SEC Company Response from CBAK Energy Technology, Inc. (CBAT) (CIK 0001117171) (CBAT) — Oct 18, 2005
CBAK Energy Technology, Inc. (CBAT) (CIK 0001117171)
Date: Oct. 18, 2005 · CIK: 0001117171 · Accession: 0001010549-05-000740
AI Filing Summary & Sentiment
File numbers found in text: 333-122209
Referenced dates: August 2, 2005
Letter
Re: China BAK Battery, Inc., formerly known as Medina Coffee, Inc. Pre-effective Amendments I and 2 to Registration Statement on Form SB-2 Filed June 22 and 27, 2005 File No. 333-122209
[LETTERHEAD OF ANDREWS KURTH LLP]
October 11, 2005
U.S. Securities and Exchange Commission Division of Corporate Finance 450 Fifth Street NW Washington, DC 20549
Ladies and Gentleman:
On behalf of China BAK Battery, Inc. (the "Company"), we have electronically transmitted herewith Pre-Effective Amendment No. 3 to the Registration Statement on Form SB-2, which has been marked to indicate the change effected by this amendment. In addition, we have today forwarded by overnight delivery five (5) marked copies of Amendment No. 3, c/o Edward M. Kelly, for the convenience of the Staff.
This letter responds to the Staff's letter of comment, dated August 2, 2005, on behalf of the Company.
1. Comment: Risk Factors, page 4 -----------------------------
a. Refer to prior comment 6. As requested previously, revise the ninth factor.
b. We assume that inclusion of the words "could be" in the thirty-first risk factor's heading are inadvertent. Please delete.
Response: The risk factors have been amended and restated to conform to -------- the risk factors included in Amendment No. 1 to the Quarterly Report on Form 10-QSB for the quarter ended June 30, 2005 filed with the Commission on September 1, 2005.
2. Comment: Suppliers. page 29
--------------------------- Expand your disclosure to discuss any material contracts that you have entered into with your suppliers relating to energy and materials used in the production of your products.
<PAGE>
U.S. Securities and Exchange Commission October 11, 2005 Page 2
Response: We have modified the Disclosure in accordance with the Staff's -------- comments.
3. Comment: Description of Our Capital Stock, Page 37
Remove from this section's first paragraph the statement that the description of China BAK Battery's capital stock is "qualified in its entirety" by information outside the prospectus. This section should include all of the disclosure required by Item 202 of Regulation S-B.
Response: We have removed the statement in accordance with the Staff's -------- comment.
4. Comment: Selling Stockholders, Page 38 --------------------------------------
Refer to (28) after the names of Robert G. and Judith T. Rader in the table. We are unable to locate the related footnote disclosure. Please revise.
Response: We have modified the Disclosure in accordance with the Staffs -------- comments.
5. Comment: Report of Independent Registered Public Accounting Firm. page F-1 -----------------------------------------------------------------------
The independent auditor's report included in your filing is not signed by your auditor. Obtain from your auditor a signed audit report. Also ensure that an updated consent is filed with your next amendment.
Response: A signed audit report is included in Amendment No. 3. An -------- updated consent is included as Exhibit 23.1 to Amendment No. 3.
6. Comment: Financial Statements -----------------------------
a. Update your disclosures here and elsewhere in the filing to include financial information through June 30, 2005.
Response: We have modified the Disclosure in accordance with the Staffs -------- comments.
b. As requested previously, provide us the summarized balance sheet of Medina Coffee, the shell company immediately before the transaction with BAK International, the operating company. Also provide us the summarized balance sheet of BAK International immediately before the transaction with Medina Coffee.
Response: Please see Appendices A and B attached hereto. --------
<PAGE>
U.S. Securities and Exchange Commission October 11, 2005 Page 3
7. Comment: Statements of Changes in Stockholders' Equity, page F-4 ----------------------------------------------------------------
a. Confirm to us that BAK Battery did not issue or retire any shares of its common stock during the period from September 30, 2002 through September 30, 2004.
