January 30, 2006
VIA TELEFAX (202) 772-9206
Ms. Babette Cooper
United States Securities and Exchange Commission
100 F Street, NE
Mail Stop 3561
Washington, DC 20549
RE: Fit for Business International, Inc.
SEC File No. 333-122176
Dear Ms. Cooper:
We represent Fit for Business International, Inc. ("FFB"). Per our discussion,
enclosed is FFB's proposed response to the SEC questions received from the
Commission on January 20, 2006. Specifically, we respectfully request your
review of Question 3 whereby FFB has presented its position regarding the SEC's
question.
Although you have indicated to me that the question will be reviewed in due
course, we respectfully request that you expedite your review since FFB is
trying to go effective by February 14, 2006. Thank you for your attention to
this matter.
Very truly yours,
ANSLOW & JACLIN, LLP
By: /s/ RICHARD I. ANSLOW
-------------------------
RICHARD I. ANSLOW
RIA/
Encls.
cc: Fit for Business International, Inc.
Ted Davis, CPA
Response to January 30, 2006 Comment Letter Page 1 of 5
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Comment 3:
- ----------
It appears that Fort Street Equity, a principal stockholder, granted the options
to third parties and your employees on your behalf and that you should recognize
the applicable compensation in your financial statements in accordance with SAB
Topic 5.T. We note that you rely upon Fort Street Equity to provide cash to
finance your operations via the promissory notes. We also believe that you would
not be able to obtain financing from another party under the favorable terms
that Fort Street provides due to your status as a development stage entity with
no significant operating history and weak financial condition. Accordingly, it
appears to us that Fort Street is a principal stockholder as defined by
paragraph 395 of SFAS 123 based upon its status as your largest source of cash
flow, which we believe gives it the ability to significantly influence you.
Please revise the financial statements to recognize compensation for the options
granted by Fort Street Equity and provide all disclosures required by paragraphs
45-48 of SFAS 123, as applicable. For purposes of determining the fair value of
the options granted (and volatility), please note that you became a public
entity upon the initial filing of the SB-2 in March 2005.
Answer:
- -------
As a foundation for response to this comment, the management of FFBI states and
reaffirms that the Company is engaged in a registration process with the SEC as
a small business registrant for financial reporting and other purposes under
Regulation SB, and has filed its initial Registration Statement on Form SB-2 in
March 2005, and all subsequent amendments thereto, as such. Given this status as
a small business registrant, the Company is subject to the accounting rules as
contained in SFAS 123 and APB Opinion No. 25, and related interpretations, until
reporting periods that commence subsequent to December 15, 2005, after which
time, it will be subject to the accounting rules as contained in SFAS 123R. The
Company also recognizes SAB Topic 5.T. (prior to amendment by SAB No. 107 for
SFAS 123R) as authoritative guidance on this matter, and in formulating its
answer to this comment.
Background-
The management of FFBI believes that the following citations and information are
relevant to its assertions and conclusions regarding comment 3:
FASB Interpretation ("FIN") No. 44 adopts a common law approach to the
definition of "employee" and concludes that an individual is an employee of a
grantor if the grantor exercises or has the right to exercise sufficient control
over that individual to establish an employer-employee relationship (underline
provided). Paragraph 5 of FIN 44 includes the following definition of an
employee for purposes of applying Opinion 25 (underline provided):
A grantee is an employee if the grantor exercises or has the right to
exercise sufficient control over that individual to establish an
employer-employee relationship. That relationship shall be determined based
on common law as illustrated in case law and currently under the U.S.
Internal Revenue Service Revenue Ruling 87-41 (underline provided).
Accordingly, for purposes of applying Opinion 25, a grantee meets the
definition of an employee if the grantor consistently represents that
individual to be an employee under common law (underline provided). The
definition of an employee for payroll tax purposes under the U.S. Internal
Revenue Code includes common law employees.
As a result of the above, it is understood that it is not appropriate to apply
APB Opinion No. 25 accounting to stock options granted to nonemployees
(underline provided).
Response to January 30, 2006 Comment Letter Page 2 of 5
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SFAS 123, paragraph 8, states the following: "Except for transactions with
employees that are within the scope of Opinion 25, all transactions in which
goods or services are the consideration (underline provided) received for the
issuance of equity instruments shall be accounted for based on the fair value of
the consideration received or the fair value of the equity instruments issued,
whichever is more reliably measurable."
SFAS 123, paragraph 15, states the following: "Equity instruments granted or
otherwise transferred directly to an employee by a principal stockholder are
stock-based employee compensation to be accounted for the entity under either
Opinion 25 or this Statement, whichever method the entity is applying, unless
the transfer clearly is for a purpose other than compensation9 (underline
provided).
