0001019056-09-000380.txt : 20110415
0001019056-09-000380.hdr.sgml : 20110415
20090327102257
ACCESSION NUMBER: 0001019056-09-000380
CONFORMED SUBMISSION TYPE: CORRESP
PUBLIC DOCUMENT COUNT: 1
FILED AS OF DATE: 20090327
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: TRUDY CORP
CENTRAL INDEX KEY: 0000815098
STANDARD INDUSTRIAL CLASSIFICATION: BOOKS: PUBLISHING OR PUBLISHING AND PRINTING [2731]
IRS NUMBER: 061007765
STATE OF INCORPORATION: DE
FISCAL YEAR END: 0331
FILING VALUES:
FORM TYPE: CORRESP
BUSINESS ADDRESS:
STREET 1: 353 MAIN AVE
STREET 2: PO BOX 679
CITY: NORWALK
STATE: CT
ZIP: 06851
BUSINESS PHONE: 2038462274
MAIL ADDRESS:
STREET 1: 353 MAIN AVE
STREET 2: PO BOX 679
CITY: NORWALK
STATE: CT
ZIP: 06851
CORRESP
1
filename1.txt
TRUDY CORPORATION_______________________________________________________________
Where Children Discover . . .
March 10, 2009
David Humphrey, Branch Chief, Division of Corporate Finance
RE: Trudy Corporation
In response to fax received February 9, 2009
File No. 0-16056
Dear Mr. Humphrey,
We received your fax dated February 9, 2009. The letter asked for a
response within 10 business days. On February 11, 2009 Kristen Shifflett granted
the Company an extension through March 10, 2009.
Below are the Company's responses, with numbered answers corresponding to your
inquiries.
1. The Company lists and explains by channel of trade major sales
increases or decreases as well as any material changes. The Company
currently sells to over 44 separate divisions. The Company currently
lists in table form the sales channels that led to the greatest impact
on the overall sales decline or increase and then mentions other
divisions that had increased or decreased sales. This provides the
reader with a thorough understanding of the changes in operations. We
believe a reconciliation showing net sales increases and decreases by
division that ties out to total net sales would confuse the reader due
to the substantial number of sales channels.
2. The Company will update the Liquidity and Capital Resources section of
its 10K and in its future quarterly filing to state the following:
The Company has suffered recurring losses from operations and has a
deficiency in net assets. Such factors raise substantial doubt about
the Company's ability to continue as a going concern. The Company
continues to explore alternative financing options other than those
from its principal shareholder in the event that cash flow does not
materialize in line with current expectations. If additional funding
options were not to materialize, the Company would be forced to explore
other options including Bankruptcy.
3. The Company agrees, and this will be corrected in the 03/31/08 10K and
all subsequent filings. In reading the transition data, the Company
incorrectly thought that this applied to our fiscal year ending
03/31/10.
__________________________________________________
353 Main Avenue, Norwalk, Connecticut 06851-1552
Tel: (203) 846-2274 Fax: (203) 846 1776
www.Soundprints.com
4. We will revise our filing to include the below language:
Market value is determined by the sales price that the Company would
expect to receive to liquidate quantities of inventory. Valuation
reserves are estimated based on quantities on hand, historical and
forecasted sales.
5. The Prepublication costs are amortized on an accelerated basis over 3-5
years. We do not believe the table suggested is necessary though it is
a useful idea that the Company will consider for future filings.
6. After review, we deemed the purchase of certain assets from Musical
Kidz, LLC to be an asset purchase and not a business purchase. The
Company purchased certain assets applicable to the direct to consumer
and school library segment but the majority of the business remained at
Musical Kidz, including sales to trade resellers and distributors, as
well as the record label and music publishing business.
7. Because both the buyer and the seller agreed that this was an asset
purchase, the seller did not have a breakout of operations for the
assets purchased. The anticipated contribution to the net income of the
Company from the purchased assets was $119,457, which was 15.4% of the
Company's loss for FY `08.
8. Thank you for this information, the Company will keep this in mind for
any future transactions.
9. The Company did not assign a material amount to either of these
contracts, and therefore no disclosure was deemed necessary.
