Cal Alta Auto Glass, Inc.
#8, 3927 Edmonton Trail, N.E.
Calgary, Alberta T2E 6T1
July 7, 2008
Remitted Via EDGAR
Mr. David R. Humphrey, Esq.
Branch Chief
And Ms. Beverly Singleton, Esq.
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
RE: Cal Alta Auto Glass, Inc.
Your Comment Letter of April 29, 2008
Form 10-KSB, FYE 12-31-2007;
File No. 0-51227
Dear Mr. Humphrey and Ms. Singleton:
On behalf of Cal Alta Auto Glass, Inc., a Nevada corporation
(the Company"), allow me to express our appreciation for your comments
on the Company's 2007 Form 10-KSB (filed April 14, 2008) set forth in
your letter of April 29, 2008 (the "Comment Letter") and for the
cooperation and courtesies that you have extended to our legal
counsel, William M. Aul, Esq. in connection with the matters underlying
the Letter.
Please allow this letter to respond to the Comment Letter. The
following questions were presented in the Comment Letter (as numbered in
accordance with the numbers presented in the Comment Letter.
Form 10-KSB (Fiscal Year Ended December 31, 2007)
General
1. In addition to the comments below, please consider filing an amendment
to your December 31, 2007 Annual Report on Form 10-KSB, in its
entirety, for the purpose of aligning the presentation of your audited
financial statements in columnar format. As presently shown in the filing,
the amounts in the audited financial statements are not in columnar
alignment and the format is difficult for an investor or shareholder to easily
view.
Answer: We will do so.
Changes in Securities/Recent Sales of Unregistered Securities
2. Refer to the description of the May 17, 2007 transactions. Please
reconcile the number of shares issued for bonuses and for services with
the share issuances shown separately in the statement of changes in
stockholders' equity. For example, you disclosed that 1,372,000 shares
were issued for bonuses on May 17, 2007, whereas the statement of changes
in stockholders' equity discloses that 1,225,000 shares were issued on
May 10, 2007. Please ensure consistency of all amounts and disclosures
throughout the filing.
Answer: Please see new disclosure below (items changed are highlighted).
On May 10, 2007, the Company issued 2,375,000 shares of common stock at
$.28 per share for total consideration of $665,000. The shares were
issued for the following consideration. The Company issued 1,225,000
shares for bonuses to key employees for total consideration of $343,000.
The Company also issued 70,000 shares for legal fees for total consideration
of $21,000 and further issued 1,075,000 shares for paid to four individuals
for SEC consulting and acquisition due diligence. The shares were issued
under the 2007 Employee and Consultants Compensation Fund and Plan. The
Company filed an S-8 registration statement and issued the securities
to employees and consultants in accordance with rule 405 of Regulation
C of the 1933 Securities Act.
Changes in Securities/Recent Sales of Unregistered Securities
3. Refer to the description of the July 3, 2007 transaction whereby
1,500,000 shares had been issued for investor relation services of
$405,000, and later cancelled in the fourth quarter of 2007. Please
disclose the reasons for the cancellation of the shares and disclose
whether or not any investor service relations were rendered in
connection with this share issuance; if any services were
performed, the financial statements should be revised to reflect
that portion of the services rendered.
Answer: Please see new disclosure below (items changed are highlighted).
On July 3, 2007, the Company issued 1,530,000 shares of common stock at
$.27 per share for total consideration of $413,100. The shares were issued for
the following consideration. The Company issued 30,000 shares for legal fees
for total consideration of $8,100 and further issued 1,500,000 shares for
investor relations services for total consideration of $405,000 (the
shares issued for investor relations were cancelled in the fourth quarter
of 2007, the share issuance representing the investor relations shares were
netted out of the transaction in the equity statement for presentation
purposes). It should be noted that the shares for investor relations were
retired due to the proposed transaction with Energy One not closing in a
timely manner and no investor relation's services were rendered in
connection with this share issuance. The shares were issued under the 2007
Employee and Consultants Compensation Fund and Plan. The Company filed an
S-8 registration statement and issued the securities to employees and
consultants in accordance with rule 405 of Regulation C of the 1933
Securities Act.
Management's Discussion and Analysis
Results of Operation
4. See our discussion of general and administrative expenses where
you indicate $108,000 of the increase is attributable to a management fee
to your President. Please describe the nature of this management fee agreement
and its significant terms, and separately disclose this related party amount
on the face of the statement of operations. See paragraph 2 of SFAS No.57.
