SEC Comment Letter for SHINECO, INC. (SISI) (CIK 0001300734) (SISI) — Jan 7, 2015
SHINECO, INC. (SISI) (CIK 0001300734)
Date: Jan. 7, 2015 · CIK: 0001300734 · Accession: 0000000000-15-000944
AI Filing Summary & Sentiment
Reasoning
Letter
January 7, 201 5 Yuying Zhang Chief Executive Officer Shineco, Inc. Room 3106, Building B #39 East 3rd Ring Middle Road Chaoyang District Beijing 100022 People’s Republic of China
Re: Shineco, Inc. Amendment No. 1 to Draft Registration Statement on Form S -1 Submitted December 18 , 2014 CIK No. 0001300734
Dear Mr. Zhang :
We have reviewed your amended draft registration statement and have the following comments. In some of our comments, we may ask you to provide us with information so we may better understand your disclosure.
Please respond to this letter by providing the requested information and either submitting an amended draft registration statement or publicly filing your registration statement on EDGAR. If you do not believe our comments apply to your facts and circumstances or do not believe an amendment is appropriate, please tell us why in your response.
After reviewing the information you provide in response to these comments and your amended draft re gistration statement or filed registration statement, we may have additional comments.
General
1. The financial statements should be updated, as necessary, to comply with Rule 8 - 08 of Regulation S -X at the effective date of the registration statement.
Yuying Zhang Shineco, Inc. January 7, 2015 Page 2
Prospectus Cover Page
2. We note your response to our prior comment 4 and reissue the comment. Please state the date the offering will end . Indicate if there may be extens ions to the offering and, if so, the duration of such extensions. Refer to Exchange Act Rule 10b-9 and Item 501(b) (8)(iii) of Regulation S -K.
Prospectus Summary, page 1
3. We note your response to our prior comment 5. Please disclose that the McKinsey & Co. projection you cite was published in 2012.
The Offering, page 6
4. We note your response to our prior comment s 6 and 7 . From your response and your disclosure, it appears that the number of placement agent warrants to be issued to the placement agent will be determined at the closing date , based on the results of the best efforts off ering and a percentage of common stock sold in the offering . We also note the aggregate offering price for the placement agent warrants and underlying shares is currently blank in the fee table. Please provide us with your analysis regarding how you can register that part of the transaction now, without i ndicating the amount of placement agent warrants, and the amount of the underlying common stock. As part of your response, please tell us if the percentage will be determined prior to effectiveness. We m ay have further comment when we review your response.
Risk Factors, page 9
5. We note your response to our prior comment 16 , including your disclosure that Yantai Agricultural “is a cooperative and thus has no equity interests .” Please tell us what conside ration you gave to providing risk factor disclosure explaining, if true, that because this is a cooperative you are unable to control the actions of the cooperative members that control the cooperative , or describe any other risks resulting from its struct ure as a cooperative . If there are no risks resulting from it being a cooperative please explain to us why. In addition please tell us the difference between “Yantai Agricultural” which is referred to only on page 29 and “Zhisheng Agricultural ” which is referenced throughout the prospectus.
Related Party Transactions, page 75
6. We note your response to our prior comment 27, and we reissue the comment . It appears that you may only be report ing transactions that have occurred as of June 30, 2014. The disclosure in this section should not be limited to the end of the periods reported in your financial statements . Please revise to disclose all reportable transactions as of the most recent practicable date or please advise.
Yuying Zhang Shineco, Inc. January 7, 2015 Page 3
Description of Stock, page 7 8
7. Please also add a description of the placement agent warrants here.
Tax Matters Applicable to U.S Holders, page 82
8. We note your response to our prior comment 28. Please revise to state what part of the disclosure in this section is the opinion of Kau fman & Canoles, P.C.
United States Federal Income Taxation, page 84
Taxation of dividends and other distributions on our common stock, page 84
9. It appears that much of this disclosure is limited to “ taxable years beginning before January 1, 2011 .” We note similar language “ assuming the renewal of current capital gains rates prior to their scheduled expiration at the end of 2010 ” on page 85. Please revise or advise.
Index to Consolidated Financial Statements , page 93
10. Please amend to include the report of your independent registered public accounting firm.
Consolidated Statement of Cash Flows, page F -4
11. Please tell us your basis for classifying “Loans to Third Parties” as operating cash flows. Please tell us what consideration was given to presen ting the loans as investing cash flows.
Notes to the Consolidated Financial Statements
Note 2. Summary of Significant Accounting Policies
Fair Value of Financial Instruments, page F -10
12. We note your response to our prior comment 30. You state that it wa s not practicable to estimate the fair value of your investment in unconsolidated entities due to their lack of marketability. Please tell us how you determined that these investments were not impaired and their value is recoverable.
Note 6. Investment in Unconsolidated Entities, page F -14
13. We note that your investment with Shaanxi XunyangHongye Real Estate Co., Ltd., to establish a Chinese herbal medicine exchange market (the “Exchange”) in Ankang City, China entitles you to profit sharing of 60% of the a fter-tax net income annually. Please tell us your basis for not consolidating this entity.
Yuying Zhang Shineco, Inc. January 7, 2015 Page 4
Exhibit Index
14. We note your response to our prior comment 33 and reissue to clarify our comment . Please file as an exhibit any form of subscription agreement for the purchase of the common stock being offered or advise.
15. Please file a copy of the executed escrow a greement prior to effectiveness.
You may contact Aamira Chaudhry at (202) 551 - 3389 or L ynwood Shenk at (202) 551 - 3380 if you have questions regarding comments on the financial statements and related matters. Please contact John Dana Brown at (202) 551 -3859 or me at (202) 551-3210 with any other questions.
