SecProbe.io

CORRESP
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filename1.htm

    skypeoplesecrespjan14_2009.htm

    January
14, 2009

    BY EDGAR

    Norman
Gholson, Esq.

    Division
of Corporation Finance

    Securities
and Exchange Commission

    100 F
Street, N.E.

    Washington,
D.C. 20002

            Re:  SkyPeople
      Fruit Juice, Inc.

            File No.
      333-149896

              Amendment
      No. 3 Filed: December 5, 2008

              Form 10-Q Filed: November 14, 2008

            File No.
      000-32249

    Dear Mr.
Gholson:

    Reference
is made to your comment letter, dated January 7, 2009 to our client, SkyPeople
Fruit Juice, Inc. (the “Company”), relating to Amendment No. 3 to the subject
registration statement and the Company’s Quarterly Report on Form 10-Q for the
quarter ended September 30, 2008 which was filed on November 14, 2008 (the
“Comment Letter”). Set forth below are the comments contained in the Comment
Letter followed by our response thereto. After receiving your informal comments
with respect to the matters set forth herein, the Company intends to file an
Amendment No. 4 to the Registration Statement and an Amendment No. 1 to its
Quarterly Report on Form 10-Q for the quarter ended September 30, 2008 to
address the matters referred to herein that require changes in the disclosure
set forth in such documents.

    Amendment No. 3 to
Registration Statement on Form S-1

    Management's Discussion and
Analysis of Financial Condition and Results of Operations

    Results of Operations and
Business Outlook

    Gross Margin, page
40

      1.    We note your
response to our prior comment 6 and the revised disclosure that states you use a
relative sales value costing method in determining your cost of kiwifruit seeds.
Please clarify how you calculate and apply this relative sales value method when
determining your cost of sales for kiwifruits seeds and concentrated kiwifruit
juice. In this respect, if you are using a relative percentage of your kiwifruit
seeds revenue to your total revenues from both kiwifruit seeds and kiwifruit
juice and applying that percentage to your total cost in producing both
kiwifruit seeds and kiwifruit juice, it would seem that would result in an
identical margin for both products. Please clarify your methodology and tell us
specifically how this methodology result in a 90.8% margin for kiwifruit seeds
and 39.1% margin for kiwifruit juice of the nine months ended September 30,
2008.

      Kiwifruit
seeds are the byproduct of kiwifruit juice. They are removed from the fresh
kiwifruits when we process kiwifruit juice for purity. Initially, the Company
did not allocate any cost to kiwifruit seeds as there was no expected sales
value. In the second quarter of 2008, the Company began the sale of kiwifruit
seeds. As the revenue for the sale of kiwifruit seeds was only about 2% of the
total revenue for the nine months ended September 30, 2008, in calculating the
gross margin of kiwifruit seeds, the Company applied the average method to
simplify the calculation.  In applying this method, we first
calculated the average sales values of kiwifruit seeds and kiwifruit juice that
can be produced from one ton of kiwifruit based on our estimate in a normal
production situation in the second quarter of 2008. This percentage was then
applied to actual cost for the production of kiwifruit juice to calculate the
actual cost of sales for kiwifruit seeds and concentrated kiwifruit juice in the
period covered by the financial statements. As the Company is using the first
in, first out inventory method, the kiwifruit seeds of zero cost allocation were
sold first, then the kiwifruit seeds of higher cost allocation. Hence, the gross
margin for kiwifruit seeds as a percentage of revenues in the nine months
ended September 30, 2008 was much higher than that of concentrated kiwifruit
juice.

            -1-

    Business - Industry and
Principal Markets, page 57

    2.           We
note your response to our previous comment 8. Your have provided Web addresses
for several items that are in the Chinese language. Please provide us with
English translations of these items.

    Attached
hereto as Appendix A are the English translations of the statements made in
Mandarin on the web page links that were provided in our letter to you dated
December 5, 2008. Please note that one of the web addresses has been updated and
the new address has been provided with the translation.

    Note 2. Summary of
Significant Accounting Policies

    Consolidation, page
F-7

    3.           We
note your response to our prior comment 10. Please tell us if a written
agreement has been executed that substantiates:

              ·

              Hede
      was acting as a de facto agent and it was the intention of both entities
      that Hede would sell Huludao to you at Hede's purchase price after a brief
      operating period;

              ·

              Hede
      would only have temporary voting control of
  Huludao;

              ·

              How
      Shaanxi Tianren participated significantly in the arrangement of the
      transaction;

              ·

              Why
      Shaanxi Tianren would be required to provide additional financial support
      to Hede;

              ·

              Why
      Shaanxi Tianren would absorb the losses and receive the expected returns
      of Huludao.