10. Additional language:
Earn out:
---------
If, for the year ending March 31, 2009, net revenues of the business conducted
by the Purchaser using the Transferred Assets generates net income greater than
ten percent (10%) of such net revenues, then the Company must pay Musical Kidz
5% of such net income. If such net income is greater than 5% but less than 10%,
then the Company must pay Musical Kidz 2.5% of such net income.
For the fiscal year ending March 31, 2010, the same above provision applies
except that an additional overhead burden of 5% shall be incorporated into the
net income figures to account for Trudy's oversight of the purchased assets.
For the fiscal year ending March 31, 2011, if the Purchaser using the
Transferred Assets generates net income greater than ten percent (10%) of such
net revenues, then the Company must pay Musical Kidz 2.5% of such net income. If
such net income is greater than 5% but less than 10%, then the Company must pay
Musical Kidz 1.5% of the net income. Again, an additional overhead burden of 5%
shall be incorporated into the net income figures to account for Trudy's
oversight of the purchased assets.
Amortization:
-------------
The Company is amortizing the intangible assets related to the acquisition on a
5 or 10 year life.
Employment & Non-compete Agreements
-----------------------------------
The controlling member of the seller executed a 3-year employment agreement. The
controlling member is to receive a salary, work 30 hours/week and can receive
the standard benefits package available to the Company's existing employees. The
3-year agreement may be extended automatically on a year-to-year basis unless it
is terminated as a result of the controlling member's death, his extended
absence, or for Cause.
The controlling member and the purchaser agreed that during the 3 year Term (and
subsequent renewals or extensions of the Term) and for a period ending eighteen
(18) months following the expiration or earlier termination of the Term, neither
party shall serve directly or indirectly, as an operator, owner, partner,
consultant, officer, director, or employee of any firm or corporation operating
within and/or trading to the Americas, Asia, Spain, the United Kingdom,
Australia and South Africa which is or which such Party knows has plans to be
substantially and directly in competition with the business conducted by the
Purchaser.
No material amount of the purchase price was assigned to these intangible
assets.
11. We will revise our filing to state the following:
The Company's Chief Executive Officer and the Chief Financial Officer
conducted an evaluation of the Company's critical disclosure controls
and procedures (as defined in Rule 13a-15(e) under the Securities
Exchange Act of 1934) as of March 31, 2008. Based on that evaluation,
Management identified the following weaknesses:
(i) As of March 31, 2008, the Company does not have adequate
office and financial staffing in place to effectively control
the level of transaction activity and consistently address the
complex accounting matters that arise. Management is working
towards adding staffing to correct this issue
(ii) A principal shareholder and Director of the Company who is
involved in certain functions of the daily operations of the
Company, could in theory override normal operating procedures.
(iii) The Company currently does not have an Audit Committee.
Management believes that the internal controls and procedures are
effective including consideration of the above-identified matters.
12. We will revise our filing to state the following:
A control system, no matter how well conceived and operated, can
provide only reasonable, not absolute, assurance that the objectives of
the control system are met. Further, the design of a control system
must reflect the fact that there are resource constraints and the
benefits of controls must be considered relative to their costs.
Because of the inherent limitations in control systems, no evaluation
of controls can provide absolute assurance that all control issues and
instances of fraud, if any, within the registrant would be detected.
However the Company's disclosure controls and procedures are designed
to provide reasonable assurance of achieving their objectives. The
Company's principal executive officer and principal financial officer
have concluded that the current disclosure controls and procedures are
effective at the reasonable assurance level.
13. We will modify the filing as follows:
Management believes that the internal controls over financial reporting
are effective including consideration of the above-identified matters.
14. We will amend our filings to reflect this. This was an oversight on our
part, we thought this applied to next year, not this current fiscal
year.
15. We agree, we will consider and include all necessary changes in future
filings.
Sincerely,
/s/ Ashley C Andersen Zantop
-------------------------------------
Ashley C. Andersen Zantop
President and Chief Executive Officer
/s/ Fell C. Herdeg
-------------------------------------
Fell C. Herdeg
Chief Financial Officer