9That accounting has been required since 1973 in accordance with AICPA
Accounting Interpretation 1, "Stock Plans Established by a Principal
Stockholder," of Opinion 25."
Under AICPA Accounting Interpretation No. 25 - Accounting for Stock Issued to
Employees: Accounting Interpretations of APB Opinion No. 25, Interpretation 1 -
Stock Plans Established by a Principal Stockholder, it states the following:
"Question - Accounting for compensatory and noncompensatory stock
option, purchase and award plans adopted by a corporation is discussed
in APB Opinion No. 25 and ARB No. 43, Chapter 13B. Should a corporation
account for plans or transactions ("plans"), if they have
characteristics otherwise similar to compensatory plans adopted by
corporations (underline provided), that are established or financed by
a principal stockholder (i.e. one who either owns 10% or more of the
corporation's common stock or has the ability, directly or indirectly,
to control or influence significantly the corporation)?
Interpretation - It is difficult to evaluate a principal stockholder's
intent when he establishes or finances a plan with characteristics
otherwise similar to compensatory plans generally adopted by
corporations (underline provided). A principal stockholder may be
satisfying his generous nature, settling a moral obligation, or
attempting to increase or maintain the value of his own investment. If
a principal stockholder's intention is to enhance or maintain the value
of his investment by entering into such an arrangement, the corporation
is implicitly benefiting from the plan by retention of, and possibly
improved performance by, the employee (underline provided). In this
case, the benefits to a principal stockholder and to the corporation
are generally impossible to separate. Similarly, it is virtually
impossible to separate a principal stockholder's personal satisfaction
from the benefit to the corporation. Accounting Principles Board
Statement No. 4, Basic Concepts and Accounting Principles Underlying
Financial Statements of Business Enterprises, paragraph 127 states that
"Financial accounting emphasizes the economic substance of events even
though the legal form may differ from the economic substance and
suggest different treatment."
The economic substance of this type of plan is substantially the same
for the corporation and the employee, whether the plan is adopted by
the corporation or a principal stockholder. Consequently, the
corporation should account for this type of plan when one is
established or financed by a principal stockholder unless (underline
provided) (1) the relationship between the stockholder and the
corporation's employee is one which would normally result in generosity
Response to January 30, 2006 Comment Letter Page 3 of 5
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(i.e. an immediate family relationship), (2) the stockholder has an
obligation to the employee which is completely unrelated to the
latter's employment (underline provided) (e.g. the stockholder
transfers shares to the employee because of personal business
relationships in the past, unrelated to the present employment
situation, or (3) the corporation clearly does not benefit from the
transaction (e.g. the stockholder transfers shares to a minor employee
with whom he has had a close relationship over a number of years).
This type of plan should be treated as a contribution to capital by the
principal stockholder with the offsetting charge accounted for in the
same manner as compensatory plans adopted by corporations (underline
provided)."
Facts Regarding the Transactions of Fort Street Equity-
The following table illustrates the option purchase transactions between Fort
Street Equity and various nonemployees and employees:
Table 1 - Fit For Business International, Inc.
Summary of Stock Options Purchased from Fort Street Equity
Goods/
Period of No. of Percent Employee Services
Date Exercise Purchasing Party Options of Total Status Provided
- ----------- ------------ --------------------------------- --------- ---------- ---------- ----------
6/14/2005 6.5 months Bruce Gilling 50,000 8.8% None None
8/26/2005 4.0 months Kelly Superannuation Fund 16,666 2.9% None None
9/23/2005 3.5 months Keith Appleby 16,666 2.9% None None
5/10/2005 7.5 months Ralston Superannuation Fund 100,000 17.7% Related to None
Officer &
Employee
8/19/2005 4.5 months Mark Hoey 66,666 11.8% None None
9/26/2005 3.0 months Neil Wendt 25,000 4.4% Related to None
Officer &
Employee
--------- ----------
Total options purchased - Nonemployees 274,998 48.6%
--------- ----------
Employees of FFBI:
7/1/2005 6.0 months Therese Mulherin (1) 277,576 49.0% Part-time None
employee
9/14/2005 3.5 months Sandra L. Wendt 13,420 2.4% Officer & None
Employee
--------- ----------
Total options purchased - Employees 290,996 51.4%
--------- ----------
Grand total 565,994 100.0%
========= ==========
(1) Part-time, administrative employee; Not an officer or
Director of FFBI.
