May 13, 2009
VIA EDGAR AND FEDEX
Securities and Exchange Commission
Division of Corporation Finance
Station Place
100 F Street, N.E.
Washington, DC 20549
Attn: Edwin Kim
| Re: | Yuhe International, Inc. |
| Post-Effective Amendment for Registration Statement on Form S-1 | |
| Filed on April 22, 2009 | |
| File No. 333-150836 | |
| Form 10-K | |
| Filed March 31, 2009 | |
| File No. 333-83125 |
Dear Mr. Kim:
On behalf of Yuhe International, Inc., the “Company”, we are responding to the letter from the Staff of the Securities and Exchange Commission, the “Commission”, dated May 11, 2009 commenting on the Company’s Annual Report on Form 10-K filed on March 31, 2009, the “10-K”.
We have provided four courtesy copies of 10-K/A No. 2 to show changes from the 10-K, along with this response letter for your review. For your convenience, we have repeated comment from the Staff’s May 11, 2009 letter immediately prior to our response below.
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Form 10-K filed March 31, 2009, Amended April 22, 2009
Controls and Procedures, page 39
| 1. | We note that you do not provide management’s report on internal control over financial reporting (as defined in Rules 13a-15(f) and 15d(f) of the Exchange Act) as required by Item 308T of Regulation S-K. Please address Regulation S-K Compliance and Disclosure Interpretation 215.02 available on the Commission’s website at http://www.sec.gov/divisions/corpfin/guidnance/regs-kinterp.html#215.02 |
We appreciated the opportunity to speak with you on May 11, 2009. The Company notes the Staff’s comment and respectfully advises that the Company has revised Item 9A, Part II of its annual report on Form 10-K/A No. 2 as follows:-
ITEM 9A. CONTROLS AND PROCEDURES
| (a) | Disclosure controls and procedures |
The Company’s disclosure controls and procedures are designed to provide reasonable assurance of achieving the Company’s objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
The Company’s management, with the participation of its chief executive officer and chief financial officer, Messrs. Gao Zhentao and Hu Gang, respectively evaluated the effectiveness of the Company’s disclosure controls and procedures. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports, such as this 10-K, that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, Messrs. Gao and Hu concluded that because of the significant deficiency in internal control over financial reporting as described below, the Company’s disclosure controls and procedures were not effective as of December 31, 2008.
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| (b) | Management’s report on internal control over financial reporting |
Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control system was designed to provide reasonable assurance to its management and Board of Directors regarding the preparation and fair presentation of financial statements, and includes those policies and procedures:-
| (i) | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of its assets; |
| (ii) | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that its receipts and expenditures are being made only in accordance with the authorization of the Company’s management and directors; and |
| (iii) | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements. |
In making its assessment of internal control over financial reporting, the management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework .
Pursuant to Rule 15d-15 of the Exchange Act, the Company’s management, with the participation of its chief executive officer and chief financial officer, Messrs. Gao Zhentao and Hu Gang, respectively evaluated the effectiveness of the Company’s internal control over financial reporting as of December 31, 2008. Based on this evaluation, the Company’s management concluded that as of December 31, 2008, the Company’s internal controls over financial reporting were not effective.
Management had concluded, as of December 31, 2008, that material weaknesses existed with respect to compliance with Section 402 of the Sarbanes-Oxley Act. As of December 31, 2008, the Company advanced money to four related parties with a total outstanding amount in excess of $3.7 million, of which, the Company advanced over $3.5 million to one related party, Shandong Yuhe Food Group Co., Ltd.
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In order to correct the foregoing material weakness, the Company has taken or is taking the following remediation measures:-
| · | The Company will no longer make payments to any related parties that would be classified as a loan and will reduce the outstanding amount from Shandong Yuhe Food Group Co., Ltd. and other related parties; |
| · | The Company is in the process of arranging necessary training for its accounting department staff; |
| · | The Company is in the process of engaging external professional accounting or consultancy firms to assist it in the preparation of the US GAAP accounts; |
| · | The Company has committed to the establishment of effective internal audit functions; however, due to the scarcity of qualified candidates with extensive experiences in U.S. GAAP reporting and accounting in the region, the Company was not able to hire sufficient internal audit resources before the end of its reporting period. However, the Company will increase its search for qualified candidates with assistance from recruiters and through referrals; |
| · | The Company has allocated significant financial and human resources to strengthen the internal control structure. As part of its efforts to comply with Section 404 of the Sarbanes-Oxley Act for fiscal year 2009, the Company has been actively working with external consultants to assess its data collection, financial reporting, and control procedures and to strengthen its internal controls over financial reporting. |
The Company believes that the foregoing steps will remediate the material weakness identified above, and the Company will continue to monitor the effectiveness of these steps and make any changes that the Company’s management deems appropriate.
There were no changes in the Company’s internal control over financial reporting identified in connection with the evaluation performed that occurred during the period covered by this report that has materially affected or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
This annual report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.
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| Sincerely, | |
/s/ Simon Luk Simon Luk |
c.c. Yuhe International, Inc.
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