Response: The Company has confirmed that there were no issuances or -------- retirements of any shares of BAK Battery during the period from September 30, 2002 through September 30, 2004.
b. We read your July 21, 2005 correspondence and your response to prior comment 35. Based on your response, it appears that five shareholders, representing 1.85% of the shares of BAK Battery immediately before the transaction with BAK International, did not receive shares of BAK International upon the consummation of the transaction. Expand your disclosure to include in a footnote the effect that the transaction had on these shareholders and the accounting treatment used to eliminate these shares, including the line items impacted and their related amounts.
Response: The Company's accountants have added the following disclosure. -------- Disclosure has been added to Note 1 to explain that 5 shareholders in Shenzhen BAK Battery Co., Ltd. did not receive shares in BAK International, Ltd wider the share exchange. Further disclosure has been added to explain that the 5 shareholder interests were transferred to the other existing shareholders as well as 7 new shareholders in BAK International, Ltd. The disclosure further explains that the total number of shares outstanding remained unchanged and the accounting for the transaction.
c. We read your July 21, 2005 correspondence and your response to prior comment 35. Based on section III of your correspondence, it appears that 1,013,554 shares of common stock were issued to shareholders that were not initially shareholders of Shenzhen BAK Battery Co., Ltd. or BAK International, Ltd. These shareholders are numbered 12-18 in the table in section III of your correspondence. Disclose in a footnote how and when you reflected or intend to reflect the issuance of these shares. Also disclose the value that these shares were or will be issued at in your statement of stockholders' equity, including the line items impacted and their related amounts. Also disclose the accounting treatment used to record the transaction in accordance with U.S. GAAP.
Response: See the response to the immediately preceding comment. -------- d. You state on page F-8 that BAK International, Ltd. acquired 100% of the outstanding shares of Shenzhen BAK Battery Co., Ltd. for a total consideration of $11.5 million on November 6, 2004. However, you disclosed in note 14 to the financial statements that during the year ended September 30, 2004 the
<PAGE>
U.S. Securities and Exchange Commission October 11, 2005 Page 4
existing stockholders contributed cash in the amount of $10,875,918 that was recorded as an increase to additional paid-in capital in your financial statements. You stated in your response to prior comment 35 that the $11.5 million was recorded as if it had occurred during the year ended September 30, 2004. Tell us the accounting guidance that you used in determining that this should be recorded in the year ended September 20, 2004 rather than during the year ended September 30, 2005. Also tell us how this was reflected in your statements of cash flows.
Response: The Company's accountants have advised us that the -------- contribution of cash to BAK International, Ltd. of $11,500,000 was an integral part of the share exchange transaction between BAK International, Ltd. and Shenzhen BAK Battery Co., Ltd. This element of the transaction was necessary to accommodate certain provisions of PRC and Hong Kong law. As this element of the transaction was inseparable from the share exchange transaction, which was given retroactive treatment, the $11,500,000 was given accounting recognition by the Company's accountants in the same period as well. The Company's accountant's have advised that they followed the accounting principles for reverse acquisitions found under APB 16 and FAS 141 as well as rule 3.02 under Regulation S-B..
The Company has advised that the $11,500,000 was contributed into BAK International, Ltd. by the shareholders (on or about November 6, 2004) and was immediately disbursed to purchase the interests of Shenzhen BAK Battery Co., Ltd. The accounting treatment was reflected as part of the recapitalization.
e. You stated in your response to prior comment 35 that you received $11.5 million from the BAK International, Ltd. shareholders. Based on your current disclosure, it appears that you have only recorded approximately $10.9 million as contribution of cash by stockholders. Expand your disclosure to include an explanation for the apparent $0.6 million difference.
Response: The Company's accountants have advised us that the transaction -------- involving the amount of $11,500,000 in connection with the merger of BAK International, Ltd. and the contribution of cash by the stockholders recorded on the statement of changes in stockholders' equity for the year ended September 30, 2004 in the amount of $10,875,918 are separate and distinct transactions.
The Company has advised us that the contribution of cash in the amount of $10,875,918 occurred on or about December 22, 2003 (fiscal year ended September 30, 2004) and was a pure contribution of cash with no stock issued or any costs associated therewith.
The transaction involving the 11,500,000 is disclosed as an event occurring subsequent to the year end September 30, 2004 in Note 18.
<PAGE>
U.S. Securities and Exchange Commission October 11, 2005 Page 5
f. Provide us a shareholder list for BAK International immediately before the transaction with Medina Coffee. Include in your response the names of the shareholders and the corresponding number of shares held by each shareholder.
