Unassociated Document
GTX
CORP
117 W.
9th Street, #1214
Los
Angeles, California 90015
August
25, 2009
VIA EDGAR
CORRESPONDENCE
Assistant
Director
Division
of Corporation Finance
Mail
Stop 3720
Securities
and Exchange Commission
100
F Street, N.E.
Washington,
D.C. 20549
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Form
10-K for the year ended December 31,
2008
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By letter
dated August 11, 2009, the staff of the Securities and Exchange Commission (the
“Staff”) provided this company, GTX Corp, with comments to this company’s Annual
Report on Form 10-K for the year ended December 31, 2008. This letter
contains the responses of GTX Corp to the Staff’s comments. The
numbers of the responses and the headings set forth below correspond to the
numbered comments and headings in the August 11, 2009 letter from the
Staff.
Item 1A. Risk
Factors, page 13
1. In
future filings, we will clarify that this company’s common stock is not “listed”
but is quoted on the OTC Bulletin Board. We intend to use wording
such as the following (or language substantially similar to the following
wording):
“Our
securities are currently quoted on the OTC Bulletin Board, an NASD-sponsored and
operated inter-dealer automated quotation system for equity securities not
listed on a national securities exchange.”
Larry
Spirgel
August
25, 2009
Page
2
Revenue Recognition, page
31
2. In
regards to EITF 00-21, GTX Corp sells its products and services either
separately or as part of a multiple-element arrangement. Revenue from
multiple-element arrangements is allocated to the elements based on the relative
fair value of each element, which is generally based on the relative sales price
of each element when sold separately. Product revenue is recognized, net of an
allowance for estimated returns, when both title and risk of loss transfer to
the customer, provided that no significant obligations
remain. Revenue from licensing agreements is deferred and
subsequently recognized over the term of the agreement. Revenue
associated with undelivered elements, such as monthly service revenue, is
deferred and recorded when the services are provided.
Under our
existing warranty program, our customers have a right to return products
purchased within ninety days for repair or replacement at our
discretion. We will supplement our future annual reports to disclose
this company’s product warranty/return policy. (To date, no customers
have returned a product within the permitted ninety day period.)
Item
10. Directors, Executive Officers, Promoters and Corporate
Governance, page 34
Compliance with Section
16(a) of the Exchange Act, page 37
3. We
agree, and in future filings, if there is a failure to comply with Section
16(a), for each person known to have failed to timely file a required form, we
will list the number of late reports and the number of transactions that were
not reported on a timely basis.
Item
11. Executive Compensation, page 37
Summary Compensation Table,
page 38
4. The
reference to Note 2 of the financial statements included in the Form 10-K was
accidentally omitted. We will attempt to not omit these references in the
future. Furthermore, in the event that any note to the financial
statements cited in future filings does not disclose all assumptions made in the
valuation of awards columns, the footnote to the compensation table will include
the foregoing information.
5. We
have attempted to disclose the material factors necessary to understand the
information contained in the summary compensation table. However, we
will, in our future filings, include a narrative description of any material
factors that may be necessary to an understanding of that table.
Product Warranty, page
F-8
6. From
inception through August 24, 2009, this Company has not incurred any warranty
obligations. In future filings, we will include the disclosures
required in paragraph 14 of FIN 45 as it relates to significant warranty
obligations related to our product sales. We intend to use wording
such as the following (or language substantially similar to the following
wording):
Larry
Spirgel
August
25, 2009
Page
3
“The
Company’s warranty policy provides repair or replacement of products returned
within ninety days of purchase. Warranty liabilities are recorded at
the time of sale for the estimated costs that may be incurred under our standard
warranty. Changes in the Company’s warranty liability for standard
warranties which is included in accounts payable and accrued expenses on our
Consolidated Balance Sheets are presented in the following tables:
Warranty
liability:
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Warranty
liability at beginning of year
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$ |
X |
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Costs
accrued for new warranty contracts and changes in estimates for
pre-existing warranties
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X |
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Previous
costs accrued warranty contracts and changes in estimates for pre-existing
warranties
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X |
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Service
obligations honored
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(X
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Warranty
liability at end of year
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$ |
X |
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Common Stock, page
F-14
7. We
accounted for the management bonuses as a component of cost of capital because
the payment of the bonuses was dependent solely upon the company’s success in
raising more than $1,000,000. We considered SAB Topic 5A which states: “Specific
incremental costs directly attributable to a proposed or actual offering of
securities may properly be deferred and charged against the gross proceeds of
the offering. However, management salaries or other general and administrative
expenses may not be allocated as costs of the offering…” We
acknowledge that the payment of these bonuses is not similar to the normal fees
allocated to cost of capital (i.e. finder’s fee, placement agent fees, broker’s
fees, legal expense); however, the payment of these bonuses is not part of
management salaries or other general and administrative expenses. In
connection with the May 2008 financing, our Board of Directors decided that it
would incentivize those persons who likely would participate directly or
indirectly, in raising capital, with the payment of a bonus. The
bonus would only be paid to the officers and directors if the company raised a
minimum of $1,000,000 of equity funding. The amount of the bonus did not
increase when the actual amount of funds raised by the company exceeded
$1,000,000 (the company actually raised $1,700,000, but the size of the bonus
did not increase). Also, unlike typical cost of capital payments (i.e. finder’s
fees, placement agent fees, and broker’s fees), the amount of the bonus was not
a percentage of funds raised by any officer/director or as a whole.
Because
the bonus was an incremental cost, and the incremental cost was payable only
upon the success of a proposed offering, we believe that it is appropriate to
charge that bonus to cost of capital. As contemplated by SAB Topic 5A, the
130,000 shares that were awarded to the company’s officers and a director were
payments made in connection with an actual offering, and not for normal
management salaries or other general administrative
services. Although these payments were not commissions or finder’s
fees, these bonus payments were payments made in connection with raising
capital.
* * * * *
Larry
Spirgel
August
25, 2009
Page
4
As requested by the Staff, we hereby
acknowledge that:
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This
Company is responsible for the adequacy and accuracy of the disclosure in
the filings;
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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
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This
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.
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Please
direct questions regarding this letter to the undersigned at (949)
456-9510.
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GTX
CORP
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Murray
Williams,
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Chief
Financial Officer
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Enclosures