Cal Alta Auto Glass, Ltd
#8 3927 Edmonton trail NE
Calgary, Alberta, Canada T2E6T1
September 28, 2008
United States Securities and Exchange Commission
Washington, DC 20549
Re: Cal Alta Auto glass, Ltd.
File No. 0-51227
Dear, Mr. Humphrey,
In reference to your comment letter dated July 31,
2008.
1. We have reviewed your proposed new disclosure
shown in response to our prior comment 2. Your
response indicates that the total shares issued
for services equates to 1,145,000 shares (i.e.
70,000 shares and 1,075,000 shares) whereas the
statement of changes on stockholders' equity
reflects a total issuance of 1,150,000 shares
for services on may 10, 2007. Please reconcile
this apparent 5,000 share difference. Further
expand the disclosure to indicate whether the
value assigned to the shares issued to the four
individuals for consulting services aggregated
$301,000.
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 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.
Also on May 10, 2007, the Company issued
1,150,000 shares of common stock for services
rendered at $.28 per share for total
consideration of $322,000. The shares issued
for services rendered were issued as follows.
The Company issued 75,000 shares of common
stock for legal fees for total consideration of
$21,000 and 1,075,000 shares of common stock
for consulting services for total consideration
of $301,000. The consulting fees of $301,000
were 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.
2. See your discussion of "cost of goods sold".
In the amended filing, please clarify that cost
of goods sold increased as a percentage of
sales by approximately 2%. Your current
disclosure indicated there was a decrease. The
resulting narrative discussion of the reason
for the increase should also be reviewed.
Results of Operations
For the year ended December 31, 2007, the Company
had sales of $1,721,963 compared to $1,133,615 for the
same period ended December 31, 2006, with a net loss
of ($1,626,794) compared with to net income of
$29,176, for the same period respectively. The
$588,348 increase in revenues for year ended December
31, 2007 compared to 2006, can be attributed largely
in managements opinion to a mild winter in the Calgary
area and good economic conditions in the Calgary area.
In mild winters people tend to not wait to replace
their auto glass, so there is no slump in the winter.
Also contributing is the Company increasing their
advertising spend by approximately 10%. The further
strengthening of the Canadian dollar to the US dollar
also contributed to approximately $245,000 of this
increase. The Canadian dollar exchange rates
strengthened from 1.13 for the year average ended
December 31, 2006 to .93 for the year average ended
December 31, 2007. Cost of goods sold increased as a
percentage of sales by approximately 2%.In the opinion
of management the increase in the cost of goods sold
as a percentage of revenue is due to the main supplier
to the Company PPG passing along price increase.
Salaries and wages were up approximately $776,239.
$689,200 of this increase is due to the Company
rewarding their staff with stock based bonuses. The
bonuses are for key employees who are important to the
daily operations. The remaining increase is due to
increased wages and increased business so there are
more overall payroll hours. Bad debt expense increased
$44,000. This was due to the Company being unable to
obtain year end confirmations from the insurance
companies who had significant accounts receivable
balances. 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). It should be noted that Mr. Aiello
receives no salary from the Company. Accounting costs
increased almost $20,000 due to the Company incurring
additional costs due to being a publicly traded
company. Credit card transaction fees also increased
almost $10,000 and shop supplies increased almost
$5,000 as the Company experienced greater business
volumes. Advertising expenses increased approximately
$37,000 as the Company advertised in more phonebooks
and mailers than in the past. Consulting expenses were
up $870,095 as the Company incurred significant
expenses due to being publicly traded (this note is
not in the filing only for clarification of publicly
held vs. publicy held and trading: the costs increased
over 2006 (in 2006 the co. was public but not
trading)due to the Company now trading and attempting
to implement its business plan, the Company used its
common stock to pay for most of the expenses of
attempting to implement the business plan, it had not
done this in the past). The consulting expenses can be
broken down into two main categories investor
relations $300,000 (ie. Reviewing company financing
options, working to make the Company DTC eligible,
working with market makers) 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 for management services related to work on the
Company's business plan) and $216,000 for general
consulting (ie. SEC document preparation, clerical
work, and possible new site location screening).
3. We have revised your proposed new disclosure
shown in response to our prior comment 4.
Expand the discussion to indicate whether or
not Mr. Aiello also receives a separate salary
from the Company in connection with him being
employed as President of the Company. We
suggest you include your response to our prior
comment 4 also in the last paragraph of Note 5
(Related Party Transaction) to the audited
financial statements, including the management
fee for each period in which statements of
operations are presented.
Results of Operations
For the year ended December 31, 2007, the Company
had sales of $1,721,963 compared to $1,133,615 for the
same period ended December 31, 2006, with a net loss
of ($1,626,794) compared with to net income of
$29,176, for the same period respectively. The
$588,348 increase in revenues for year ended December
31, 2007 compared to 2006, can be attributed largely
in managements opinion to a mild winter in the Calgary
area and good economic conditions in the Calgary area.