Answer: Please see new disclosure below (items changed are highlighted).
General and administrative expenses were up approximately $185,000.
Approximately $117,500 of the general and administrative increase is a
management fee expense to Frank Aiello, the Company's President. Mr. Aiello
provides senior management and day-to-day operational oversight to the
Company. For these management services Mr. Aiello earns $9,166 (CAN)
monthly. The management fee is payable upon demand or Mr. Aiello can
elect to offset the payable against a receivable owed to the Company by
Westcan Auto Glass, Ltd (Westcan (100% owned by Frank Aiello) supplies
approximately 45% of the Company's auto glass and supplies).
5. Please expand your discussion of the consulting expenses to describe
the nature of the services you incurred as a public entity, and whether
you anticipate this to be a continuous trend. We note consulting
expenses represented approximately 36% of your total operating expenses,
second behind your salaries & wages expense at 39% for the
year 2007.
Answer: Please see new disclosure below (items changed are highlighted).
Consulting expenses were up $870,095 as the Company incurred significant
expenses due to being publicly traded. The consulting expenses can be
broken down into two main categories investor relations (approximately
$300,000) and business consulting (approximately $570,000). The business
consulting expense is broken down as follows, approximately $352,000 for
business management ($227,500 of this was paid to FAA Enterprises, which
is 100% owned by Frank Aiello) and $216,000 for general consulting
(i.e. SEC document preparation, clerical work, and possible new site
location screening).
6. Please add a paragraph discussion of your operating loss and net loss
for fiscal 2007 in comparison to your operating income and net income in
the prior year. Under the section of "Liquidity and Capital Resources,"
disclose that your independent registered public accounting firm has issued
a going concern opinion on your audited financial statements that raise
substantial doubt as to your ability to continue as a going concern.
Answer: Please see new disclosure below (items changed are highlighted).
The Company generated an operating loss of $1,621,020 and a net loss of
$1,616,794 during the year ended December 31, 2007. Due to the significant
operating and net loss the Company's independent registered public
accountant has issued a going concern opinion on our audited financial
statements. This condition raises substantial doubt about
the Company's ability to continue as a going concern. The Company's
continuation as a going concern is dependent on its ability to meet its
obligations, to obtain additional financing as may be required and
ultimately to attain profitability. The consolidated financial
statements do not include any adjustments that might result from the
outcome of this uncertainty.
7. Expand this section to discuss the terms of your planned acquisition
of Energy One Resource Services, Inc. ("Energy One"). Reference is made
to the Form 8-K filed with us on March 10, 2008. Disclose the nature of
the business operations of Energy One, and, if determinable, the amount
and source of funding for this acquisition. Also describe how this
proposed acquisition would affect your current business operations, as
we note the Form 8-K indicates you have the right to divest or make
arrangements for the divestiture, in whole or in part, of your current
business.
Answer: Please see new disclosure below (items changed are highlighted).
It should be noted that the Company is currently under "LOI" with Energy
One Resources, Inc. Energy One Resources, Inc., is in the business of
providing hospitality services to the mining / oil services industry.
It is anticipated that the transaction will be a stock for stock transaction
and outside funding will not be needed. However, the Company is still
awaiting significant elements of the requested due diligence so there has
been no determination of the final purchase price. However, it is
anticipated that if the acquisition is completed that the Company will
divest all or part of the auto glass operation.
Critical Accounting Policies
8. Please expand this section to provide a description of each of your .
critical accounting policies identified as accounts receivable, bad debts,
and loans receivable. For guidance, please refer to Section V of FR-72,
"Interpretation: Commission Guidance Regarding Management"s Discussion and
Analysis of Financial Condition and Results of Operations." Further, expand
Note 2 to your audited financial statements to include or identify where
these critical policies are reflected in your significant accounting policies.
Answer: Please see new disclosure below.
We believe that the estimates and assumptions that are most important to
the portrayal of our financial condition and results of operations, in that
they require our most difficult, subjective or complex judgments, form the
basis for the accounting policies deemed to be most critical to us. These
critical accounting policies relate to revenue recognition (changed from
AR, easier to explain the issue from the revenue side), allowance for
doubtful accounts and loans receivable. We believe estimates and
assumptions related to these critical accounting policies are appropriate
under the circumstances; however, should future events or occurrences
result in unanticipated consequences, there could be a material impact
on our future financial conditions or results of operations.