If so,
please provide a copy of this agreement. Also, tell us how it was determined
that Huludao was more closely related to you than to Hede under the criteria of
FIN 46(R).

    In your
prior response dated October 6, 2008, you stated that Hede was established in
February 2006 as a venture capital investment corporation and can stand alone
and absorb its own losses. You also stated that your subsidiary, Shaanxi
Tianren, is a separate entity from Hede and has no financial interest in it.
Given Shaanxi Tianren had no equity interest in Huludao, and without executed
agreements substantiating the terms of the relationship between the various
entities as described in your response(s), it does not appear consolidation
under FIN 46(R) was appropriate for the period from June 2007 through the
acquisition in May 2008.

    The
Company is unable to locate a written agreement between the parties listing
details that would require consolidation under FIN 46(R). However, this is not
unusual given that Hede and Shaanxi Tianren (“ST”) were both controlled by Mr.
Yongke Xue according to the criteria established by EITF 02-5. The response in
our letter to you dated October 6, 2008 explained why Hede should not be
consolidated by ST and it seems that paragraph 2 of comment 3 is confusing a
lack of financial interest in Hede with the determination of whether Huludao
should be consolidated. The Company belives that its determination to
consolidate Huludao was correct, as evidenced by the advance by ST to Hede to
make the purchase (which advance establishes pecuniary financial interest and
risk of loss) and by the subsequent transfer of Huludao to ST at Hede’s original
purchase price during 2008 (which confirms that potential losses were to be
absorbed by and potential gains were to be enjoyed by ST). The Company maintains
that the substance of the agreements, whether written or not, required
consolidation under FIN 46(R).

          -2-

    4.           We
note your conclusion that if you had not consolidated Huludao under FIN 46(R)
that upon its acquisition you would be required under the guidance of SPAS
141(R), paragraphs D8-D14, to retroactively restate your financial statements to
include Huludao's operations from its time of acquisition by Hede. Tell us in
detail how you accounted for the acquisition of Huludao in May 2008. Citing the
specific guidance in SPAS 141(R) and the terms of your acquisition of Huludao,
tell us why you believe retrospective restatement would be appropriate as
entities under common control.

    As of
June 1, 2007, Hede was owned 80% by Mr. Yongke Xue and ST was owned 59% by Mr.
Yongke Xue and his brother, Mr. Hongke Xue. According to paragraph 3(b) of EITF
02-5, Hede and ST were under common control on that date.

    Note 4. Convertible
Preferred Stock, page F-14

    5.           We
note your response to our prior comment 16 and your conclusion that your
private
placement investors were acting as valuation experts in their own right. The
negotiations that took place between you and the private placement investors for
this specific transaction may not be representative of the fair value of your
individual equity securities. Please provide us with an analysis of the fair
value of your common stock if you had considered a market or income approach in
accordance with the AICPA Practice Aid "Valuation of Privately-Hold-Company
Equity Securities Issued as Compensation." Further, tell us the specific
differences between your Series B Preferred Stock and your Common Stock and how
those differences were factored into your determination of fair
value.

    In
determining whether a beneficial conversion feature existed in the Series B
Preferred Stock the Company evaluated whether any of the preferences listed in
the Certificate of Designations for the Series B Preferred Stock would cause a
share of such preferred stock to be valued lower than a share of common stock.
The Company concluded that the preferences resulted in the value of the Series B
Preferred Stock being at least equal to or greater than the value of the common
stock, resulting in no potential for a beneficial conversion feature to exist.
The following discussion of the rights and preferences of the Series B Preferred
Stock is set forth in the section of the Prospectus called “Description of
Securities” on page ___ of the Prospectus contained in Amendment No. 3 to the
Registration Statement (the subsection on “No Dividends” and the first three
lines of the “Voting Rights” section were inadvertently omitted in Amendment
No.3, but will be added back in the Prospectus to be contained in Amendment No.
4). A discussion of the rights of the Common Stock is also set forth therein.
The Common Stock has none of the rights or preferences of the Series B Preferred
Stock.

    Series
B Stock

    In
connection with the Share Exchange, we designated 7,000,000 shares of Series B
Stock out of our total authorized number of 10,000,000 shares of Preferred
Stock, par value $0.001 per share. The rights and preferences of the Series B
Preferred Stock are set forth in the Certificate of Designations, Preferences
and Rights of Series B Convertible Preferred Stock which we filed with the
Secretary of State of Florida on February 22, 2008. The following is a summary
of the rights and preferences:

    No
Dividends. No dividends are payable with respect to the Series A Stock
and no dividends can be paid on our Common Stock while the Series B Stock is
outstanding.