In mild winters people tend to not wait to replace
their auto glass, so there is no slump in the winter.
Also contributing is the Company increasing their
advertising spend by approximately 10%. The further
strengthening of the Canadian dollar to the US dollar
also contributed to approximately $245,000 of this
increase. The Canadian dollar exchange rates
strengthened from 1.13 for the year average ended
December 31, 2006 to .93 for the year average ended
December 31, 2007. Cost of goods sold increased as a
percentage of sales by approximately 2%.In the opinion
of management the increase in the cost of goods sold
as a percentage of revenue is due to the main supplier
to the Company PPG passing along price increase.
Salaries and wages were up approximately $776,239.
$689,200 of this increase is due to the Company
rewarding their staff with stock based bonuses. The
bonuses are for key employees who are important to the
daily operations. The remaining increase is due to
increased wages and increased business so there are
more overall payroll hours. Bad debt expense increased
$44,000. This was due to the Company being unable to
obtain year end confirmations from the insurance
companies who had significant accounts receivable
balances. 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). It should be noted that Mr. Aiello
receives no salary from the Company. Accounting costs
increased almost $20,000 due to the Company incurring
additional costs due to being a publicly traded
company. Credit card transaction fees also increased
almost $10,000 and shop supplies increased almost
$5,000 as the Company experienced greater business
volumes. Advertising expenses increased approximately
$37,000 as the Company advertised in more phonebooks
and mailers than in the past. Consulting expenses were
up $870,095 as the Company incurred significant
expenses due to being publicly traded (this note is
not in the filing only for clarification of publicly
held vs. publicy held and trading: the costs increased
over 2006 (in 2006 the co. was public but not
trading)due to the Company now trading and attempting
to implement its business plan, the Company used its
common stock to pay for most of the expenses of
attempting to implement the business plan, it had not
done this in the past). The consulting expenses can be
broken down into two main categories investor
relations $300,000 (ie. Reviewing company financing
options, working to make the Company DTC eligible,
working with market makers) 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 for management services related to work on the
Company's business plan) and $216,000 for general
consulting (ie. SEC document preparation, clerical
work, and possible new site location screening).
4. We have reviewed your proposed new disclosure
shown in response to our prior comment 5.
Expand the discussion to indicate whether you
anticipate the amount of fiscal year 2007
consulting services to be representative of
ongoing annual consulting expenses or explain
the nature of any one time significant costs
incurred during the year. As you were also a
public company in fiscal year 2006 it is
unclear why the costs of being a public company
increased significantly in fiscal year 2007.
As such, further explain the nature of the
investor relations services performed and
separately the business management services
provided by FAA Enterprises during the year.
If any of these costs were one time in nature
and unusual or infrequent so disclose. We note
that your response to prior comment 17
indicates FAA Enterprises provided management
services related to work on your business plan.
Please provide this disclosure also in MD&A.
Results of Operations
For the year ended December 31, 2007, the Company
had sales of $1,721,963 compared to $1,133,615 for the
same period ended December 31, 2006, with a net loss
of ($1,626,794) compared with to net income of
$29,176, for the same period respectively. The
$588,348 increase in revenues for year ended December
31, 2007 compared to 2006, can be attributed largely
in managements opinion to a mild winter in the Calgary
area and good economic conditions in the Calgary area.
In mild winters people tend to not wait to replace
their auto glass, so there is no slump in the winter.
Also contributing is the Company increasing their
advertising spend by approximately 10%. The further
strengthening of the Canadian dollar to the US dollar
also contributed to approximately $245,000 of this
increase. The Canadian dollar exchange rates
strengthened from 1.13 for the year average ended
December 31, 2006 to .93 for the year average ended
December 31, 2007. Cost of goods sold increased as a
percentage of sales by approximately 2%.In the opinion
of management the increase in the cost of goods sold
as a percentage of revenue is due to the main supplier
to the Company PPG passing along price increase.
Salaries and wages were up approximately $776,239.
$689,200 of this increase is due to the Company
rewarding their staff with stock based bonuses. The
bonuses are for key employees who are important to the
daily operations. The remaining increase is due to
increased wages and increased business so there are
more overall payroll hours. Bad debt expense increased
$44,000. This was due to the Company being unable to
obtain year end confirmations from the insurance
companies who had significant accounts receivable
balances. 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). It should be noted that Mr. Aiello
receives no salary from the Company. Accounting costs
increased almost $20,000 due to the Company incurring
additional costs due to being a publicly traded
company. Credit card transaction fees also increased
almost $10,000 and shop supplies increased almost
$5,000 as the Company experienced greater business
volumes. Advertising expenses increased approximately
$37,000 as the Company advertised in more phonebooks
and mailers than in the past. Consulting expenses were
up $870,095 as the Company incurred significant
expenses due to being publicly traded (this note is
not in the filing only for clarification of publicly
held vs. publicy held and trading: the costs increased
over 2006 (in 2006 the co. was public but not
trading)due to the Company now trading and attempting
to implement its business plan, the Company used its
common stock to pay for most of the expenses of
attempting to implement the business plan, it had not
done this in the past). The consulting expenses can be
broken down into two main categories investor
relations $300,000 (ie. Reviewing company financing
options, working to make the Company DTC eligible,
working with market makers) 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 for management services related to work on the
Company's business plan) and $216,000 for general
consulting (ie. SEC document preparation, clerical
work, and possible new site location screening).
