SEC Company Response from CBAK Energy Technology, Inc. (CBAT) (CIK 0001117171) (CBAT) — Nov 30, 2005
CBAK Energy Technology, Inc. (CBAT) (CIK 0001117171)
Date: Nov. 30, 2005 · CIK: 0001117171 · Accession: 0001010549-05-000881
AI Filing Summary & Sentiment
File numbers found in text: 333-122209
Referenced dates: October 24, 2005
Letter
November 28, 2005 Ms. Jennifer Hardy United States Securities and Exchange Commission 450 Fifth Street NW Washington, D.C. 20549
RE: China BAK Battery, Inc., formerly known as Medina Coffee, Inc. Pre-effective Amendment 3 to Registration Statement on Form SB-2 Filed October 11, 2005 File No. 333-122209 Annual Report on Form 10-KSB for the fiscal year ended December 31, 2004 and Subsequent Exchange Act Reports File No. 0-49712
Dear Ms. Hardy:
On behalf of China BAK Battery, Inc. (the "Company"), we have electronically transmitted herewith Pre-Effective Amendment No. 4 to the Registration Statement on Form SB-2, which has been marked to indicate the changes effected by the amendment. In addition, we have today forwarded by overnight delivery three (3) marked copies of Amendment No. 4 c/o Mr. Edward Kelly, for the convenience of the Staff.
This letter responds to the Staff's letter of comment, dated October 24, 2005, on behalf of the Company.
SB-2/A3 -------
Summary, page 1 ---------------
1. We note disclosure under "Recent Sales of Unregistered Securities" and elsewhere that China BAK Battery completed a private placement of 7.9 million shares of its common stock on September 16, 2005. Based on disclosure in exhibit 10.2 to the current report on Form 8-K dated September 14, 2005 and filed September 15, 2005, it appears that a
<PAGE>
Ms. Jennifer Hardy November 28, 2005 Page 2
distribution of those 7.9 million shares may take place concurrently with the shares being registered under this registration statement. Expand the disclosures in the summary and in the forty-fifth risk factor to inform investors of that planned distribution and the aggregate number of shares to be offered for resale under it.
Response: We have modified the Disclosure in accordance with the Staff's comment.
Risk Factors, page 4 --------------------
2. Refer to the first paragraph beginning with the phrase "We caution you that the following important factors, among others." If you wish to include this language in the prospectus, the appropriate section for the language is "Special Note Regarding Forward-Looking Statements" and not the risk factors section.
Response: We have modified the Disclosure in accordance with the Staff's comment.
3. Your document as revised contains many risk factors. The risk factors section should include a discussion of the most significant risk factors that make the offering speculative or risky and should omit risks that are remote or boilerplate. See Item 503(c)(1) of Regulation S-B. For example, it is unclear why the tenth risk factor is a risk factor in view of disclosure in note 13.A.1. to the financial statements that management's belief is that the possibility of the buildings having to be vacated as illegitimate constructions is "very remote." Similarly, it is unclear why the twenty-eighth and fortieth risk factors are risk factors in view of disclosure in the forty-second risk factor that China BAK Battery has "no present intention to pay dividends." Review and, as appropriate, revise to ensure that each risk factor you include is necessary for investor protection.
Response: We have modified the Disclosure in accordance with the Staff's comment.
4. You state in the first paragraph that there are "the following important factors, among others." Delete this language because you must disclose all risks that you believe are material at this time. See our June 7, 1999 Updated Staff Legal Bulletin No, 7 that is available on the Commission's website at http://www.sec.gov.
Response: We have modified the Disclosure in accordance with the Staff's comment.
5. Avoid generic conclusions in the risk factors' headings and in the risk factors' discussions such as China BAK Battery's results of operations, business, financial condition, or prospects would or could be materially and adversely affected or would or could be harmed. For example, refer to the third, ninth, eleventh, and sixteenth risk factors. Rather, explain specifically what the risk's consequences or effects are for China BAK Battery and its securityholders. See comment 5 in our February 11, 2005 letter.
Response: We have modified the Disclosure in accordance with the Staff's comment.
<PAGE>
Ms. Jennifer Hardy November 28, 2005 Page 3
6. A number of risk factors include language like "We cannot assure," "We can provide no assurances," "nor can there be any assurance," "there can be no assurance," "We can provide no assurance," "There can be no positive assurance," and "We cannot provide assurance." For example, refer to the first, fifth, eleventh, twelfth, fifteenth,, seventeenth, eighteenth, twenty-first, twenty-third, and twenty-fourth risk factors. Since the risk is the situation described and not China BAK Battery's inability to assure, please revise. See comment 6 in our February 11, 2005 letter and comment 2 in our August 2, 2005 letter.
