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<SEC-DOCUMENT>0000950137-07-007439.txt : 20070809
<SEC-HEADER>0000950137-07-007439.hdr.sgml : 20070809
<ACCEPTANCE-DATETIME>20070514172150
<PRIVATE-TO-PUBLIC>
ACCESSION NUMBER:		0000950137-07-007439
CONFORMED SUBMISSION TYPE:	CORRESP
PUBLIC DOCUMENT COUNT:		1
FILED AS OF DATE:		20070514

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			LIFEWAY FOODS INC
		CENTRAL INDEX KEY:			0000814586
		STANDARD INDUSTRIAL CLASSIFICATION:	DAIRY PRODUCTS [2020]
		IRS NUMBER:				363442829
		STATE OF INCORPORATION:			IL
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		CORRESP

	BUSINESS ADDRESS:	
		STREET 1:		6431 W OAKTON
		CITY:			MORTON GROVE
		STATE:			IL
		ZIP:			60053
		BUSINESS PHONE:		7089671010

	MAIL ADDRESS:	
		STREET 1:		6431 W OAKTON
		CITY:			MORTON GROVE
		STATE:			IL
		ZIP:			60053
</SEC-HEADER>
<DOCUMENT>
<TYPE>CORRESP
<SEQUENCE>1
<FILENAME>filename1.htm
<TEXT>
<HTML>
<HEAD>
<TITLE>corresp</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">TIMOTHY R. LAVENDER</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">DIRECT LINE: (312)&nbsp;857-2630</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" valign="top">EMAIL: tlavender@kelleydrye.com</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">May 14, 2007
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Via EDGAR and U.S. Mail</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Ms.&nbsp;Tangela Richter<BR>
Branch Chief<BR>
United States Securities and Exchange Commission<BR>
100 F St., N.E.<BR>
Washington, D.C. 20549

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="89%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Re:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Lifeway Foods, Inc.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Registration Statement on Form&nbsp;S-3</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Filed September&nbsp;14, 2006</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">File No.&nbsp;333-137317</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form&nbsp;10-KSB for the fiscal
year ended December&nbsp;31, 2005 Filed March&nbsp;31, 2006</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form&nbsp;10-QSB for the fiscal year ended March&nbsp;31, 2006 Filed November&nbsp;20, 2006</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form&nbsp;10-QSB for the fiscal year ended June&nbsp;30, 2006 Filed August&nbsp;14, 2006</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form&nbsp;10-QSB for the fiscal year ended September&nbsp;30, 2006 Filed May&nbsp;15, 2006</TD>
</TR>

<TR style="font-size: 6pt">
<TD colspan="3">&nbsp;</TD>
</TR>


<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><U>File No.&nbsp;0-17363</U></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Dear Ms.&nbsp;Richter:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On behalf of Lifeway Foods, Inc. (&#147;Lifeway&#148; or the &#147;Company&#148;), set forth below are the
Company&#146;s responses to your letter of comment dated October&nbsp;13, 2006 to Ms.&nbsp;Julie Smolyansky,
Chief Executive Officer and President of the Company. The numbered responses of the Company and
related captions contained in this letter correspond to the numbered paragraphs and related
captions in the letter of comment. For your convenience, Company&#146;s responses include supplemental
information provided to you herein and revisions to the
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Ms.&nbsp;Tangela Richter<BR>
May 14, 2007<BR>
Page Two

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Company&#146;s Registration Statement on Form S-3, Registration No.&nbsp;333-137317 (the &#147;Form S-3&#148;), the
Company&#146;s Annual Report on Form 10-KSB for the fiscal year ended December&nbsp;31, 2005 (the &#147;Form
10-KSB&#148;) and the Company&#146;s Quarterly Reports on Form 10-QSB for the quarters ended March&nbsp;31, 2006,
June&nbsp;30, 2006 and September&nbsp;30, 2006 (the &#147;Forms 10-QSB&#148;).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Form&nbsp;S-3 filed September&nbsp;14, 2006</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U><B>Selling Stockholders, page 6</B></U>