NOTE 5. RELATED PARTY TRANSACTIONS
Cal Alta Auto Glass, Ltd, purchases approximately 45%
of its glass and supplies from Westcan
Autoglass Supplies, Inc. a company owned 100% by Mr.
Frank Aiello, the Company's President.
Mr. Aiello currently does not run any auto glass shops
of his own. Autoglass and supply
purchases from Westcan were $487,337 and $239,574 for
the years ended December 31, 2007 and 2006,
respectively.
Cal Alta owes Westcan Auto Glass Supplies, Inc. (a
related party) accounts payable of $216,090
as of December 31, 2007.
FAA Enterprises (a related party) owes the Company
loans receivable of $346,918 and $100,450
as of December 31, 2007 and 2006, respectively. For
the year ended December 31, 2007, the
receivable to FAA Enterprises increased $246,468. The
loan receivable is interest bearing at a
rate of 5%. Interest income from this receivable was
$9,175 and $9,457 for the years ended
December 31, 2007 and 2006, respectively. The loans
are callable at anytime by Cal Alta Auto
Glass, Inc. As of December 31, 2007 there are no
repayment terms.
FAA Enterprises and Westcan Autoglass Supplies, Inc.
are owned 100% by Frank Aiello, the Company's
President. One of the Company's main suppliers is
Westcan Autoglass Supplies, Inc. (A Canadian
Corporation). The Company's largest debtor is FAA
Enterprises. Cal Alta has received an oral agreement
from Frank Aiello that if necessary to offset the FAA
Enterprises (FAA is owned 100% by Frank Aiello)
receivable with the payable due to Westcan Autoglass
Supplies, Inc. (Westcan is owned 100% by Frank
Aiello). As of 2007 no offset between the companies
had been made.
Cal Alta Auto Glass, Ltd, has a three year lease
agreement for its North shop location. This
location is owned by FAA Enterprises (a related
party). The monthly lease commitment is $3,000(CDN).
Total rent payments to FAA Enterprises were
$36,000(CDN) for the years ended December 31,
2007 and 2006.
Cal-Alta Auto Glass, Ltd has a note payable due to
Frank Aiello, the President of the Company. As of
December 31, 2007 and 2006 the balance was $129,056
included in the 2007 balance was a management fee
payable to Mr. Aiello of approximately $107,900 and
$1,950. Currently there are no repayment terms on the
payable to Mr. Aiello. It should also be noted that
the payable to Mr. Aiello bears a 5% interest rate
annually. The note is callable by Mr. Aiello at
anytime.
For the management fee 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). Mr. Aiello earned
a management fee of $117,565 in 2007 compared to $0 in
2006.
5. We have reviewed your new disclosure shown in
response to our prior comment 8. Expand Note
2(i) to your audited financial statements to
also include your proposed new disclosure for
Allowance for Doubtful Accounts. Further, with
respect to the proposed new disclosure for
Loans receivable, expand to disclose why you
have classified this loan receivable as long
term rather that short term as it is callable
by you at any time. To the extant you do not
foresee this lain (i.e. FAA Enterprises) being
called within the next twelve months of your
most recent balance sheet date, so disclose.
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 owe the Company, with amounts
owed by the Company to Westcan Auto Glass (100%
owned by Frank Aiello).
The Company presents the loan receivable as long term
even though it is callable at anytime by the Company
because there is no intention to call the loan within
the next twelve months and currently there are no
repayment terms.
6. We have reviewed your response to our prior
comment 10. Please tell the amount of fixed
asset disposals during the year, and advise
whether any gain or loss has been reflected in
the financial statements. Please provide us
with reconciliation on the beginning and ending
balance of the net property and equipment
balance sheet account for the fiscal year 2007
including the amount of additions, disposals
and explain any other charges. Finally, please
tell us whether and how currency and
translation issues impacted the balances of
property and equipment and of depreciation
expense.
There was $1,431 disposed of in 2007. There was no
gain or loss on the item due to the item being fully
depreciated. There was a slight difference (approx
$120) due to the exchange rate effect but this was
appropriately accounted for. Please see the
reconciliation of fixed assets and accumulated
depreciation below. To get to the net PP&E figure on
the balance sheet please subtract the accumulated
depreciation number from the fixed asset number.