Response: We have modified the Disclosure in accordance with the Staff's comment.
7. Generally, each risk factor should discuss a single risk. For example, refer to the thirteenth and fourteenth risk factors, and revise.
Response: We have modified the Disclosure in accordance with the Staff's comment.
8. Quantify and describe briefly in the second risk factor China BAK Battery's "significant amount of debt."
Response: We have modified the Disclosure in accordance with the Staff's comments.
9. Explain how the thirteenth risk factor applies specifically to China BAK Battery. For example, does China BAK Battery lack employment contracts with key personnel? Are key personnel planning to retire or nearing retirement age? Are there tensions between key personnel and the board of directors?
Response: We have modified the Disclosure in accordance with the Staff's comments.
10. The meaning of the next to last sentence in the seventeenth risk factor is unclear. Specifically, language appears to be missing between the phrase "the design and manufacturing capabilities" and the phrase "competitive third-party suppliers and technologies." Please revise.
Response: We have modified the Disclosure in accordance with the Staff's comment.
Gross Profit, page 24 ---------------------
11. You disclosed that your revenues increased approximately 59% from the three months ended June 30, 2004 to the three months ended June 30, 2005. You disclosed also that you expanded your manufacturing facilities and related acquisitions. If material, expand your disclosure to include how the items below affected your gross profit, including offsetting fluctuations that these may have had with one another:
o increases in labor costs due to volume to meet the demand requirements from the increase in sales.
<PAGE>
Ms. Jennifer Hardy November 28, 2005 Page 4
o increases in depreciation related to your manufacturing expansion and new equipment purchases.
Quantify the effects that each of these components had on your gross profit. Address similarly the items above in your comparisons for the nine months ended June 30, 2005 compared to June 30, 2004 and for the fiscal year ended September 30, 2004 compared to September 30, 2003.
Response: We have modified the Disclosure in accordance with the Staff's comments.
Report of Independent Registered Public Accounting Firm, page F-I -----------------------------------------------------------------
12. 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: We have included the signed audit report and updated consent.
Statements of Stockholders' Equity, page F-4 --------------------------------------------
13. We read your responses to prior comments 11-16 and your revised disclosures. Your response to comment 35 in our June 22, 2005 letter states that before the transaction with BAK Battery, 18 individuals paid approximately $11.5 million for 31,225,643 shares of BAK International's common stock. Based on our understanding, approximately $2.0 million was received during the fiscal year ended September 30, 2004 and the remaining $9.5 million was received during the fiscal year ended September 30, 2005. We understand also the $11.5 million was used to purchase essentially all of the shares of BAK Battery from the shareholders of BAK Battery during the fiscal year ended September 30, 2005. We would expect these cash inflows and outflows to be reflected in your statements of stockholders' equity and cash flows during these periods since you appear to be reflecting the transaction between BAK Battery and BAK International as a transaction between entities under common control. Revise your balance sheet, statements of stockholders' equity, and statements of cash flows to reflect these transactions. Also file amended 10-QSBs for filings made after January 20, 2005. If our understanding is incorrect, tell us how you determined that the transactions mentioned above should not be reflected in your financial statements for these periods.
Response: On November 6, 2004 the shareholders of BAK Battery agreed to purchase for a total of $11.5 million in cash 96.8% of the outstanding shares of capital stock of BAK International and BAK International agreed to purchase for a total of $11.5 million cash all of the outstanding shares of capital stock of BAK Battery. Please see note 2 to the Unaudited Consolidated Financial Statement at June 30, 2005.
<PAGE>
Ms. Jennifer Hardy November 28, 2005 Page 5
14. We read your response to prior comment 17 and your revised disclosures. Based on your revised disclosure, it does not appear that you have presented separately the date of the effective issuance, the number of shares effectively issued, and the value issued for the 1,152,458 post-transaction shares effectively issued to the former shareholders of Medina Coffee, Inc. Thus, revise your disclosure. Also ensure that you reflect this change in your balance sheet.
Response: We have modified the Disclosure in accordance with the Staff's comments.
Note 19. Restatement of Consolidated Financial Statements, page F-28 ---------------------------------------------------------------------
15. Confirm to us that the restatements disclosed in this note to the financial statements did not affect your financial statements included in your 10-QSBs for the fiscal quarters ended March 31, 2005 and June 30, 2005. If after considering our comment you determine that these periods should be restated, file amended 10-QSBs for the periods affected.
o We remind you that when you file your restated IO-QSB/A, you should appropriately address these items:
o An explanatory paragraph in the reissued audit opinion.
o Full compliance with APB 20, paragraphs 36 and 37.
o Fully update all affected portions of the document, including MD&A, selected financial data, and quarterly financial data.
o Updated Item 3 disclosures should include these items:
A discussion of the restatement and the facts and circumstances surrounding it.