Response: Please see the shareholder list attached hereto as Schedule 1.
g. Based on the information that you provided in your July 21, 2005 correspondence, it appears that the information in exhibit B includes transactional information that relates to the private placement discussed on page F-23 of your Form SB-2/A. If these shares in the private placement were not issuances of BAK International as we assume and included in the list requested above for the shareholder list of BAK International immediately before the transaction with Medina Coffee, tell us which entity issued these shares. Also tell us what accounting consideration you gave to these issuances in recording the transaction between BAK International and Medina Coffee.
Response: The Company has confirmed that the shares were issued by BAK International, Ltd.
h. Your response to prior comment 36 states that you have 40,978,533 total outstanding shares of common stock. However, your statements of changes in stockholders' equity indicate your total outstanding shares of common stock to be 39,826,075. The 1,152,458 share discrepancy appears to be the post-transaction shares effectively issued to the former shareholders of Medina Coffee. Disclose the date of the effective issuance of these shares, the number of shares effectively issued, the value that they were or will be reflected at in your statement of shareholders' equity, and the line items impacted, including the related amounts.
Response: The Company's accountants have revised the financial -------- statements to include the additional 1,152,458 shares outstanding from the exchange with Medina Coffee, Inc. Pursuant to the Company's accountants this transaction was described in Note 1 to the financial statements. Pursuant to the Company's accountants the shares were accounted for as a recapitalization and accordingly common stock and additional paid in capital have been revised to account for the additional shares.
8. Comment: Notes to Financial Statements, page 17 -----------------------------------------------
Expand your disclosures to include also notes to the financial statements for the period ended March 31, 2005.
<PAGE>
U.S. Securities and Exchange Commission October 11, 2005 Page 6
Response: The notes for the interim periods ended June 30, 2005 from the -------- 10-QSB have been added to the financial statements under Note 21 by the Company's accountants. See also the response at Item 6 above.
9. Comment: Note 4. Summary of Principal Accounting Policies N. Revenue Recognition, Returns and
Show Raw Text
<DOCUMENT>
<TYPE>CORRESP
<SEQUENCE>1
<FILENAME>filename1.txt
<TEXT>
[LETTERHEAD OF ANDREWS KURTH LLP]
October 11, 2005
U.S. Securities and Exchange Commission
Division of Corporate Finance
450 Fifth Street NW
Washington, DC 20549
Re: China BAK Battery, Inc., formerly known as Medina Coffee, Inc.
Pre-effective Amendments I and 2 to Registration Statement on Form SB-2
Filed June 22 and 27, 2005
File No. 333-122209
Ladies and Gentleman:
On behalf of China BAK Battery, Inc. (the "Company"), we have
electronically transmitted herewith Pre-Effective Amendment No. 3 to the
Registration Statement on Form SB-2, which has been marked to indicate the
change effected by this amendment. In addition, we have today forwarded by
overnight delivery five (5) marked copies of Amendment No. 3, c/o Edward M.
Kelly, for the convenience of the Staff.
This letter responds to the Staff's letter of comment, dated August 2,
2005, on behalf of the Company.
1. Comment: Risk Factors, page 4
-----------------------------
a. Refer to prior comment 6. As requested previously, revise the
ninth factor.
b. We assume that inclusion of the words "could be" in the
thirty-first risk factor's heading are inadvertent. Please
delete.
Response: The risk factors have been amended and restated to conform to
-------- the risk factors included in Amendment No. 1 to the Quarterly
Report on Form 10-QSB for the quarter ended June 30, 2005
filed with the Commission on September 1, 2005.
2. Comment: Suppliers. page 29
---------------------------
Expand your disclosure to discuss any material contracts that you have
entered into with your suppliers relating to energy and materials used
in the production of your products.
<PAGE>
U.S. Securities and Exchange Commission
October 11, 2005
Page 2
Response: We have modified the Disclosure in accordance with the Staff's
-------- comments.
3. Comment: Description of Our Capital Stock, Page 37
Remove from this section's first paragraph the statement that the
description of China BAK Battery's capital stock is "qualified in its
entirety" by information outside the prospectus. This section should
include all of the disclosure required by Item 202 of Regulation S-B.