Currency and translation issues affected fixed assets
by approximately $4,658 and affected accumulated
depreciation by approximately $2,842. Depreciation
expense would have been affected by approximately
$200-$400. However this is not an accurate comparison.
During our year end audit it was discovered that some
of our fixed assets were depreciated at the wrong rate
causing the run rate for the last 4 years to be
slightly overstated (oversated by $634 per year). The
amount of the overstatement was $2,535, which was
netted out in our expense this year due to being
immaterial.
Cal-Alta
12/31/2007
Fixed Assets
Fixed Asset Roll forward
USD USD USD EX
Equipment Auto Balance Rate
Beginning
balance 1/1/2007 24,005.00 1,312.00 25,317.00 0.8581
Add
Less:
Write off 2007 0 1431.54 1,431.54 0.93565
Ending
Balance 12/31/2007 24,005.00 (119.54) 23,885.46 1.0194
Fixed
Assets 12/31/2007 28,543.20
Exchange Rate Difference 4,657.74
Cal-Alta
12/31/2007
Accumulated Depreciation Roll Forward
CND USD EX
Balance Balance Rate
Beginning
balance 1/1/2007 18,103.00 15,520.00 0.8581
Add
Depreciation 2007 2,710.00 2,535.61
Correct depreciation
rate (2,283.00) (2,136.09)
Sub total 427.00 399.52 0.93565
Less:
Write off 2007 1,530.00 1,431.54 0.93565
Ending Balance
12/31/2007 17,000.00 14,487.98
Accumulated
Depreciation 12/31/2007 17,329.80 1.0194
Exchange Rate Difference 2,841.82
Net fixed assets = 28,543-17330 or $11,213
7. Further from hour response it appears there was
a charge in depreciation method during the
year. This appears to be a change in
accounting estimate that has been affected by a
change in accounting principle and if
significant, requires footnote disclosures
pursuant to paragraph 17, 18 and 22 of SFAS
154. For reference, see paragraphs 19-21 of
SFAS 154 and paragraphs B24-B26 of Appendix B
to SFAS 154. Please provide the disclosures in
the amended Form 10KSB. In addition, Exhibit
18(Letter on change in accounting principles)
is required to be filed as an exhibit to the
amended Form 10kSB pursuant to the requirements
of Item 601(b0(18) to Regulation SB.
Alternatively, if you do not consider the
impact of the change to be significant please
describe the nature of and reasons for the
change and provide numerical support for your
conclusion.
During our year end audit it was discovered that some
of our fixed assets were depreciated at the wrong rate
causing the run rate for the last 4 years to be
slightly overstated (overstated by $634 per year). The
amount of the overstatement was $2,535, which was
netted out in our expense this year due to being
immaterial. Management felt the issue was immaterial
due to the amount equaling 0.5% of total assets and
0.12 of total sales. Management decided to net the
amount of the overstatement out of the expense in 2007
due to immateriality of the item. Per FAS 154 "The
provisions of this Statement need not be applied to
immaterial items" management did not feel re-stating
prior periods was necessary.
8. We have reviewed your response to our prior
comment 11. Please revise the first sentence
of the second paragraphs as follow. Deferred
tax assets are reduced by a valuation
allowance... that some portion or all of the
deferred tax assets will not realized. In this
regard, please insert the underlined wording.
Deferred tax assets are reduced by a valuation
allowance when, in the opinion of management, it
is more likely than not that some portion of or all of
the deferred tax assets will not be realized.
Deferred tax assets and liabilities are adjusted for
the effects of changes in tax laws and rates on the
date of enactment. Realization of deferred tax assets
is dependent upon sufficient future taxable income
during the period that deductible temporary
differences and carry-forwards are expected to be
available to reduce taxable income. Income tax
returns are reported to Canada and United States as
required by regulatory agencies.
9. We have reviewed your response to our prior
comment 12. Please expand Note2(k) to disclose
your accounting policy as to whether the
collection of sales taxes are presented in the
statements of operation on either a gross
(included in revenues and costs) or on a
basis(exclude from revenue). If you include
the collection of these sales taxes on a gross
basis, disclose the amount of taxes collected
for each period in which statements of
operations are presented. Refer to disclosure
requirements of paragraph 4 to EIFT 06-3.
Deferred tax assets are reduced by a valuation
allowance when, in the opinion of management, it
is more likely than not that some portion of or all of
the deferred tax assets will not be realized.
Deferred tax assets and liabilities are adjusted for
the effects of changes in tax laws and rates on the
date of enactment. Realization of deferred tax assets
is dependent upon sufficient future taxable income
during the period that deductible temporary
differences and carry-forwards are expected to be
available to reduce taxable income. Income tax
returns are reported to Canada and United States as
required by regulatory agencies.