How the restatement impacted the original conclusions of your chief executive officer and chief financial officer on the effectiveness of the disclosure controls and procedures.
Changes to internal controls over financial reporting.
Anticipated changes to disclosure controls and procedures and/or internal controls over financial reporting to prevent future misstatements of a similar nature.
Refer to Items 307 and 308(c) of Regulation S-B.
<PAGE>
Ms. Jennifer Hardy November 28, 2005 Page 6
o Updated certifications.
Response: We will file amended 10-QSB's for March 31, 2005 and June 20, 2005.
Exhibits 10.3 and 10.4 ----------------------
16. We note the response to prior comment 23. Allow us sufficient time to review the exhibits before requesting acceleration of the registration statement's effectiveness.
Response: We are filing with Pre-Effective Amendment No. 4 Exhibits 10.3 and 10.4.
Exhibit 10.8 ------------
17. Exhibit 10.8 appears to be the same exhibit that was filed as exhibit 10.17 in pre-effective amendment 2 to the registration statement. Since you represent in response to prior comment 24 that exhibit 10.17 was deleted because the agreements were terminated, it is unclear why you include the exhibit. Since you include the exhibit, it is unclear also why you did not include a summary of the omitted terms in response to prior comment 25. Please revise or advise.
Response: This agreement is no longer in effect and will not be included as an exhibit.
Exhibit 10.9 ------------
18. Exhibit 10.9 appears to be the same exhibit that was filed as exhibit 10.18 in pre-effective amendment 2 to the registration statement. Since Jilin Provincial Huaruan Technology Company, Ltd., a corporation owned by Mr. Xianggian Li, a director and officer of China BAK Battery, is a party to the agreement, it is unclear why you did not submit a fair and accurate English transaction of the entire foreign language document in response to prior comment 24. Please revise or advise. Also confirm that Jilin Provincial Huaruan Technology Company, Ltd. is a party to the agreement filed as exhibit 10.30 rather than exhibit 10.33 as you represent in response to prior comment 24.
Show Raw Text
<DOCUMENT>
<TYPE>CORRESP
<SEQUENCE>1
<FILENAME>filename1.txt
<TEXT>
November 28, 2005
Ms. Jennifer Hardy
United States Securities and Exchange
Commission
450 Fifth Street NW
Washington, D.C. 20549
RE: China BAK Battery, Inc., formerly known as Medina Coffee, Inc.
Pre-effective Amendment 3 to Registration Statement on Form
SB-2
Filed October 11, 2005
File No. 333-122209
Annual Report on Form 10-KSB for the fiscal year ended
December 31, 2004 and Subsequent Exchange Act Reports
File No. 0-49712
Dear Ms. Hardy:
On behalf of China BAK Battery, Inc. (the "Company"), we have
electronically transmitted herewith Pre-Effective Amendment No. 4 to the
Registration Statement on Form SB-2, which has been marked to indicate the
changes effected by the amendment. In addition, we have today forwarded by
overnight delivery three (3) marked copies of Amendment No. 4 c/o Mr. Edward
Kelly, for the convenience of the Staff.
This letter responds to the Staff's letter of comment, dated October
24, 2005, on behalf of the Company.
SB-2/A3
-------
Summary, page 1
---------------
1. We note disclosure under "Recent Sales of Unregistered Securities" and
elsewhere that China BAK Battery completed a private placement of 7.9
million shares of its common stock on September 16, 2005. Based on
disclosure in exhibit 10.2 to the current report on Form 8-K dated
September 14, 2005 and filed September 15, 2005, it appears that a
<PAGE>
Ms. Jennifer Hardy
November 28, 2005
Page 2
distribution of those 7.9 million shares may take place concurrently
with the shares being registered under this registration statement.
Expand the disclosures in the summary and in the forty-fifth risk
factor to inform investors of that planned distribution and the
aggregate number of shares to be offered for resale under it.
Response: We have modified the Disclosure in accordance with the
Staff's comment.
Risk Factors, page 4
--------------------
2. Refer to the first paragraph beginning with the phrase "We caution you
that the following important factors, among others." If you wish to
include this language in the prospectus, the appropriate section for
the language is "Special Note Regarding Forward-Looking Statements" and
not the risk factors section.
Response: We have modified the Disclosure in accordance with the
Staff's comment.
