commission do not
foreclose the Commission from taking any action with respect to the
Company's filing. Finally, the Company agrees that it may not assert
staff comments as a defense in any proceeding initiated by the
Commission or any person under Federal Securities Laws of the United
States.
Sincerely
/s/ William E. Nielsen
William E. Nielsen
President & CEO