10. We have reviewed your response to our prior
comment 13. Please expand Note 5 to disclose
your response that there are no repayment terms
and that this interest rate is 5% as relating
to the note payable to Mr. Aiello. In this
regard, we assume that this mote must be
repayable upon demand. If true, please so
indicate in the footnote.
NOTE 5. RELATED PARTY TRANSACTIONS
Cal Alta Auto Glass, Ltd, purchases approximately 45%
of its glass and supplies from Westcan
Autoglass Supplies, Inc. a company owned 100% by Mr.
Frank Aiello, the Company's President.
Mr. Aiello currently does not run any auto glass shops
of his own. Autoglass and supply
purchases from Westcan were $487,337 and $239,574 for
the years ended December 31, 2007 and 2006,
respectively.
Cal Alta owes Westcan Auto Glass Supplies, Inc. (a
related party) accounts payable of $216,090
as of December 31, 2007.
FAA Enterprises (a related party) owes the Company
loans receivable of $346,918 and $100,450
as of December 31, 2007 and 2006, respectively. For
the year ended December 31, 2007, the
receivable to FAA Enterprises increased $246,468. The
loan receivable is interest bearing at a
rate of 5%. Interest income from this receivable was
$9,175 and $9,457 for the years ended
December 31, 2007 and 2006, respectively. The loans
are callable at anytime by Cal Alta Auto
Glass, Inc. As of December 31, 2007 there are no
repayment terms.
FAA Enterprises and Westcan Autoglass Supplies, Inc.
are owned 100% by Frank Aiello, the Company's
President. One of the Company's main suppliers is
Westcan Autoglass Supplies, Inc. (A Canadian
Corporation). The Company's largest debtor is FAA
Enterprises. Cal Alta has received an oral agreement
from Frank Aiello that if necessary to offset the FAA
Enterprises (FAA is owned 100% by Frank Aiello)
receivable with the payable due to Westcan Autoglass
Supplies, Inc. (Westcan is owned 100% by Frank
Aiello). As of 2007 no offset between the companies
had been made. Frank please confirm the oral agreement
Cal Alta Auto Glass, Ltd, has a three year lease
agreement for its North shop location. This
location is owned by FAA Enterprises (a related
party). The monthly lease commitment is $3,000.
Total rent payments to FAA Enterprises were $36,000
for the years ended December 31,
2007 and 2006.
Cal-Alta Auto Glass, Ltd has a note payable due to
Frank Aiello, the President of the Company. As of
December 31, 2007 and 2006 the balance was $129,056
included in the 2007 balance was a management fee
payable to Mr. Aiello of approximately $107,900 and
$1,950. Currently there are no repayment terms on the
payable to Mr. Aiello. It should also be noted that
the payable to Mr. Aiello bears a 5% interest rate
annually. The note is callable by Mr. Aiello at
anytime.
For the management fee 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). Mr. Aiello earned
a management fee of $117,565 in 2007 compared to $0 in
2006.
11. We have reviewed your response to our prior
comment 14. Please consider expanding Note 5
to indicate whether you have received an oral
or written agreement from the respective
parties with the right to offset the receivable
due from FAA Enterprises with the payable due
to Westcan Auto Glass Supplies, Inc.
NOTE 5. RELATED PARTY TRANSACTIONS
Cal Alta Auto Glass, Ltd, purchases approximately 45%
of its glass and supplies from Westcan
Autoglass Supplies, Inc. a company owned 100% by Mr.
Frank Aiello, the Company's President.
Mr. Aiello currently does not run any auto glass shops
of his own. Autoglass and supply
purchases from Westcan were $487,337 and $239,574 for
the years ended December 31, 2007 and 2006,
respectively.
Cal Alta owes Westcan Auto Glass Supplies, Inc. (a
related party) accounts payable of $216,090
as of December 31, 2007.
FAA Enterprises (a related party) owes the Company
loans receivable of $346,918 and $100,450
as of December 31, 2007 and 2006, respectively. For
the year ended December 31, 2007, the
receivable to FAA Enterprises increased $246,468. The
loan receivable is interest bearing at a
rate of 5%. Interest income from this receivable was
$9,175 and $9,457 for the years ended
December 31, 2007 and 2006, respectively. The loans
are callable at anytime by Cal Alta Auto
Glass, Inc. As of December 31, 2007 there are no
repayment terms.
FAA Enterprises and Westcan Autoglass Supplies, Inc.
are owned 100% by Frank Aiello, the Company's
President. One of the Company's main suppliers is
Westcan Autoglass Supplies, Inc. (A Canadian
Corporation). The Company's largest debtor is FAA
Enterprises. Cal Alta has received an oral agreement
from Frank Aiello that if necessary to offset the FAA
Enterprises (FAA is owned 100% by Frank Aiello)
receivable with the payable due to Westcan Autoglass
Supplies, Inc. (Westcan is owned 100% by Frank
Aiello). As of 2007 no offset between the companies
had been made. Frank please confirm the oral agreement
Cal Alta Auto Glass, Ltd, has a three year lease
agreement for its North shop location. This
location is owned by FAA Enterprises (a related
party). The monthly lease commitment is $3,000.