3. Your document as revised contains many risk factors. The risk factors
section should include a discussion of the most significant risk
factors that make the offering speculative or risky and should omit
risks that are remote or boilerplate. See Item 503(c)(1) of Regulation
S-B. For example, it is unclear why the tenth risk factor is a risk
factor in view of disclosure in note 13.A.1. to the financial
statements that management's belief is that the possibility of the
buildings having to be vacated as illegitimate constructions is "very
remote." Similarly, it is unclear why the twenty-eighth and fortieth
risk factors are risk factors in view of disclosure in the forty-second
risk factor that China BAK Battery has "no present intention to pay
dividends." Review and, as appropriate, revise to ensure that each risk
factor you include is necessary for investor protection.
Response: We have modified the Disclosure in accordance with the
Staff's comment.
4. You state in the first paragraph that there are "the following
important factors, among others." Delete this language because you must
disclose all risks that you believe are material at this time. See our
June 7, 1999 Updated Staff Legal Bulletin No, 7 that is available on
the Commission's website at http://www.sec.gov.
Response: We have modified the Disclosure in accordance with the
Staff's comment.
5. Avoid generic conclusions in the risk factors' headings and in the risk
factors' discussions such as China BAK Battery's results of operations,
business, financial condition, or prospects would or could be
materially and adversely affected or would or could be harmed. For
example, refer to the third, ninth, eleventh, and sixteenth risk
factors. Rather, explain specifically what the risk's consequences or
effects are for China BAK Battery and its securityholders. See comment
5 in our February 11, 2005 letter.
Response: We have modified the Disclosure in accordance with the
Staff's comment.
<PAGE>
Ms. Jennifer Hardy
November 28, 2005
Page 3
6. A number of risk factors include language like "We cannot assure," "We
can provide no assurances," "nor can there be any assurance," "there
can be no assurance," "We can provide no assurance," "There can be no
positive assurance," and "We cannot provide assurance." For example,
refer to the first, fifth, eleventh, twelfth, fifteenth,, seventeenth,
eighteenth, twenty-first, twenty-third, and twenty-fourth risk factors.
Since the risk is the situation described and not China BAK Battery's
inability to assure, please revise. See comment 6 in our February 11,
2005 letter and comment 2 in our August 2, 2005 letter.
Response: We have modified the Disclosure in accordance with the
Staff's comment.
7. Generally, each risk factor should discuss a single risk. For example,
refer to the thirteenth and fourteenth risk factors, and revise.
Response: We have modified the Disclosure in accordance with the
Staff's comment.
8. Quantify and describe briefly in the second risk factor China BAK
Battery's "significant amount of debt."
Response: We have modified the Disclosure in accordance with the
Staff's comments.
9. Explain how the thirteenth risk factor applies specifically to China
BAK Battery. For example, does China BAK Battery lack employment
contracts with key personnel? Are key personnel planning to retire or
nearing retirement age? Are there tensions between key personnel and
the board of directors?
Response: We have modified the Disclosure in accordance with the
Staff's comments.
10. The meaning of the next to last sentence in the seventeenth risk factor
is unclear. Specifically, language appears to be missing between the
phrase "the design and manufacturing capabilities" and the phrase
"competitive third-party suppliers and technologies." Please revise.
Response: We have modified the Disclosure in accordance with the
Staff's comment.
Gross Profit, page 24
---------------------
11. You disclosed that your revenues increased approximately 59% from the
three months ended June 30, 2004 to the three months ended June 30,
2005. You disclosed also that you expanded your manufacturing
facilities and related acquisitions. If material, expand your
disclosure to include how the items below affected your gross profit,
including offsetting fluctuations that these may have had with one
another:
o increases in labor costs due to volume to meet the demand
requirements from the increase in sales.
<PAGE>
Ms. Jennifer Hardy
November 28, 2005
Page 4
o increases in depreciation related to your manufacturing
expansion and new equipment purchases.
Quantify the effects that each of these components had on your gross
profit. Address similarly the items above in your comparisons for the
nine months ended June 30, 2005 compared to June 30, 2004 and for the
fiscal year ended September 30, 2004 compared to September 30, 2003.
Response: We have modified the Disclosure in accordance with the
Staff's comments.
Report of Independent Registered Public Accounting Firm, page F-I
-----------------------------------------------------------------
12. 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: We have included the signed audit report and updated consent.