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Expand the Selling Stockholders table to include the natural person with power to vote or to
dispose of the securities offered for resale by the entity that is listed as a selling
stockholder. If more than one holder is listed as beneficial owner for the same securities,
include explanatory text or footnotes. <U>See</U> Interpretation 4S of the Regulation&nbsp;S-K
portion of the march 1999 supplement to the CG telephone interpretation manual.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>ANSWER</U>:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Selling Stockholders table has been revised on page 9 of the Form S-3 to include the
requested disclosure.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Form&nbsp;10-KSB/A for the Fiscal Year Ended December&nbsp;31, 2005</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U><B>Patents, Trademarks, Licenses, Royalty Agreements, page 8</B></U>

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>We note your disclosure regarding the &#147;BasicsPlus&#148; mark that indicates GalaGen, Inc. assigned
the entire interest, including the goodwill of this mark to the company. Please explain your
meaning of the term goodwill in this disclosure.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>ANSWER</U>:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company used the designation of goodwill being assigned with the trademark &#147;BasicsPlus&#148;
for the legal concept that trademark protection stems from a symbol or a word as it
represents to the consumer a reliable source identifier and as a protection of the company&#146;s
&#147;goodwill&#148; as in the reputation of the company. There is no attempt to designate this as
goodwill in the accounting sense.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>We note your page 11 disclosure indicating you have undertaken a royalty obligation
associated with the sale of Ilya&#146;s Farm, Inc&#146;s products. Please tell us where these</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Ms.&nbsp;Tangela Richter<BR>
May 14, 2007<BR>
Page Three

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>amounts are reflected in your financial statements. Please provide separate disclosure if
material.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>ANSWER</U>:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The royalty obligations obligations associate with Ilya&#146;s Farm, Inc.&#146;s products is included
in other accrued liabilities and amounted to approximately $7,000.00 which the Company does
not consider material.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Management&#146;s Discussion and Analysis of Financial Condition</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U><B>Comparison of Quarter Ended December&nbsp;31, 2005 to Quarter Ended December&nbsp;31, 2004</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U><B>Results of Operations, page 15</B></U>

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>We note your disclosure that indicates sales for LFIE increased due to products sent from
your Illinois facility to Philadelphia, Pennsylvania for distribution in the tri-state area.
Please confirm that these products were sold to a third party and that all elements required
for revenue recognition of have been met. Please refer to SAB topic 13:A.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>ANSWER</U>:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The products sent from our Illinois facility to Philadelphia, Pennsylvania for distribution
in the tri-state area were sold to third parties and the following criteria were met with
respect thereto in each case: (i)&nbsp;the products were shipped and the Company had no
significant remaining obligations; (ii)&nbsp;persuasive evidence of an agreement or agreements
existed; (iii)&nbsp;the price to the buyer was fixed or determinable; and (iv)&nbsp;collection was
probable.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>We note your disclosure that indicates you have offset a portion of oil related cost
increases by making prudent investments in energy related securities. Please tell us and
expand your disclosures, to clearly describe the nature of the securities you are referring
to.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>ANSWER</U>:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The company spends a material amount of money on transportation expense which is directly
tied to the cost of oil. During the fourth quarter of 2005, the company invested in various
funds that invest in, among other things, energy related equities in order to hedge</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Ms.&nbsp;Tangela Richter<BR>
May 14, 2007<BR>
Page Four

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>their exposure to the rising costs of oil. This disclosure has been added to pages 15-16 of
the Form 10-KSB.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Report of Independent Registered Public Accounting Firm, page 19</B></U>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">6.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The opinion included in your document is not clear as to the periods covered by the report.
It appears that a single year&#146;s information contained in the statements of income, changes in
stockholder&#146;s equity and cash flows have been audited. Please provide a revised audit opinion
that indicates, if true, that all years presented have been audited.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>ANSWER</U>:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The audit opinion has been revised on page 19 of the Form 10-KSB.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Consolidated Statements of Income and Comprehensive Income, page 22</B></U>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">7.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Please tell us if your measure of gross profit includes depreciation expense associated
with the cost of goods sold.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>ANSWER</U>:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Depreciation has historically been included in operating expenses. We have amended the Form
10-KSB and the Forms 10-QSB to include depreciation in our measure of gross profit. The
amounts reclassified from operating expenses to cost of goods sold related to depreciation
are included below:</TD>
</TR>

