HAND & HAND PC
24 Calle de La Luna
San Clemente, CA 92673
(949) 489-2400
Facsimile (949) 489-0034
October 12, 2010
Russell Mancuso
Branch Chief
Securities & Exchange Commission
450 Fifth Street
Washington, DC 20549
Re:
China Bright Star Limited
Registration Statement on Form 10-12G
Filed August 30, 2010
File No. 000-54098
Dear Mr. Mancuso:
We hereby file amendment number 1 and respond as follows to your comment letter by copying your comments, followed by a response in italics:
1.
Please reconcile your references throughout your registration statement to "officers and directors" with your disclosure under "Item 5 - Directors and Executive Officers," which indicates that you have only one director and officer.
Complied.
Item 1. Business, page 2
2.
Please provide us a citation to the definition for "clean public shell" that you have disclosed in the first paragraph under this section.
Complied by revising the disclosure. The Company intends to use the definition of "shell company" in Exchange Act Rule 12b-2.
Plan of Operation, page 2
3.
We refer to your disclosure in the penultimate paragraph on page 3. Please revise to disclose the basis for management's belief that you "will offer owners of business opportunities the opportunity to acquire a controlling ownership interest in a public company at substantially less cost than is required to conduct an initial public offering." Clarify why a private operating company would benefit by completing a business combination with you rather than by filing its own Exchange Act registration statement given the information that will be required in a Form 8-K at the time of the business combination.
Complied on page 4.
4.
Please balance your disclosure in the penultimate paragraph of this section to provide equally prominent explanation regarding the effect on the operating company potentially becoming liable for your liabilities, both known and unknown.
Complied on page 4.
Sources of Opportunities, page 4
5.
Please expand your disclosure here regarding your officer being "employed in other positions" to state clearly the number of other companies with which your officer is affiliated. If such companies have a business plan that is similar to yours, please revise your disclosure to clarify. Also disclose how your sole officer and director will allocate his time if there is a concurrent acquisition opportunity for any of those other companies.
Complied.
Evaluation of Opportunities, page 4
6.
With a view toward disclosure in an appropriate section of your document, please tell how you could structure a business combination that could be completed without shareholder approval, whether you intend to attempt to structure your business combination so it does not require shareholder approval, and whether the need for shareholder approval will be a factor in your evaluation of business opportunities.
Complied in the first paragraph under "Acquisition of Opportunities."
Acquisition of Opportunities, page 4
7.
With a view toward disclosure of potential acquisition structures and risks, please tell us whether, if applicable laws prevent you from acquiring an ownership interest in a target business, you might enter into a contractual arrangement with the owners that provides you will control the target.
Complied. See also additional risk factors on pages 13-15.
8.
Since this registration statement is not an offering of securities, please tell us why you refer to "this offering" in this section.
The language has been deleted.
Competition, page 6
9.
With a view toward disclosure, please tell us about the information you have regarding the number of shell companies seeking to acquire an operating business.
Complied.
Effect of Existing or Probable Governmental Regulations...page 6
10.
If you can structure your business combination so that a shareholder vote or consent is not required, please balance your disclosure in the second paragraph to explain whether shareholder would receive proxy or information statements in connection with such a transaction.
Complied.
Item 1A. Risk Factors, page 7
Any potential acquisition or merger with a foreign company may subject us...page 9
11.
Please clarify the nature of the "risks related to shipment of raw materials and finished goods across national borders."
Complied.
It is likely that our common stock will be considered "penny stock." page 10
12.
Please tell us the authority in which you rely for the reference to the exemptions for individual accredited investors that you mention in the first paragraph of this risk factor.
Securities Act Rule 501(a).
Risks Related to Doing Business in China...page 10
13.
If you could become an entity with operations in China without shareholder approval, please add risk factors to explain the risks to you and your shareholders that result from the potential that you may become a resident enterprise as defined under Chinese tax law. Please also expand your disclosure under "Taxation" on page 19 to explain these issues.
Complied. See new risk factor on page 14 and the addition of disclosure under the Taxation discussion.
Fluctuation in the value of the RMB...page 11
14.