Response: We have removed the statement in accordance with the Staff's
-------- comment.
4. Comment: Selling Stockholders, Page 38
--------------------------------------
Refer to (28) after the names of Robert G. and Judith T. Rader in the
table. We are unable to locate the related footnote disclosure. Please
revise.
Response: We have modified the Disclosure in accordance with the Staffs
-------- comments.
5. Comment: Report of Independent Registered Public Accounting Firm. page
F-1
-----------------------------------------------------------------------
The independent auditor's report included in your filing is not signed
by your auditor. Obtain from your auditor a signed audit report. Also
ensure that an updated consent is filed with your next amendment.
Response: A signed audit report is included in Amendment No. 3. An
-------- updated consent is included as Exhibit 23.1 to Amendment No.
3.
6. Comment: Financial Statements
-----------------------------
a. Update your disclosures here and elsewhere in the filing to
include financial information through June 30, 2005.
Response: We have modified the Disclosure in accordance with the Staffs
-------- comments.
b. As requested previously, provide us the summarized balance
sheet of Medina Coffee, the shell company immediately before
the transaction with BAK International, the operating company.
Also provide us the summarized balance sheet of BAK
International immediately before the transaction with Medina
Coffee.
Response: Please see Appendices A and B attached hereto.
--------
<PAGE>
U.S. Securities and Exchange Commission
October 11, 2005
Page 3
7. Comment: Statements of Changes in Stockholders' Equity, page F-4
----------------------------------------------------------------
a. Confirm to us that BAK Battery did not issue or retire any
shares of its common stock during the period from September
30, 2002 through September 30, 2004.
Response: The Company has confirmed that there were no issuances or
-------- retirements of any shares of BAK Battery during the period
from September 30, 2002 through September 30, 2004.
b. We read your July 21, 2005 correspondence and your response to
prior comment 35. Based on your response, it appears that five
shareholders, representing 1.85% of the shares of BAK Battery
immediately before the transaction with BAK International, did
not receive shares of BAK International upon the consummation
of the transaction. Expand your disclosure to include in a
footnote the effect that the transaction had on these
shareholders and the accounting treatment used to eliminate
these shares, including the line items impacted and their
related amounts.
Response: The Company's accountants have added the following disclosure.
-------- Disclosure has been added to Note 1 to explain that 5
shareholders in Shenzhen BAK Battery Co., Ltd. did not receive
shares in BAK International, Ltd wider the share exchange.
Further disclosure has been added to explain that the 5
shareholder interests were transferred to the other existing
shareholders as well as 7 new shareholders in BAK
International, Ltd. The disclosure further explains that the
total number of shares outstanding remained unchanged and the
accounting for the transaction.
c. We read your July 21, 2005 correspondence and your response to
prior comment 35. Based on section III of your correspondence,
it appears that 1,013,554 shares of common stock were issued
to shareholders that were not initially shareholders of
Shenzhen BAK Battery Co., Ltd. or BAK International, Ltd.
These shareholders are numbered 12-18 in the table in section
III of your correspondence. Disclose in a footnote how and
when you reflected or intend to reflect the issuance of these
shares. Also disclose the value that these shares were or will
be issued at in your statement of stockholders' equity,
including the line items impacted and their related amounts.
Also disclose the accounting treatment used to record the
transaction in accordance with U.S. GAAP.
Response: See the response to the immediately preceding comment.
--------
d. You state on page F-8 that BAK International, Ltd. acquired
100% of the outstanding shares of Shenzhen BAK Battery Co.,
Ltd. for a total consideration of $11.5 million on November 6,
2004. However, you disclosed in note 14 to the financial
statements that during the year ended September 30, 2004 the
<PAGE>
U.S. Securities and Exchange Commission
October 11, 2005
Page 4
existing stockholders contributed cash in the amount of
$10,875,918 that was recorded as an increase to additional
paid-in capital in your financial statements. You stated in
your response to prior comment 35 that the $11.5 million was
recorded as if it had occurred during the year ended September
30, 2004. Tell us the accounting guidance that you used in
determining that this should be recorded in the year ended
September 20, 2004 rather than during the year ended September
30, 2005. Also tell us how this was reflected in your
statements of cash flows.
