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Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
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<SEC-DOCUMENT>0000886206-08-000012.txt : 20080401
<SEC-HEADER>0000886206-08-000012.hdr.sgml : 20080401
<ACCEPTANCE-DATETIME>20080212163121
<PRIVATE-TO-PUBLIC>
ACCESSION NUMBER:		0000886206-08-000012
CONFORMED SUBMISSION TYPE:	CORRESP
PUBLIC DOCUMENT COUNT:		1
FILED AS OF DATE:		20080212

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			FRANKLIN COVEY CO
		CENTRAL INDEX KEY:			0000886206
		STANDARD INDUSTRIAL CLASSIFICATION:	BLANKBOOKS, LOOSELEAF BINDERS & BOOKBINDING & RELATED WORK [2780]
		IRS NUMBER:				870401551
		STATE OF INCORPORATION:			UT
		FISCAL YEAR END:			0831

	FILING VALUES:
		FORM TYPE:		CORRESP

	BUSINESS ADDRESS:	
		STREET 1:		2200 W PKWY BLVD
		CITY:			SALT LAKE CITY
		STATE:			UT
		ZIP:			84119-2331
		BUSINESS PHONE:		8018177171

	MAIL ADDRESS:	
		STREET 1:		2200 W PARKWAY BLVD
		CITY:			SALT LAKE CITY
		STATE:			UT
		ZIP:			84119

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	FRANKLIN QUEST CO
		DATE OF NAME CHANGE:	19940218
</SEC-HEADER>
<DOCUMENT>
<TYPE>CORRESP
<SEQUENCE>1
<FILENAME>filename1.htm
<TEXT>
<html>

  <head>
    <title>corresp020508.htm</title>
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    <body bgcolor="#ffffff"><br><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">February
      12, 2008</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Ms.
      Linda
      Cvrkel</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Branch
      Chief</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Securities
      and Exchange Commission</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Division
      of Corporate Finance</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Washington,
      D.C.&#160;&#160;20549-0305</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">
      <div align="left">
        <table cellpadding="0" cellspacing="0" width="50%">

            <tr>
              <td align="left" valign="top" width="5%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">RE:</font></div>
              </td>
              <td align="left" valign="top" width="45%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Franklin
                  Covey Co. (the Company)</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Review
                  of Form 10-K for the year ended August 31, 2007</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">File
                  No. 1-11107</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Response
                  to Commission Letter Dated January 31,
                  2008</font></div>
              </td>
            </tr>