We refer to the last sentence of this risk factor. With a view toward disclosure, please explain how "[a]n appreciation of RMB against the U.S. dollar would also result in foreign currency losses..." Please also revise your disclosure to address the impact of the currency translation on your financial statements as a whole rather than just the effect of "financial assets."
Complied by changing the word "assets" to "liabilities" and deleting the word "financial."
Management's Discussion and Analysis of Financial Condition...page 12
15.
Please revise to disclose the nature of the operating expenses that you incurred during the period from June 11, 2010 (inception) through June 30, 2010. Refer to Regulation S-K Item 303(a)(3).
Complied.
16.
Refer to your disclosure in the second paragraph that you expect cash requirements to be met by shareholder loans.
•
Please disclose the basis for this expectation.
•
Please file any related agreements as exhibits to your registration statement.
•
Reconcile the disclosure here with the disclosure on page 9 of your financial statements regarding private placements of securities.
Complied by additional disclosure. There are no agreements.
Off-Balance Sheet Arrangements, page 13
17.
We note your disclosure that you do not have off-balance arrangements of the type that you identify. With a view toward clarified disclosure, please tell us about any other off-balance arrangements.
Complied.
Item 3. Properties, page 13
18.
Please revise to clarify whether you pay rent to your officer and director for the office space.
Complied.
Item 4. Securities Ownership of Certain Beneficial Owners and Management, page 13
19.
With a view toward clarified disclosure, please tell us whether any person other than Jonathon Mork exercised, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, sole or shared voting or investment power with respect to your shares held in the name of Millennium Group, Inc.
No other person exercises control other than Jeremy Mork and, as disclosed in the footnote, Jonathan Mork.
20.
Please reconcile the spelling of the name of your shareholder as included in the table and in the footnote to the table.
Complied.
Item 5. Directors and Executive Officers, page 13
21.
Please revise to provide all information required by Regulation S-K Item 401(e), including disclosure of Jeremy Mork's positions with other companies that have a pending Exchange Act registration statement. Clarify whether Jeremy Mork has held positions with entities other than these and Millennium Group, Inc, in the last five years, and disclose the principal business of Millennium Group, Inc. Your revised disclosure also should discuss the specific experience, qualifications, attributes or skills that led to the conclusion that Jeremy Mork should serve as director, in light of your business and structure.
Complied. We advise the staff supplementally that all entity positions held by Jeremy Mork have been disclosed.
22.
Please provide the information required by Regulation S-K Item 401(g).
No promoter is involved for which any of the items in 401(f) are applicable.
Conflicts of Interest, page 13
23.
Please replace your disclosure regarding "certain conflicts" with disclosure that describes the specific conflicts.
Complied.
24.
Please name each company with reporting obligations under the Exchange Act with which you, your officer, your promoters, or your affiliates have been affiliated in the past five years. Disclose the relationship between (1) each such reporting company and (2) you, your officer, your promoters and your affiliates. Also, identify which of those companies was or is a shell company.
•
For each such company that was a shell company, please disclose:
•
the date that the company was incorporated,
•
the date that the company filed an Exchange Act registration statement,
•
the date that the shell company engaged in a business combination with an operating company and the nature of that business combination,
•
Whether approval of the shell company's shareholders was obtained to approve the business combination,
•
the nature of any affiliation between (1) the operating company and (2) you, your officer, your promoters and your affiliates,
•
the nature of any consideration that you, your officer your promoters, and your affiliates received in connection with or related to the business combination, and
•
whether and when affiliates of the shell company left their position with the company or sole their securities after the business combination.
Also, with a view toward disclosure, please tell us about the performance of the operating company since the date of the business combination.
•
For each such company that is a shell company, please disclose:
•
the date that the company was incorporated, and
•
the date that the company filed an Exchange Act registration statement.
Also, with a view toward disclosure, please tell us about any attempted business combinations involving each such shell company and the reasons that the business combination did not close.
The staff is advised supplementally that no officer, promotor or affiliate of the registrant was involved with any other publicly reporting company during the past 5 years.
25.