Revenue Recognition
Revenue from the sale of windshields is recognized at the time of installation,
as the Company has no obligation after installation.
For Cash Paying Customers -For customers paying via cash or charge the Company
receives payment before releasing the vehicle.
For Insurance Paying Customers For customers who are having their windshields
and repair work being covered via insurance it adds additional steps for the
Companyto be able to recognize revenue. The shop must communicate with the
customer's insurance company to determine the rate at which the insurance
company will reimburse the Company for these repairs. After the repair work
the Company must submit the appropriate paperwork for collection from the
insurance companies. Collectibility is reasonably assured due to initially
working out the payment terms as described above, before rendering services.
The Company does not recognize an allowance on these insurance receivables
due to non-collection being very rare. However, also from time to time the
insurance companies may attempt to pay less than the agreed upon amount.
Allowance for Doubtful Accounts
The allowance for all probable uncollectible receivables is based on a
combination of historical data, cash payment trends, specific customer issues,
write-off trends, general economic conditions and other factors. These factors
are continuously monitored by management to arrive at an estimate for the
amount of accounts receivable that may ultimately be uncollectible. In
circumstances where Cal Alta is aware of a specific customer's inability to
meet its financial obligations, Cal Alta records a specific allowance for bad
debts against amounts due to reduce the net recognized receivable to the
amount it reasonably believes will be collected. This analysis requires making
significant estimates, and changes in facts and circumstances could result in
material changes in the allowance for uncollectible receivables.
Loans Receivable
The loan receivable represents a significant portion of the Company's assets.
Due to historical payment terms, management has not placed an allowance on this
loan even though there has been an outstanding balance for sometime. The note
is callable at anytime by the Company. It should be noted that the Company does
allow FAA Enterprises (100% owned by Frank Aiello) to offset the amount they o
we the Company, with amounts owed by the Company to Westcan Auto Glass (100%
owned by Frank Aiello).
Financial Statements
Statement of Cash Flows
9. Refer to the "Supplemental schedule of non-cash flows activities." Please
delete first two line items pertaining to common stock issued for services and
for bonuses, as these two transactions have been reflected as "adjustments to
reconcile net loss to net cash used in operating activities." Also, refer to
the last three line items within "Cash flows from financing activities." To
the extent any of these equity related transactions are non-cash or have a
non-cash component, they should be relocated to the "Supplemental schedule of
non-cash flows activities," while only the cash portion should be presented as
a financing activity. Please revise or advise.
Answer: Cash flow statement has been revised to delete first two lines in "
supplemental schedule of non-cash flows activities".
Note 2, Summary of Significant Accounting Policies
h. Property and Equipment/Depreciation
10. Please disclose why total depreciation for the year 2007 was only $400
as compared to $2,601 for the prior year. We note your accumulated
depreciation, as shown in Note 4, increased by approximately $1,800 during the
year 2007.
Answer: Depreciation was lower in comparison to 2007 due to disposal of fixed
assets. Also, an adjustment was required to reflect the proper depreciation
method in accordance to GAAP and this affected accumulated depreciation.
j. Income Taxes
11. A valuation allowance is appropriate when it is more likely than not
that some portion or all of the deferred tax assets "will note be realized."
Refer to paragraph 17c of SFAS 109 and revise accordingly, or advise.
Answer: In accordance with SFAS 109 the Company took a valuation allowance due
to the losses incurred in 2007. The Company deems it that some portion of the
deferred tax asset will not be realized.
k. GST Payable
12. It appears that additional disclosures are required pursuant to paragraph
4 of EITF 06-3. If our understanding is correct, please provide this
information in your response and revise your filings to include them as
appropriate.
Alternatively, please explain why no additional disclosures are required.
Answer: GSP is a tax put on purchases and sales items in Canada. Note K has
been revised to properly disclose the nature of this tax.
Note 5, Related Party Transactions
13. Disclose the repayment terms of the related party note payable to
Mr. Frank Aiello, the President, including the interest rate (or
imputed interest amount). Refer to paragraphs 6 and 7 of APB No.21.
Answer: As of 2007 there are no repayment terms. The interest rate is 5%.
14. We note the increasing balance of the loan to FAA Enterprises. Please
provide specific support for your apparent conclusion that this loan balance
is fully recoverable.
Answer: The Company feels this loan to be fully collectable. One of the
Company's main suppliers is Westcan (A Canadian Corporation), which is
owned 100% by Mr. Frank Aiello. The Company has agreed if necessary to
allow the offset of FAA (FAA is owned 100% by Frank Aiello) receivable
with the payable due to Westcan. As of 2007 no adjustment had been made.