        </table>
      </div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Dear
      Ms.
      Cvrkel:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">This
      letter is written in response to the Staff&#8217;s review of the Company&#8217;s Form 10-K
      for the year ended August 31, 2007 as outlined in the Commission&#8217;s letter dated
      January 31, 2008.&#160;&#160;As requested, the Company is providing the
      following supplemental information and responses regarding our financial
      statements and disclosures as contained in our Form 10-K for the fiscal year
      ended August 31, 2007.&#160;&#160;As requested by the Commission, the Company
      has disregarded the first comment from the letter dated January 31,
      2008.&#160;&#160;The Company will incorporate revisions and additional
      disclosures as requested by this comment letter in its future filings, as
      appropriate, with the Commission.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Consolidated
      Financial
      Statements</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Note
      17. Income
      Taxes</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top">
            <td align="right" style="WIDTH: 36pt">
              <div><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">1.&#160;&#160;</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">We
                note that you significantly reduced your valuation allowance for
                deferred
                tax assets in 2006 primarily as a result of improved operating performance
                and the expectation of future profitability.&#160;&#160;Tell us and revise
                Note 17 and MD&amp;A in future filings to provide an enhanced discussion
                of the reasons why you believed that realization of the deferred
                tax
                assets was more likely than not during 2006 given your lack of history
                of
                profitability.&#160;&#160;Refer to the guidance provided in paragraphs
                20-25 of SFAS No. 109.&#160;&#160;Your response should clearly explain the
                specific nature and timing of the factors that caused you to believe
                your
                deferred tax assets were realizable during the fourth quarter of
                2006.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Response:&#160;&#160;As
      required by paragraphs 20-25 of Statement of Financial Accounting Standards
      (SFAS) No. 109, <font style="DISPLAY: inline; FONT-STYLE: italic">Accounting for
      Income Taxes</font>, the Company considered all available evidence, both
      positive and negative, in the determination to reverse substantially all of
      the
      valuation allowances on its deferred tax assets in fiscal 2006.&#160;&#160;The
      determination to reverse these valuation allowances was complex and required
      the
      use of significant judgment by the Company&#8217;s management since the realizability
      of deferred tax assets in future periods is inherently dependent upon estimates
      and projections of future financial results.&#160;&#160;The positive evidence
      considered by the Company regarding the future realizability of deferred tax
      assets consisted primarily of the following items:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top">
            <td style="WIDTH: 36pt">
              <div>&#160;</div>
            </td>
            <td style="WIDTH: 18pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">a.</font></font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Significant
                Improvement in
                Operating Results Resulting in Cumulative Earnings in Recent Years
&#8211;
                </font>From fiscal 2002 through fiscal 2006, pre-tax income improved
                $135.8 million as the Company went from a pre-tax loss of $122.2
                million
                to pre-tax income of $13.6 million.&#160;&#160;During that time, the
                Company made many strategic changes and has demonstrated its ability
                to
                achieve the expected results from those strategic changes as further
                discussed below.&#160;&#160;The Company was able to perform well against
                budgeted targets through fiscal 2006, which resulted in the Company
                achieving consistent improvements in domestic pre-tax income from
                2004
                through 2006 as well as forecasted improvements that were expected
                to
                continue into the foreseeable future.&#160;&#160;As a result of these
                improvements, at August 31, 2006 the Company had cumulative positive
                domestic pre-tax income for the preceding three fiscal
                years.&#160;&#160;In addition, at August 31, 2004 the Company had a gross
                deferred tax asset related to its net operating loss carryforwards
                of
                $21.3 million, which was reduced to $14.3 million as of August 31,
                2006
                and further reduced to $9.8 million at August 31, 2007 as a result
                of the
                actual utilization of net operating loss carryforwards from the Company&#8217;s
                ability to generate taxable income.
</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top">
            <td align="right" style="WIDTH: 54pt">
              <div><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">b.&#160;&#160;</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Consideration
                of Pre-Tax
                Earnings Sources &#8211; </font>The Company considered the availability and
                timing of various income sources as they relate to the expected
                realization of the deferred tax assets.&#160;&#160;At August 31, 2006, it
                was determined that $112 million of taxable income was needed over
                the
                next 20 years for the Company to realize the benefits of its deferred
                tax
                assets.&#160;&#160;Of this amount, $69 million would be provided from the
                reversal of temporary taxable differences while the remaining $43
                million
                would need to be provided from the&#160;pre-tax earnings&#160;of the
                Company.&#160;&#160;Based upon improving operating results and better
                forecasting as described above, the Company believed that it was
                more
                likely than not that $43 million could be generated from operations
                over
                the next 20 years.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 54pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">During
      fiscal 2007, the Company continued the recent trend of improving operations
      and
      increased domestic pre-tax income.&#160;&#160;At August 31, 2007, the Company
      determined that $94 million of taxable income was needed over the next 19 years
      to realize its deferred tax assets.&#160;&#160;Of the required $94 million, $66
      million will be provided from the reversal of temporary taxable differences
      while the remaining $28 million will need to be provided from the&#160;pre-tax
      earnings&#160;of the Company.&#160;&#160;The Company continues to believe that
      it is more likely than not that $28 million of taxable income can be generated
      from operations over the next 19 years.&#160;&#160;During the fiscal year ended
      August 31, 2007 the Company recognized $15.7 million of pre-tax income and
      for
      the quarter ended December 1, 2007 the Company recognized $4.2 million of
      pre-tax earnings.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top">
            <td align="right" style="WIDTH: 54pt">
              <div><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">c.&#160;&#160;</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Strategic
                Changes and Future
                Expectations &#8211; </font>As previously mentioned, and as disclosed in various
                Commission filings, the Company has made numerous strategic changes
                during
                the periods when it was losing money.&#160;&#160;These strategic
                initiatives included selling operating divisions, closing unprofitable
                or
                underperforming store locations, headcount reductions, reduced capital
                expenditures, asset sales, and various efforts to improve sales and
                reduce
                the corresponding cost of sales.&#160;&#160;These changes have thus far
                contributed to improving financial results and the Company believed
                at
                August 31, 2006 that it was more likely than not that the trend of