Statements of Stockholders' Equity, page F-4
--------------------------------------------
13. We read your responses to prior comments 11-16 and your revised
disclosures. Your response to comment 35 in our June 22, 2005 letter
states that before the transaction with BAK Battery, 18 individuals
paid approximately $11.5 million for 31,225,643 shares of BAK
International's common stock. Based on our understanding, approximately
$2.0 million was received during the fiscal year ended September 30,
2004 and the remaining $9.5 million was received during the fiscal year
ended September 30, 2005. We understand also the $11.5 million was used
to purchase essentially all of the shares of BAK Battery from the
shareholders of BAK Battery during the fiscal year ended September 30,
2005. We would expect these cash inflows and outflows to be reflected
in your statements of stockholders' equity and cash flows during these
periods since you appear to be reflecting the transaction between BAK
Battery and BAK International as a transaction between entities under
common control. Revise your balance sheet, statements of stockholders'
equity, and statements of cash flows to reflect these transactions.
Also file amended 10-QSBs for filings made after January 20, 2005. If
our understanding is incorrect, tell us how you determined that the
transactions mentioned above should not be reflected in your financial
statements for these periods.
Response: On November 6, 2004 the shareholders of BAK Battery agreed to
purchase for a total of $11.5 million in cash 96.8% of the outstanding
shares of capital stock of BAK International and BAK International
agreed to purchase for a total of $11.5 million cash all of the
outstanding shares of capital stock of BAK Battery. Please see note 2
to the Unaudited Consolidated Financial Statement at June 30, 2005.
<PAGE>
Ms. Jennifer Hardy
November 28, 2005
Page 5
14. We read your response to prior comment 17 and your revised disclosures.
Based on your revised disclosure, it does not appear that you have
presented separately the date of the effective issuance, the number of
shares effectively issued, and the value issued for the 1,152,458
post-transaction shares effectively issued to the former shareholders
of Medina Coffee, Inc. Thus, revise your disclosure. Also ensure that
you reflect this change in your balance sheet.
Response: We have modified the Disclosure in accordance with the
Staff's comments.
Note 19. Restatement of Consolidated Financial Statements, page F-28
---------------------------------------------------------------------
15. Confirm to us that the restatements disclosed in this note to the
financial statements did not affect your financial statements included
in your 10-QSBs for the fiscal quarters ended March 31, 2005 and June
30, 2005. If after considering our comment you determine that these
periods should be restated, file amended 10-QSBs for the periods
affected.
o We remind you that when you file your restated IO-QSB/A, you
should appropriately address these items:
o An explanatory paragraph in the reissued audit opinion.
o Full compliance with APB 20, paragraphs 36 and 37.
o Fully update all affected portions of the document, including
MD&A, selected financial data, and quarterly financial data.
o Updated Item 3 disclosures should include these items:
A discussion of the restatement and the facts and
circumstances surrounding it.
How the restatement impacted the original conclusions of your
chief executive officer and chief financial officer on the
effectiveness of the disclosure controls and procedures.
Changes to internal controls over financial reporting.
Anticipated changes to disclosure controls and procedures
and/or internal controls over financial reporting to prevent
future misstatements of a similar nature.
Refer to Items 307 and 308(c) of Regulation S-B.
<PAGE>
Ms. Jennifer Hardy
November 28, 2005
Page 6
o Updated certifications.
Response: We will file amended 10-QSB's for March 31, 2005 and June 20,
2005.
Exhibits 10.3 and 10.4
----------------------
16. We note the response to prior comment 23. Allow us sufficient time to
review the exhibits before requesting acceleration of the registration
statement's effectiveness.
Response: We are filing with Pre-Effective Amendment No. 4 Exhibits
10.3 and 10.4.
Exhibit 10.8
------------
17. Exhibit 10.8 appears to be the same exhibit that was filed as exhibit
10.17 in pre-effective amendment 2 to the registration statement. Since
you represent in response to prior comment 24 that exhibit 10.17 was
deleted because the agreements were terminated, it is unclear why you
include the exhibit. Since you include the exhibit, it is unclear also
why you did not include a summary of the omitted terms in response to
prior comment 25. Please revise or advise.
Response: This agreement is no longer in effect and will not be
included as an exhibit.
Exhibit 10.9
------------
18. Exhibit 10.9 appears to be the same exhibit that was filed as exhibit
10.18 in pre-effective amendment 2 to the registration statement. Since
Jilin Provincial Huaruan Technology Company, Ltd., a corporation owned
by Mr. Xianggian Li, a director and officer of China BAK Battery, is a
party to the agreement, it is unclear why you did not submit a fair and
accurate English transaction of the entire foreign language document in
response to prior comment 24. Please revise or advise. Also confirm
that Jilin Provincial Huaruan Technology Company, Ltd. is a party to
the agreement filed as exhibit 10.30 rather than exhibit 10.33 as you
represent in response to prior comment 24.