Total rent payments to FAA Enterprises were $36,000
for the years ended December 31,
2007 and 2006.
Cal-Alta Auto Glass, Ltd has a note payable due to
Frank Aiello, the President of the Company. As of
December 31, 2007 and 2006 the balance was $129,056
included in the 2007 balance was a management fee
payable to Mr. Aiello of approximately $107,900 and
$1,950. Currently there are no repayment terms on the
payable to Mr. Aiello. It should also be noted that
the payable to Mr. Aiello bears a 5% interest rate
annually. The note is callable by Mr. Aiello at
anytime.
For the management fee 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). Mr. Aiello earned
a management fee of $117,565 in 2007 compared to $0 in
2006.
12. We have reviewed your response to our prior
comment 15 and 16. Please ensure that one
introductory paragraph of Note 7 is revised to
indicate your accounting is based on SFAS
1239R0. Further, please ensure that your
disclosure clarifies if true that share based
transaction with nonemployees are measured
either by the fair value of the equity
instruments issued or by the fair value of the
goods or services received, whichever is more
reliably measurable. For shares based
transaction with employee, see the guidance
set forth in paragraph 10 of SFAS 123( R).
Please revise your disclosures accordingly and
if necessary your financial balances should be
revised to comply with guidance in paragraphs 7
and 10 of SFAS 123( R ).
NOTE 7. COMMON STOCK
Transactions' other than employees' stock issuance,
are accounted for in accordance with paragraph 7 of
SFAS123(R). These transactions are 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.
Transactions involving employees' stock issuance are
accounted for in accordance with paragraphs 11-63 of
SFAS 123(R). The cost of services received from
employees in exchange for awards of share-based
compensation generally shall be measured based on the
grant-date fair value of the equity instruments issued
or on the fair value of the liabilities incurred.
13. We have reviewed your response to out prior
comment 17 relating to the shares issued for
the services FAA Enterprises in June 1, 2007 at
$0.07 per share. It is unclear from your
response as to how it was determined that the
fair values of these shares should be
substantially different from the shares
issuances in May 2007 and July 20047 which
ranged around $0.25 to 0.28 per share. To the
extent the FASS Enterprise shares issuance was
at a discount, which appears to the situation
the discount should be reflected as additional
expense in your financial statements. However,
to the extent the fair value of the services
recieved were valued at only $0.07 per share,
please provide us with the detailed methodology
used by the Company in determining the value of
these services provided as compared to similar
services f were provided by nonrelated parties
and as compared to your most recent common
share issuances in may 2007 and June 2007. We
may have further comments upon review of your
response.
The shares issued to FAA Enterprises were issued in
accordance with paragraph 7 of SFAS123(R).
Measurement Principle for Share-Based Payment
Transactions
7. If the fair value of goods or services received in
a share-based payment transaction with nonemployees is
more reliably measurable than the fair value of the
equity instruments issued, the fair value of the goods
or services received shall be used to measure the
transaction. In contrast, if the fair value of the
equity instruments issued in a share-based payment
transaction with nonemployees is more reliably
measurable than the fair value of the consideration
received, the transaction shall be measured based on
the fair value of the equity instruments issued. A
share-based payment transaction with employees shall
be measured based on the fair value (or in certain
situations specified in this Statement, a calculated
value or intrinsic value) of the equity instruments
issued. These transactions are 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.
The main factor in the valuation difference between
the shares issued in May and June of 2007 compared to
this issuance is that the other issuances were free
trading shares and this issuance was restricted stock.
In determining the fair value of the share-based
payment the Company considered the restrictions placed
on insider holdings, length of time it would take Mr.
Aiello to liquidate the holdings, and the lack of
liquidity in the Company's common stock. In
considering the value to place on the shares it is
necessary to consider the "fair value" of the equity
instrument. In considering the fair value it is
important to consider liquidity, restrictions, etc.
Fair Value as defined by FAS 123 (R):
Fair Value - The amount at which an asset (or
liability) could be bought (or incurred) or sold (or
settled) in a current transaction between willing
parties, that is, other than in a forced or
liquidation sale.
Restriction as defined by FAS 123 (R):
Restriction - A contractual or governmental provision
that prohibits sale (or substantive sale by using
derivatives or other means to effectively terminate
the risk of future changes in the share price) of an
equity instrument for a specified period of time.