                improving domestic pre-tax income would continue.&#160;&#160;The Company
                believes that these expectations were substantiated in fiscal 2007
                and
                during the first quarter of fiscal
                2008.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top">
            <td align="right" style="WIDTH: 54pt">
              <div><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">d.&#160;&#160;</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Long
                Carryforward Periods and
                History of Using Carryforwards Before Expiration &#8211;</font> At August 31,
                2006, the Company&#8217;s federal net operating loss carryforwards had a 20-year
                carryforward period, thereby allowing the Company a significant amount
                of
                time to realize the related deferred tax assets.&#160;&#160;The Company
                has never experienced a situation in which federal loss carryforwards
                have
                expired before being used.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top">
            <td align="right" style="WIDTH: 54pt">
              <div><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">e.&#160;&#160;</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Ability
                to Reasonably Forecast
                Future Operating Results &#8211;</font> During the periods from fiscal 2000
                through fiscal 2004, the Company was involved in significant restructuring
                activities which made it difficult for the Company to reasonably
                forecast
                operating results.&#160;&#160;However, as the Company began to focus more
                on the remaining core operations and those operations continued to
                stabilize in terms of revenues and operating expenses, the ability
                to
                forecast results significantly improved.&#160;&#160;Specifically, the
                Company met or exceeded its budgeted results during both fiscal 2005
                and
                fiscal 2006.&#160;&#160;Also, the cumulative amount of income that would
                be necessary to realize the remaining deferred tax assets, exclusive
                of
                those that are realizable due to the reversal of taxable temporary
                differences, is likely achievable based upon the recent historical
                results
                and projected results.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      addition to the foregoing positive evidence, the Company also evaluated the
      weight of negative evidence, which primarily consisted of the following
      considerations:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top">
            <td align="right" style="WIDTH: 54pt">
              <div><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">a.&#160;&#160;</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Operating
                Losses Prior to
                Fiscal 2005 </font>&#8211; While the period from 2004 through 2006 showed
                significant improvements in operating results, which included cumulative
                pre-tax income,<font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font>the Company
                experienced significant operating losses from fiscal 2000 through
                fiscal
                2004.&#160;&#160;The Company considered the probability of a sustained
                downturn in operating results as negative evidence; however, given
                the
                recent periods of operating income and the forecasted results for
                future
                periods, the Company concluded that these losses were not by themselves
                sufficient negative evidence to overcome the positive evidence of
                recent
                cumulative earnings.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top">
            <td align="right" style="WIDTH: 54pt">
              <div><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">b.&#160;&#160;</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Other
                Factors &#8211; </font>The
                Company also considered other potentially negative factors including
                the
                expiration of unused deferred tax assets (none); unsettled circumstances,
                such as litigation or environmental assessments, that could have
                an
                adverse impact on operations (no significant items noted); and a
                carryforward or carryback period that is so brief that it would limit
                realization of tax benefits (the carryforward period of most deferred
                income tax assets appears ample).&#160;&#160;Although the realization of
                deferred tax assets is necessarily based upon estimates of future
                income
                and other events, which could change, no other significant negative
                factors were identified that would have an impact upon the Company&#8217;s
                ability to realize its deferred tax
                assets.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">At
      August
      31, 2006, in consideration of both the positive evidence and the negative
      evidence as described above, the Company determined that it was more likely
      than
      not that substantially all of the Company&#8217;s deferred tax assets were realizable
      and that the majority of the valuation allowances on those assets should be
      reversed.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      decision to reverse substantially all of the deferred tax asset valuation
      allowances in the fourth quarter of fiscal 2006 was based on the positive and
      negative evidence that accumulated during the entire fiscal year.&#160;&#160;One
      of the significant pieces of negative evidence that no longer existed in the
      fourth quarter was the existence of cumulative losses in recent years, which
      the
      Company has interpreted to mean the current year and two prior
      years.&#160;&#160;The weight of other positive evidence also strengthened at
      August 31, 2006 as the Company completed another full fiscal year of profitable
      operations and updated its forecasts.&#160;&#160;Accordingly, management
      concluded that the reversal of substantially all of the valuation allowances
      in
      the fourth quarter of fiscal 2006 was appropriate.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As
      requested by the Commission, the Company will include a more detailed
      description of these factors in its income tax footnote and in MD&amp;A in
      future periods, as appropriate.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Other</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Management
      acknowledges that the Company is responsible for the adequacy and accuracy
      of
      the disclosure in the filings; Staff comments or changes to disclosure in
      response to Staff comments in the filings reviewed by the Staff do not foreclose
      the Commission from taking any action with respect to the filing; and that
      it is
      the position of the Staff that the Company may not assert Staff comments as
      a
      defense in any proceeding initiated by the Commission or any person under the
      federal securities laws of the United States in connection with the Company&#8217;s
      response to the Commission&#8217;s comments.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Company believes that the supplemental information presented above is fully
      responsive to the Staff&#8217;s comments on our annual report on Form 10-K for the
      fiscal year ended August 31, 2007.&#160;&#160;Please contact me with any further
      questions that you may have regarding these matters.</font></div>
    <div>&#160;</div>
    <div>&#160;</div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Sincerely,</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div><br>
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      <table cellpadding="0" cellspacing="0" width="35%">

          <tr>
            <td align="left" valign="top" width="35%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">/s/
                Stephen D. Young</font></div>
            </td>
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            <td align="left" valign="top" width="35%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Stephen
                D. Young</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="35%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Chief
                Financial
                Officer</font></div>
            </td>
          </tr>

      </table>
    </div><br><br><br><br><br><br></body>
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