Response to January 30, 2006 Comment Letter Page 4 of 5
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FFBI is of the opinion that the information presented in the Table 1 above is
"not characteristic or otherwise similar to compensatory plans generally adopted
by corporations", for the following reasons:
a. It is the opinion of FFBI that Fort Street Equity is not a
principal stockholder (as per SFAS 123, paragraph 395) even under
the SEC assertion in Comment 3 that Fort Street exercises
significant influence over the Company from a cash flow
perspective. This is illustrated by the fact that FFBI has
completed over $52,000 of debt transactions (two separate loan
transactions) since September 30, 2005, that did not involve
option purchase transactions or Fort Street. These two
transactions indicate that FFBI is not dependent upon Fort Street
for its cash needs considering its development stage and/or level
of financial weakness.
b. Six out of a total of eight option purchase transactions were
completed by individuals or entities that were not employees of
FFBI (per APB 25), and for which no goods or services were
provided as part of their respective transactions (per SFAS 123).
As such, it is the opinion of FFBI that such transactions do not
fall under the rules for consideration as stock options provided
under a plan by a principal stockholder (SAB Topic 5.T. and
Interpretation No. 1 to APB 25) or the rules for fair value
accounting as per SFAS 123 to be recognized by FFBI in its
financial statements.
c. Of the two option purchase transactions completed by employees,
one transaction (with Ms. Mulherin), representing 49% of the total
options purchased from Fort Street, was completed by a part-time
administrative employee who, at the time of the option purchase,
had less that two weeks of employment history with FFBI. As such,
FFBI is of the opinion that this transaction, and each of the
other seven option purchase transactions, had nothing to do with
employee compensation as provided in SFAS 123, paragraph 15.
Further, FFBI is of the opinion that all of the eight option
transactions with Fort Street Equity represented separate
obligations and consideration, and had nothing to do with
employment matters such as employee retention, employee
motivation, future compensation or other aspects associated with
conventional compensatory stock option plans of corporations.
d. The second option purchase transaction completed by an Officer and
Director of FFBI (Ms. Wendt) only represented 2.4% of the total
options purchased from Fort Street. As such, FFBI is of the
opinion that this transaction is immaterial to the determination
of whether or not a plan was put in place by a principal
stockholder, and, per reason a. above, that Fort Street was not
acting in the capacity of a principal stockholder to provide such
a plan. In addition, as noted in the Registration Statement on
Form SB-2, Amendment 9, all officers and directors of the Company
are covered by individual employment agreements which provide
detail as to compensation, term of employment, and other matters.
Only the employment agreement of Mr. Ralston discusses the grant
of stock options, and indicates that Mr. Ralston shall receive
stock options in a specified amount, when and if such a plan is
adopted by the Company. The Company has not yet adopted such a
plan, nor believes that any of its stockholders have provided such
a plan.
e. The dates of the respective option purchases from Fort Street
provide, in all instances, for a term of less than 7.5 months to
the date of the initial expiration of the options including the
remaining options not sold by Fort Street (December 31, 2005, and
Response to January 30, 2006 Comment Letter Page 5 of 5
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subsequently extended by the Board of Directors to March 31,
2006). Further, there was no vesting period required in the
options purchased. FFBI believes that this is further evidence
that the options were not related to compensation of employees,
employment matters, or that such terms would be considered as
"typical" under a conventional compensatory stock option plan of a
corporation.
f. FFBI affirms its opinion that Fort Street was not acting, and
never intended to act, as a principal stockholder providing a
stock option plan to employees or nonemployees of the Company.
g. Given the reasons a. through f. above, FFBI is of the opinion that
"substance over form" does not, and should not, apply to the
option purchase transactions between Fort Street and the
respective parties thereto.
Comment 4:
- ----------
Your response to Comment No. 6 suggests that the issuance of 225,000 shares in
aggregate to Messrs. Stough and Murray through certain nominees represents a
compensatory transaction entered into by Mr. Poulsen on behalf of the FFBI.
Please confirm that the financial statements bear the appropriate amount of
compensation.
Answer:
- -------
The financial statements of FFBI as of June 30, 2005, and for the year then
ended, and the related notes to financial statements, have been corrected to
reflect $112,500 of compensation expense related to the shares provided by Mr.
Poulsen from the Stock Exchange Agreement.
February 8, 2006
VIA TELEFAX (202) 772-9206
Ms. Babette Cooper
United States Securities and Exchange Commission
100 F Street, NE
Mail Stop 3561
Washington, DC 20549
RE: Fit for Business International, Inc.