Response: The Company's accountants have advised us that the
-------- contribution of cash to BAK International, Ltd. of $11,500,000
was an integral part of the share exchange transaction between
BAK International, Ltd. and Shenzhen BAK Battery Co., Ltd.
This element of the transaction was necessary to accommodate
certain provisions of PRC and Hong Kong law. As this element
of the transaction was inseparable from the share exchange
transaction, which was given retroactive treatment, the
$11,500,000 was given accounting recognition by the Company's
accountants in the same period as well. The Company's
accountant's have advised that they followed the accounting
principles for reverse acquisitions found under APB 16 and FAS
141 as well as rule 3.02 under Regulation S-B..
The Company has advised that the $11,500,000 was contributed
into BAK International, Ltd. by the shareholders (on or about
November 6, 2004) and was immediately disbursed to purchase
the interests of Shenzhen BAK Battery Co., Ltd. The accounting
treatment was reflected as part of the recapitalization.
e. You stated in your response to prior comment 35 that you
received $11.5 million from the BAK International, Ltd.
shareholders. Based on your current disclosure, it appears
that you have only recorded approximately $10.9 million as
contribution of cash by stockholders. Expand your disclosure
to include an explanation for the apparent $0.6 million
difference.
Response: The Company's accountants have advised us that the transaction
-------- involving the amount of $11,500,000 in connection with the
merger of BAK International, Ltd. and the contribution of cash
by the stockholders recorded on the statement of changes in
stockholders' equity for the year ended September 30, 2004 in
the amount of $10,875,918 are separate and distinct
transactions.
The Company has advised us that the contribution of cash in
the amount of $10,875,918 occurred on or about December 22,
2003 (fiscal year ended September 30, 2004) and was a pure
contribution of cash with no stock issued or any costs
associated therewith.
The transaction involving the 11,500,000 is disclosed as an
event occurring subsequent to the year end September 30, 2004
in Note 18.
<PAGE>
U.S. Securities and Exchange Commission
October 11, 2005
Page 5
f. Provide us a shareholder list for BAK International
immediately before the transaction with Medina Coffee. Include
in your response the names of the shareholders and the
corresponding number of shares held by each shareholder.
Response: Please see the shareholder list attached hereto as Schedule 1.
g. Based on the information that you provided in your July 21,
2005 correspondence, it appears that the information in
exhibit B includes transactional information that relates to
the private placement discussed on page F-23 of your Form
SB-2/A. If these shares in the private placement were not
issuances of BAK International as we assume and included in
the list requested above for the shareholder list of BAK
International immediately before the transaction with Medina
Coffee, tell us which entity issued these shares. Also tell us
what accounting consideration you gave to these issuances in
recording the transaction between BAK International and Medina
Coffee.
Response: The Company has confirmed that the shares were issued by BAK
International, Ltd.
h. Your response to prior comment 36 states that you have
40,978,533 total outstanding shares of common stock. However,
your statements of changes in stockholders' equity indicate
your total outstanding shares of common stock to be
39,826,075. The 1,152,458 share discrepancy appears to be the
post-transaction shares effectively issued to the former
shareholders of Medina Coffee. Disclose the date of the
effective issuance of these shares, the number of shares
effectively issued, the value that they were or will be
reflected at in your statement of shareholders' equity, and
the line items impacted, including the related amounts.
Response: The Company's accountants have revised the financial
-------- statements to include the additional 1,152,458 shares
outstanding from the exchange with Medina Coffee, Inc.
Pursuant to the Company's accountants this transaction was
described in Note 1 to the financial statements. Pursuant to
the Company's accountants the shares were accounted for as a
recapitalization and accordingly common stock and additional
paid in capital have been revised to account for the
additional shares.
8. Comment: Notes to Financial Statements, page 17
-----------------------------------------------
Expand your disclosures to include also notes to the financial
statements for the period ended March 31, 2005.
<PAGE>
U.S. Securities and Exchange Commission
October 11, 2005
Page 6
Response: The notes for the interim periods ended June 30, 2005 from the
-------- 10-QSB have been added to the financial statements under Note
21 by the Company's accountants. See also the response at Item
6 above.
9. Comment: Note 4. Summary of Principal Accounting Policies N. Revenue
Recognition, Returns and