Describe how you determined the number of shell companies to form and the number of registration statements to file under the Exchange Act.
We advise the staff supplementally that in Chinese culture 8 is a lucky number because the word for "8" sounds like the word for "fortune" or "wealth." For example, it is well known that the opening ceremony for the Beijing Olympics commenced on 08/08/08 at 08:08:08.
26.
Please clarify what you mean by "a random order of priority." State exactly what your affiliates will do to determine which of its shell companies will engage in business combinations that they identify. Also, disclose how you will determine which of the shell companies will pay the expenses of your affiliates as they seek business combinations before a specific combination is assigned to a specific shell company. Add appropriate risk factors.
We have added disclosure as follows: None of these companies will pay any of management, its shareholders or any of their affiliates any compensation or expenses prior to entering into a definitive agreement. The Company does not understand the comment regarding "a random order of priority." The Company believes that "a random order of priority" need no further explanation. If a passenger has a pocketful of subway tokens, he or she does not care which one is used today. Since there is only one shareholder of each company, there is no reason for management to choose one company over another.
27.
With a view toward disclosure, please provide us your analysis of whether, under applicable law, the registration is considered a wholly owned subsidiary of a holding company for purposes of section 9.3 of exhibit 3.2.
The Millennium Group has its own discrete business and is not a holding company.
Item 6. Executive Compensation, page 14
28.
Refer to your disclosure that you do not intend to pay compensation "until an acquisition is made." With a view toward clarified disclosure, please tell us:
•
the amount and nature of compensation that you intend to pay when you make an acquisition,
•
the amount of compensation you or your officer, affiliates, or promoters were paid in connection with prior business combinations involving shell companies, and
•
how your officer, affiliates and promoters intend to profit from their involvement with this company.
Complied by revising the disclosure in this section. The second comment is inapplicable since such persons were not paid for business combinations with shell companies.
29.
Refer to your disclosure that current management may resign and be replaced in connection with an acquisition. With a view toward appropriate disclosure, including risk factors, please tell us whether this fact creates an incentive for your current affiliates to sell their shares after the business combination, particularly given the absence of other compensation arrangements.
The disclosure added in response to the previous comment makes clear that Millennium Group will be required to wait one year after the super 8-K is filed before it can resell. Millennium Group's incentive to sell shares has nothing to do with whether or not Mr. Jeremy Mork resigns or when he resigns. Millennium intends to sell its shares when it legally can under Rule 144(i).
Item 7. Certain Relationships and Related Transactions, page 14
30.
Please revise to include the disclosure required by Regulation S-K Item 407(a).
407(a) is applicable "in a proxy or information statement relating to the election of directors" or a Form 10 when " the registrant has applied for listing with a national securities exchange or in an inter-dealer quotation system which has requirements that a majority of the board of directors be independent." Neither of these requirements is applicable here.
31.
Please reconcile your disclosure here with (1) your reference to related-person transactions on page 29 under the caption "Fair Value of Financial Instruments" in your financial statements, (2) Note E to your financial statements, and (3) your sale of securities to related persons.
There are no related party payables or receivables. S-K 404 has a dollar threshold of $120,000. This is greater than the $6,000 paid by Millennium Group for its shares. Also, prior to purchasing the shares, Millennium Group was not an affiliate of the issuer.
Item 11. Description of Securities, page 15
32.
Please add separate risk factors to your document to:
•
explain the risk to investors of the power of the board to change your Memorandum of Association without shareholder approval as mentioned in the last sentence of the first paragraph of your disclosure in this section,
•
explain the risk created by preferred stock being convertible into 10,000 shares of common with as-converted voting rights, and
•
disclose the effect of the 1/3 quorum in section 7.13 of exhibit 3.2.
Complied by adding additional risk factors.
33.
Please disclose the 75% vote requirement in section 8.5 of exhibit 3.2.
Complied by adding disclosure in Item 5.
Shares Eligible for Future Sale, page 15
34.
Please tell us the authority for your statement regarding a three-year holding period in the second paragraph.
The disclosure has been revised.
Memorandum of Association and Articles of Association, page 16
35.