</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><u><B>Depreciation Adjustments</B></u>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2004</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">10-KSB</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">585,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">643,004</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2005</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">10-QSB &#151; Q1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">126,911</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">124,546</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">10-QSB &#151; Q2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">131,714</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">161,311</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">10-QSB &#151; Q3</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">149,641</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">151,112</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Ms.&nbsp;Tangela Richter<BR>
May 14, 2007<BR>
Page Five

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">8.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Please provide us with an analysis of the components of the line item referred to as
&#147;Operating expenses.&#148; Please refer to rule 5-03(b) of Regulation&nbsp;S-X.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>ANSWER</U>:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The line item referred to as &#147;Operating Expenses&#148; consists of selling expenses and general
and administrative expenses. The line item has been revised to show such components on page
22 of the Form 10-KSB and, in addition, on page 4 of each of the Forms 10-QSB.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Note 2 &#150; summary of significant Accounting Policies</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U><B>Revenue Recognition, page 25</B></U>

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">9.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Please expand your revenue recognition policy to address the elements described in SAB Topic
13:A.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>ANSWER</U>:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The discussion of the revenue recognition policy on page 25 of the Form 10-KSB and on page 7
of each of the Forms 10-QSB has been revised as requested.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Controls and Procedures, page 36</B></U>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">10.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>It is not clear whether your management concluded that your disclosure controls and
procedures, as defined by Rule&nbsp;13a-15(e) or 15d-15(e) of the Exchange Act, were effective as
of the end of the period covered by t his report. Please revise to clearly state your
management&#146;s conclusion with respect to the effectiveness of your disclosure controls and
procedures. This comment extends to your Forms 10-QSB. Please revise those forms
accordingly.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>ANSWER</U>:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company has revised page 36 of the Form 10-KSB, page 20 of the Form 10-QSB for the
quarter ended March&nbsp;31, 2006 and page 19 of the Form 10-QSB for the quarter ended June&nbsp;30,
2006 to clearly state management&#146;s conclusion that disclosure controls and procedures were
effective as of the end of the period covered by the respective report. Please note that the
Company&#146;s Form 10-QSB for the quarter ended September&nbsp;30, 2006 contained the revised
language at the time of its filing on November&nbsp;20, 2006.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Ms.&nbsp;Tangela Richter<BR>
May 14, 2007<BR>
Page Six

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">11.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>You state that there were no &#147;significant changes&#148; in your internal control over financial
reporting. Please note that Item 308(c) of Regulation&nbsp;S-B requires that you disclose
<U>any</U> change in your internal control over financial reporting identified in connection
with the evaluation required by paragraph (d)&nbsp;of Exchange Act rules 13a-15 or 15D-15 that
occurred during the fourth fiscal quarter that has &#147;materially affected, or is reasonably
likely to materially affect, the small business issuer&#146;s internal control over financial
reporting.&#148; See also Regulation&nbsp;S-B, paragraph 4(d) of Exhibit&nbsp;31. Please review your
disclosure and revise as appropriate. This comment also applies to your forms 10-QSB.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>ANSWER</U>:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company has revised page 36 of the form 10-KSB, page 20 of the Form 10-QSB for the
quarter ended March&nbsp;31, 2006 and page 19 of the Form 10-QSB for the quarter ended June&nbsp;30,
2006 to state there were no changes in the Company&#146;s internal control over financial
reporting identifying in connection with the valuation required by the Exchange Act that has
&#147;materially affected, or is reasonably likely to material affect, small business issuer&#146;s
internal control over financial reporting.&#148; Please note that the Company&#146;s Form 10-QSB for
the quarter ended September&nbsp;30, 2006 contained the revised language at the time of its
filing on November&nbsp;20, 2006.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We hope this addresses all of the Commission&#146;s comments and concerns. Please do not hesitate
to contact us with any further questions.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 50%">Sincerely,

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 50%">Timothy R. Lavender

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">TRL:jjz
</DIV>



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