Sincerely,
/s/ Susan Block
Show Raw Text
January 7, 201 5
Yuying Zhang
Chief Executive Officer
Shineco, Inc.
Room 3106, Building B
#39 East 3rd Ring Middle Road
Chaoyang District
Beijing 100022
People’s Republic of China
Re: Shineco, Inc.
Amendment No. 1 to
Draft Registration Statement on Form S -1
Submitted December 18 , 2014
CIK No. 0001300734
Dear Mr. Zhang :
We have reviewed your amended draft registration statement and have the
following comments. In some of our comments, we may ask you to provide us with
information so we may better understand your disclosure.
Please respond to this letter by providing the requested information and either
submitting an amended draft registration statement or publicly filing your registration
statement on EDGAR. If you do not believe our comments apply to your facts and
circumstances or do not believe an amendment is appropriate, please tell us why in your
response.
After reviewing the information you provide in response to these comments and
your amended draft re gistration statement or filed registration statement, we may have
additional comments.
General
1. The financial statements should be updated, as necessary, to comply with Rule 8 -
08 of Regulation S -X at the effective date of the registration statement.
Yuying Zhang
Shineco, Inc.
January 7, 2015
Page 2
Prospectus Cover Page
2. We note your response to our prior comment 4 and reissue the comment. Please
state the date the offering will end . Indicate if there may be extens ions to the
offering and, if so, the duration of such extensions. Refer to Exchange Act Rule
10b-9 and Item 501(b) (8)(iii) of Regulation S -K.
Prospectus Summary, page 1
3. We note your response to our prior comment 5. Please disclose that the
McKinsey & Co. projection you cite was published in 2012.
The Offering, page 6
4. We note your response to our prior comment s 6 and 7 . From your response and
your disclosure, it appears that the number of placement agent warrants to be
issued to the placement agent will be determined at the closing date , based on the
results of the best efforts off ering and a percentage of common stock sold in the
offering . We also note the aggregate offering price for the placement agent
warrants and underlying shares is currently blank in the fee table. Please provide
us with your analysis regarding how you can register that part of the transaction
now, without i ndicating the amount of placement agent warrants, and the amount
of the underlying common stock. As part of your response, please tell us if the
percentage will be determined prior to effectiveness. We m ay have further
comment when we review your response.
Risk Factors, page 9
5. We note your response to our prior comment 16 , including your disclosure that
Yantai Agricultural “is a cooperative and thus has no equity interests .” Please tell
us what conside ration you gave to providing risk factor disclosure explaining, if
true, that because this is a cooperative you are unable to control the actions of the
cooperative members that control the cooperative , or describe any other risks
resulting from its struct ure as a cooperative . If there are no risks resulting from it
being a cooperative please explain to us why. In addition please tell us the
difference between “Yantai Agricultural” which is referred to only on page 29 and
“Zhisheng Agricultural ” which is referenced throughout the prospectus.
Related Party Transactions, page 75
6. We note your response to our prior comment 27, and we reissue the comment . It
appears that you may only be report ing transactions that have occurred as of June
30, 2014. The disclosure in this section should not be limited to the end of the
periods reported in your financial statements . Please revise to disclose all
reportable transactions as of the most recent practicable date or please advise.
Yuying Zhang
Shineco, Inc.
January 7, 2015
Page 3
Description of Stock, page 7 8
7. Please also add a description of the placement agent warrants here.
Tax Matters Applicable to U.S Holders, page 82
8. We note your response to our prior comment 28. Please revise to state what part
of the disclosure in this section is the opinion of Kau fman & Canoles, P.C.
United States Federal Income Taxation, page 84
Taxation of dividends and other distributions on our common stock, page 84
9. It appears that much of this disclosure is limited to “ taxable years beginning
before January 1, 2011 .” We note similar language “ assuming the renewal of
current capital gains rates prior to their scheduled expiration at the end of 2010 ”
on page 85. Please revise or advise.
Index to Consolidated Financial Statements , page 93
10. Please amend to include the report of your independent registered public
accounting firm.
Consolidated Statement of Cash Flows, page F -4
11. Please tell us your basis for classifying “Loans to Third Parties” as operating cash
flows. Please tell us what consideration was given to presen ting the loans as
investing cash flows.
Notes to the Consolidated Financial Statements
Note 2. Summary of Significant Accounting Policies
Fair Value of Financial Instruments, page F -10
12. We note your response to our prior comment 30. You state that it wa s not
practicable to estimate the fair value of your investment in unconsolidated entities
due to their lack of marketability. Please tell us how you determined that these
investments were not impaired and their value is recoverable.
Note 6. Investment in Unconsolidated Entities, page F -14
13. We note that your investment with Shaanxi XunyangHongye Real Estate Co.,
Ltd., to establish a Chinese herbal medicine exchange market (the “Exchange”) in
Ankang City, China entitles you to profit sharing of 60% of the a fter-tax net
income annually. Please tell us your basis for not consolidating this entity.
Yuying Zhang
Shineco, Inc.
January 7, 2015
Page 4
Exhibit Index
14. We note your response to our prior comment 33 and reissue to clarify our
comment . Please file as an exhibit any form of subscription agreement for the
purchase of the common stock being offered or advise.
15. Please file a copy of the executed escrow a greement prior to effectiveness.
You may contact Aamira Chaudhry at (202) 551 - 3389 or L ynwood Shenk at
(202) 551 - 3380 if you have questions regarding comments on the financial statements
and related matters. Please contact John Dana Brown at (202) 551 -3859 or me at (202)
551-3210 with any other questions.
Sincerely,
/s/ Susan Block
Susan Block
Attorney Advisor
cc: Anthony W. Basch, Esq.
Kaufman & Canoles, P.C.