        -3-

    Voting
Rights. The Series B Stock shall have no voting rights, except as
required by Florida law. However, so long as any shares of Series B Stock are
outstanding, we cannot, without the affirmative approval of the holders of 75%
of the shares of the Series B Stock then outstanding,

    (a) alter
or change adversely the powers, preferences or rights given to the Series B
Stock or alter or amend the Certificate of Designations of the Series B
Stock,

    (b)
authorize or create any class of stock (other than Series A Stock) ranking as to
dividends or distribution of assets upon a liquidation senior to or otherwise
pari passu with the Series B Stock, or any series of preferred stock possessing
greater voting rights or the right to convert at a more favorable price than the
Series B Stock,

    (c) amend
our certificate of incorporation or other charter documents in breach of any of
the provisions hereof,

    (d)
increase the authorized number of shares of Series B Stock or the number of
authorized shares of Preferred Stock.

    Liquidation
Preference. On liquidation the holders are entitled to receive $1.20 per
share (out of available assets) before any distribution or payment can be made
to the holders of any junior securities.

    Conversion at
Option of Holder. Upon effectiveness of the Reverse Split, each share of
Series B Stock is convertible at any time into one share of Common Stock at the
option of the holder. If the conversion price (initially $1.20) is adjusted, the
conversion ratio will likewise be adjusted and the new conversion ratio will be
determined by multiplying the conversion ratio in effect by a fraction, the
numerator of which is the conversion price in effect before the adjustment and
the denominator of which is the new conversion price.

    Automatic
Conversion on Change of Control. In the event of a “change of
control” the shares of Series B Stock will be automatically converted into
Common Stock. A “change in control” means a consolidation or merger of us with
or into another company or entity in which we are not the surviving entity or
the sale of all or substantially all of our assets to another company or entity
not controlled by our then existing stockholders in a transaction or series of
transactions.

    4.9% Beneficial
Ownership Limitation. Except in certain circumstances, the right of the
holder to convert the Series B Stock is subject to the 4.9% limitation, with the
result we shall not effect any conversion of the Series B Stock, and the holder
has no right to convert any portion of the Series Stock, to the extent that
after giving effect to such conversion, the holder (together with the holder’s
affiliates) would beneficially own in excess of 4.9% of the number of shares of
Common Stock outstanding immediately after giving effect to such
conversion.  Beneficial ownership is determined in accordance with Section
13(d) of the Exchange Act, and Regulation 13d-3 thereunder. The 4.9% limitation
may not be waived or amended.

    Liquidated
Damages for Failing to Timely Deliver Certificates: If we fail to deliver
the appropriate stock certificates within three trading days of the conversion
date, we are required to pay the holder, in cash, liquidated damages the amount
by which (x) the holder’s total purchase price (including brokerage commissions,
if any) for the Common Stock so purchased exceeds (y) the product of (1) the
aggregate number of shares of Common Stock that such holder was entitled to
receive from the conversion at issue multiplied by (2) the price at which the
sell order giving rise to such purchase obligation was executed.

        -4-

    Certain
Adjustments

    Stock Dividends
and Stock Splits. Appropriate adjustments will be made to the conversion
ratio in the event of a stock dividend, stock distribution, stock split or
reverse stock split or reclassification with respect to the outstanding shares
of Common Stock.

    Price Adjustment;
Full Ratchet. From and after February 26, 2008 and until such time as the
investors hold less than 20% of the Series B Stock, except for certain exempt
issuances not to exceed 5% of the outstanding shares of Common Stock for every
two year period, certain issuances as to which price adjustment has already been
made, in the event we issue Common Stock at a price, or issue warrants, options,
convertible debt or equity securities with a exercise price per share or
conversion price which is less than the conversion price then in effect, then
the conversion price will be reduced, concurrently with such issue or sale, to
such lower price.

    Subsequent
Transactions. For so long as any investor holds any of the Series B
Stock, we are prohibited from effecting or entering into an agreement to effect
any transactions involving a “Variable Rate Transaction” or an “MFN
Transaction”.

    Subsequent Rights
Offerings. We are prohibited from, at any time while the Series B Stock
is outstanding, issuing rights, options or warrants to holders of Common Stock
entitling them to subscribe for or purchase shares of Co