Please clarify whether your disclosure in paragraph 13.2 means that disclosure of the interest need not be made until after the date of entry into the transaction.
Complied.
36.
Given your lead-in language to your disclosure addressing Article 8.13 regarding independence, please revise your disclosure to clarify whether a "Resolution of Directors" requires a majority of a quorum and whether that quorum must be independent.
Complied.
37.
With a view toward disclosure in an appropriate section of your document, please tell us:
•
the circumstances in which a director could be given more than one vote as indicated in section 1.1 of your Memorandum of Association under "Resolution of Directors,
•
whether section 8 of your Memorandum of Association means that you can divide your common stock into different classes with different rights, and
•
the circumstances in which your Memorandum or Articles or applicable law permit you to redeem shares without the consent of shareholders as mentioned in section 3.1 of exhibit 3.2.
We see no provisions in the Memorandum or Articles of Association under which a director could be granted more than one vote, nor under which shares could be redeemed without the consent of the shareholder. Article 8 does not provide the Company to divide an existing class into two or more classes, but only provides that if there are two or more classes, each has to vote separately as a class on any variation of its rights.
Provisions of the Company's articles, charter or bylaws that have the effect... page 18
38.
Please provide us your analysis supporting your conclusions that the following would not have the effect of delaying, deferring or preventing a change in control:
•
the number of authorized common shares,
•
the authorized preferred shares,
•
the ability of the board to amend your charter, and
•
the ability of the board to name new directors per sections 8.3 and 8.7 of exhibit 3.2 without shareholder approval.
The item (7) referred to, which is taken from the Commission's own Form 20-F, requests that the Company list the provisions "which would operate only with respect to a merger, acquisition or corporate restructuring." None of the enumerated provisions above are applicable only in connection with mergers, acquisitions or corporate restructurings.
Exchange Controls, page 18
39.
Please add disclosure in this section that addresses foreign exchange controls in China, given your disclosure under "Governmental control of currency conversion may affect..." on page 10.
Complied.
Taxation, page 19
40.
Please explain what you mean by "IBC."
Complied.
Item 12. Indemnification of Directors and Officers, page 19
41.
Please state the effect of Article 14 of your Articles of Association.
Complied.
Item 13. Financial Statements and Supplementary Data, page 19
42.
Please update your financial statements when required by Rule 8-08 of Regulation S-X.
Complied.
Note A - Summary of Significant Accounting Policies, page 26
Organization, Name of Business and Trade Name, page 26
43.
Please revise to clarify whether June 30 is your fiscal year end.
Complied.
Signatures
44.
Please include the text on the Signatures page required by Form 10.
Complied.
45.
We note the August 19, 2010 date on your August 30, 2010 filing. Please file currently dated signatures.
Complied.
Exhibit 3.1
46.
Please file a complete exhibit. Currently:
•
the left side of some of your document is omitted, and
•
cross references to other clauses, like in section 2.1, are missing.
Complied.
Exhibit 3.2
47.
Please tell us the purpose of Article 1.2. Include in your response (1) a description of all circumstances in which shareholders would be required to indemnify the registrant and its affiliates and (2) whether the Article is intended to attempt to eliminate liability under the United States federal securities laws or require shareholders to indemnify others for such liabilities.
The purpose of Article 1.2 is so that if a shareholder receives a share certificate and then uses that share certificate to defraud another person, and the Company is thereby damaged, the shareholder would be required to make the Company whole. This could happen if a shareholder took money from a third party in a transaction, promising to deliver his shares, and then failed to deliver the shares, and then the third party sued the Company; alternatively, if the shareholder misrepresented something about the Company in the sale of his shares, and the third party sued the Company. This has nothing to do with the indemnification language set forth in S-K Item 510. It is not intended to indemnify the officers and directors for their own securities act liability, but to require the shareholder to be responsible for its own misdeeds. This Article 1.2 does not impose any requirement to indemnify any other shareholder qua shareholder and is not intended to eliminate the Company's liability under the Federal securities laws.
Very truly yours,
Jehu Hand
JH:kp