The shares issued to FAA were clearly restricted due
to a) being a new restricted issuance and b) Mr. Frank
Aiello the Company's President is the sole owner of
FAA, therefore FAA will be bound by the same rules as
insiders for the sale of shares (ie. The drip out
rules, etc.)
Below is detail supporting the fair value of the
issuance at $.07.
Facts:
- -After the issuance there were 16,025,000 shares of
common stock outstanding.
- -After the issuance Mr. Aiello controlled 10,255,000
shares of common stock.
- -Due to drip out rules Mr. Aiello could liquidate
quarterly the lesser of the 30 day average volume or
1% of the total outstanding (for the scenarios below
Mr. Aiello could liquidate 1% of the total outstanding
as the stock is highly illiquid)
- -Assume value of transaction to be $845,000 (3,250,000
X .26) before a present value calculation.
- -Assume Mr. Aiello sells the shares acquired in the
FAA issuance ratably per his other holdings (31% of
each sale would be from this transaction.
NPV Calculation:
Mr. Aiello can liquidate 1% per quarter of the total
outstanding or 160,250 shares per quarter. This would
take Mr. Aiello roughly 64 quarters after the one-year
hold period or 17years total.
NPV of $845,000, in 17 years at prime 8.25% = $219,575
or $.0675 per share. The transaction was booked at
$.07 per share.
The Company believes that NPV is a fair indicator of
fair value.
14. Please indicate a title to this report such as
Independent Accountant's report. Also, the
first sentence of the introductory paragraph
should make reference to the comparative 2007
interim period as pertaining to the statements
of operations, changes in stockholders equity
and cash flows. Further, the third paragraph
should be revised to indicate : Based on our
review.. for them to be in conformity with
accounting principles generally accepted in the
United States of America. Please revise in an
amendment to the March 31, 2008 Form 10Q.
Chang G. Park CPA., Ph. D.
371 E street, Chula Vista, CA 91910
Telepnone 858-722-5953
Fax 858-760-0341, 585-764-5480
Report of Independent Registered Public Accounting Firm
To the Board of Directors of
Cal Alta Auto Glass, Inc. and Subsidiary
We have reviewed the condensed consolidated accompanying
balance sheet of Cal Alta Auto Glass, Inc. and subsidiary
(the "Company") as of March 31, 2008, and the related
condensed consolidated statements of operation, changes
in stockholders' equity, and cash flows for the three
months ended March 31, 2008 and 2007. These financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with the standards
of the Public Company Accounting Oversight Board (United
States). A review of interim financial information consists
principally of applying analytical procedures to financial
data and making inquiries of persons responsible for
financial and accounting matters. It is substantially
less in scope than an audit conducted in accordance with
the standards of the Public Company Accounting Oversight
Board, the objective of which is the expression of an
opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to the condensed
consolidated financial statements referred to above for
them to be in conformity with accounting principles
generally accepted in the United Stated of America.
The financial statements have been prepared assuming
that the Company will continue as a going concern. As
discussed in Note 3 to the consolidated financial
statements, the Company's losses from operations raise
substantial doubt about its ability to continue as a
going concern. The financial statements do not include
any adjustments that might result from the outcome of this
uncertainty.
/s/ Chang G. Park
____________________________
Chang G. Park, CPA
May 15, 2008
San Diego, California
15. Please expand to discuss the sources of the
significant mount of other incomes and interest
income (related party) for the three months
ended March 31, 2008 as shown on the face of
the statements of operations. Please revise in
an amendment to the march 31, 2008 Form 10Q.
The other income presented in the 3/31/08 10Q was a
misclassified expense reversal. This was corrected in
the June 2008 10Q filing and will be corrected in the
3/31/2008 10Q/A.
16. Please revise this Exhibit to comply with the
exact wording format shown in Item 601(b)(31)
of regulation SK. We note certain paragraphs
you provided are not consistent with the
wording required by Item 301(b)(31) of
Regulation SK. Please file a corrected version
in am amendment to the March 31, 2008 Form 10Q.
EXHIBIT 31.1
CERTIFICATION OF THE
PRESIDENT
I, Frank Aiello certify that:
1. I have reviewed this quarterly report on Form 10-Q
of CAL ALTA AUTO GLASS, INC.;
2. Based on my knowledge, this quarterly report does
not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the
statements made, in light of the circumstances under
which such statements were made, not misleading with
respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements,
and other financial information included in this
quarterly report, fairly present in all material
respects the financial condition, results of
operations and cash flows of the registrant as of, and
for, the periods presented in this quarterly report;
4. The registrant's other certifying officer(s) and I
are responsible for establishing and maintaining
disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
registrant and have:
a) Designed such disclosure controls and procedures,
or caused such disclosure controls and procedures to
be designed under our supervision, to ensure that
material information relating to the registrant,
including its consolidated subsidiaries, is made known
to us by others within those entities, particularly
during the period in which this quarterly report is
being prepared;
b) Designed such internal control over financial
reporting, or caused such internal control over
financial reporting to be designed under our
supervision, to provide reasonable assurance regarding
the reliability of financial reporting and the
preparation of financial statements for external
purposes in accordance with generally accepted
accounting principles;
c) Evaluated the effectiveness of the registrant's
disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end
of the period covered by this report based on such
evaluation; and
d) Disclosed in this report any change in the
registrant's internal control over financial reporting
that occurred during the registrant's most recent
fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the
registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer(s) and I
have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the
registrant's auditors and the audit committee of
registrant's board of directors (or persons performing
the equivalent functions):
a) All significant deficiencies and material
weaknesses in the design or operation of internal
control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to
record, process, summarize and report financial
information; and
b) Any fraud, whether or not material, that involves
management or other employees who have a significant
role in the registrant's internal control over
financial reporting.