SEC File No. 333-122176
Dear Ms. Cooper:
We represent Fit for Business International, Inc. ("FFB"). Per our discussion
this morning, please be advised of the following regarding FFB's response to
Question 3 of the most recent SEC letter:
The purchase price paid by each of the eight individuals/entities to Fort Street
Equity is listed on line 4 of the Summary of SFAS 123 (the "Summary") provided
previously to the SEC. Based on the number of options purchased under the terms
of each transaction (line 3 of the Summary), the price per option paid is
provided on line 5 of the Summary. In 5 of the 8 transactions, a purchase price
of $0.30 per option was used. In the remaining three transactions, a purchase
price of $.19, $.22, and $.17 per option/share were realized, respectively.
These individual prices were used to arrive at the total amount paid to Fort
Street for the options for a total of $134,070. Such prices would represent a
"discount" from the option price of $.50 per share.
As such, FFB has already used a "discounted" price for the calculation of the
fair value paid for the options. Also, each of the individuals/entities that
purchased FFB options from Fort Street will have to pay $.50 per
share to FFB upon exercise of the options to obtain FFB common shares. This will
put the total amount paid by each party higher than the $134,070 already paid.
In the Black-Scholes calculation, an exercise price of $.50 per share was used,
as this amount is the minimum to be paid upon exercise to FFB by each of the
option holders (including Fort Street Equity). The formula for pricing is the
greater, not the lesser of $.50 per share; or the average price for 10 ten days
before exercise less a discount of 40%. I have included a copy of the first page
of the original stock option agreement between Fort Street and FFB (formerly
known as Patient Data Corporation). Please note Section 1 of such agreement when
referring to the exercise price of the options.
Although I understand your reviewer is on jury duty, we respectfully request
that you expedite your review of this remaining question since I have now been
advised by Pam Howell that the registration statement must go effective by
Monday, February 13, 2006. In addition, please confirm that you have no other
questions regarding FFB's proposed changes to question 4 (previously submitted
to you).
Thank you for your attention to this matter.
Very truly yours,
ANSLOW & JACLIN, LLP
By: /s/ RICHARD I. ANSLOW
-------------------------
RICHARD I. ANSLOW
RIA/
Encls.
cc: Fit for Business International, Inc.
PLEASE SEE THE ATTACHED PDF DOCUMENT FOR THE RESPONSE
TO THE ABOVE FEBRUARY 8, 2006 COMMENT LETTER
February 9, 2006
VIA TELEFAX (202) 772-9206
Ms. Babette Cooper
United States Securities and Exchange Commission
100 F Street, NE
Mail Stop 3561
Washington, DC 20549
RE: Fit for Business International, Inc.
SEC File No. 333-122176
Dear Ms. Cooper:
We represent Fit for Business International, Inc. ("FFB"). Per our discussion,
enclosed is FFB's proposed changes to the SB-2 registration statement to respond
to SEC question 3 received from the Commission on January 20, 2006.
We respectfully request that you expedite your review since FFB is trying to go
effective by Monday, February 13, 2006. If the enclosed is acceptable to the
SEC, we can file the amendment immediately. Thank you for your attention to this
matter.
Very truly yours,
ANSLOW & JACLIN, LLP
By: /s/ RICHARD I. ANSLOW
-------------------------
RICHARD I. ANSLOW
RIA/
Encls.
cc: Fit for Business International, Inc.
Pamela Howell, Esq. - SEC
PLEASE SEE THE ATTACHED PDF DOCUMENT FOR THE RESPONSE
TO THE ABOVE FEBRUARY 9, 2006 COMMENT LETTER
February 13, 2006
VIA TELEFAX (202) 772-9206 Pamela Howell, Esq.
United States Securities and Exchange Commission
100 F Street, NE
Mail Stop 3561
Washington, DC 20549
RE: Fit for Business International, Inc.
SEC File No. 333-122176
Dear Ms. Howell:
We represent Fit for Business International, Inc. ("FFB"). Per our discussion,
enclosed is FFB's proposed response to questions 1 and 2 of the SEC questions
received from the Commission on January 20, 2006. We have also enclosed a "black
line" version of the proposed changes in the SB-2 amendment.
Per our discussion, Babette Cooper is reviewing FFB's response to Questions 3
and 4. We respectfully request that you expedite your review since FFB is trying
to go effective by February 14, 2006. Thank you for your attention to this
matter.
Very truly yours,
ANSLOW & JACLIN, LLP
By: /s/ RICHARD I. ANSLOW
-------------------------
RICHARD I. ANSLOW
RIA/
Encls.
cc: Fit for Business International, Inc.