Note 7, Common Stock
15. We assume that you are accounting for these transactions in accordance
with SFAS 123R). Please revise or advise. In addition, reference is made
to paragraph 7 of that statement with regard to share-based payment
transactions with noneemployees. These transactions should be measured
either by the fair value of the equity instruments issued or by the fair
value of the good or services received, whichever is more reliably
measurable. Please revise your disclosures and, if applicable, your
financial statement balances to comply with this guidance.
Answer: Note 7 has been revised to address the Company's accounting for
share-based transactions with nonemployees. These transactions are
measurered by either fair value of equity measured or fair value of
the services received or performed.
16. As a related matter, your disclosure regarding your method of accounting
for share-based payment transactions with employees does not appear
consistent with the guidance set forth in paragraph 10 of SFAS 123(R).
Please revise your disclosures and/or your financial statement balances,
as appropriate.
Answer: Note 7 has been revised to comply with SFAS 123(R) in respect
to transactions with employees.
17. Finally, please address the valuation of the shares issued for services
on June 1, 2007. We assume that the recipient was FAA Enterprises, a related
party. Please advise. Describe the specific nature of the services performed
and explain how you valued this transaction. It appears that your methodology
differs from that applied to the other share issuances. Please advise.
We may have further comments upon review of your responses.
Answer: The shares issued to FAA Enterprises were issued for management
services relating to the work on the Company's Business Plan and the
implementation of certain management strategies. All of the shares were
issued after review with the Company's financial and accounting advisors.
Item 8a,Controls and Procedures
18. Refer to the sentence beginning with "Based upon that evaluation,
our Officers..." Please clarify to disclose that your Officers pertain
to the Chief Executive Officer and Chief Financial Officer
(i.e., Principal Accounting Officer).
Answer: Please see new disclosure below (items changed are highlighted).
We have instituted disclosure controls and procedures designed to ensure
the timely recording, processing, summarization and reporting to our
management, including our Chief Executive Officer / Principal Accounting
Officer, of information required to be disclosed in our reports under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). Within
the 90 days prior to the filing date of this Annual Report on Form 10-KSB,
we have performed an evaluation of the effectiveness of the design and
operation of these controls under the supervision and with the participation
of our management, including our Chief Executive Officer / Principal
Accounting Officer. Based upon that evaluation, our Chief Executive Officer /
Principal Accounting Officer has concluded that the disclosure controls and
procedures are effective to ensure that information required to be disclosed
in the reports that the Company files or submits under the Exchange Act is
accumulated and communicated to management, including our Chief Executive
Officer / Principal Accounting Officer, to allow timely decisions regarding
required disclosures of such information. In the design and evaluation of our
disclosure controls and procedures, management has recognized that risks of
misstatements due to error, failures in compliance, or changes in conditions
are inherent in any cost-effective control system.
Exhibit 32.1Certification
19. In the amended filing, please ensure that the certification refers to
the Annual Report on Form 10-KSB for the period ending December 31, 2007
rather than 2006.
Answer: Please see new disclosure below (items changed are highlighted).
In connection with the Annual Report of Cal Alta Auto Glass, Inc. (the
"Company") on Form 10-KSB for the period ending December 31, 2007,as filed
with the Securities and Exchange Commission on the date hereof (the
"Report"), I, Frank Aiello, President of the Company certify, pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:
General
20. Please note that the SEC has issued Release No. 33-8876,"Smaller
Reporting Company Regulatory Relief and Simplification," which became
effective on February 4, 2008. We refer you to the Compliance Dates in
Section IV of the Release which will require that your March 31, 2008
quarterly report be filed on Form 10-Q rather than Form 10-QSB. For
additional guidance on this and other changes, please refer to the Release
and A Small Equity Compliance Guide, both of which are available on our
website at htt://www.sec.gov/rules/final/finalarchive/finalarchive2007.sbtml.
Answer: The Company will file using the new reporting requirements stating
with the March 31, 2008 Form 10-Q.
In submitting this response to your Comment Letter, please be assured that
the company acknowledges that:
The company is responsible for the adequacy and accuracy of the disclosure in
the filing:
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.
Further, if you have any questions, please contact our legal counsel,
William M. Aul at 619-497-2555.
Again, thank you for your cooperation and assistance.
Sincerely,
Frank Aiello,
President and Chief Executive Officer