/s/ Frank Aiello
Date: May 19, 2008 -------------
- -------
Frank Aiello
President/CEO/Principal Accounting Officer/Dir.
17. It does not appear that your management has
performed its assessment of internal control
over financial reporting as of December 31,
2007. Since you were required to file or filed
an annual report for the prior fiscal period,
it appear you are required to report on your
managements assessment on internal control over
financial reporting. If your management has
not yet performed its assessment, we ask that
you complete your evaluation and amend your
filing within 30 calendar days to provide the
required managements report on internal control
over financial reporting.
Item 8A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We conducted an evaluation under the supervision and
with the participation of our management, including
our Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and
operation of our disclosure controls and procedures.
The term "disclosure controls and procedures," as
defined in Rules 13a-15(e) and 15d-15(e) under the
Securities and Exchange Act of 1934, as amended
("Exchange Act"), means controls and other procedures
of a company that are designed to ensure that
information required to be disclosed by the company in
the reports it files or submits under the Exchange Act
is recorded, processed, summarized and reported,
within the time periods specified in the Securities
and Exchange Commission's rules and forms. Disclosure
controls and procedures also include, without
limitation, controls and procedures designed to ensure
that information required to be disclosed by a company
in the reports that it files or submits under the
Exchange Act is accumulated and communicated to the
company's management, including its principal
executive and principal financial officers, or persons
performing similar functions, as appropriate, to allow
timely decisions regarding required disclosure.
Based on this evaluation, our Chief Executive Officer
and Chief Financial Officer concluded (as of December
31, 2007 and as amended on September 24, 2008 as a
result of management's further review of these
matters), that our disclosure controls and procedures
were not effective because of the untimely filing of
the management report on the internal controls. We
have since taken steps to ensure that our disclosure
controls and procedures will be effective in that we
will be able to timely file the management report in
all future filings with the Securities and Exchange
Commission.
However, it should be noted that the design of any
system of controls 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, regardless of how remote.
Management's Report on Internal Control Over Financial
Reporting
Our management is responsible for establishing and
maintaining adequate internal control over financial
reporting as defined in Rules 13a-15(f) and 15d-15(f)
under the Exchange Act. Our internal control over
financial reporting is designed to provide reasonable
assurance regarding the reliability of financial
reporting and the preparation of financial statements
for external purposes in accordance with generally
accepted accounting principles. The internal controls
for the Company are provided by executive management's
review and approval of all transactions. Our internal
control over financial reporting also includes those
policies and procedures that:
(1) pertain to the maintenance of records that in
reasonable detail accurately and fairly reflect the
transactions and dispositions of our assets;
(2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of
financial statements in accordance with U.S. GAAP, and
that our receipts and expenditures are being made only
in accordance with the authorization of our
management; and
(3) provide reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use
or disposition of our assets that could have a
material effect on the financial statements.
Because of its inherent limitations, internal control
over financial reporting may not prevent or detect
misstatements. 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.
Management assessed the effectiveness of the Company's
internal control over financial reporting as of
December 31, 2007. In making this assessment,
management used the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway
Commission in Internal Control-Integrated Framework.
Management's assessment included an evaluation of the
design of our internal control over financial
reporting and testing of the operational effectiveness
of these controls.
Based on this assessment, management has concluded
that as of December 31, 2007, our internal control
over financial reporting was effective to provide
reasonable assurance regarding the reliability of
financial reporting and the preparation of financial
statements for external purposes in accordance with
U.S. generally accepted accounting principles.
This annual report does not include an attestation
report of the Company's registered public accounting
firm regarding internal control over financial
reporting. Management's report was not subject to
attestation by the Company's registered public
accounting firm pursuant to temporary rules of the
Securities and Exchange Commission that permit the
Company to provide only management's report in this
annual report.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over
financial reporting during our fiscal quarter ended
December 31, 2007 that have materially affected, or
are reasonably likely to materially affect, our
internal control over financial reporting.
Sincerly
/S/ Frank Aiello
Frank Aiello, President