Via facsimile and US Mail
Mail Stop 3-09 September 3, 2004
James Nian Zhan, Secretary
Kiwa Bio-Tech Products Group Corporation
17700 Castleton Street, Suite 589
City of Industry, California 91748
Re: Kiwa Bio-Tech Products Group Corporation
Registration Statement on Form SB-2
File No. 333-117868, filed August 2, 2004
Dear Mr. Zhan:
We have reviewed your filing and have the following
comments.
Where indicated, we think you should revise your March 31, and
June
30, 2004 Forms 10-QSB for the comment under "Note 5 convertible
note
payable." The MD&A comments and the December 31, 2003, financial
statement comment can be complied with in future filings including
any
amendment to your Form SB-2. If you disagree, we will consider
your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may or may not raise
additional
comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We
look forward to working with you in these respects. We welcome
any
questions you may have about our comments or on any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
Form SB-2
General
1. Update all information to the latest practicable date. (e.g.
current stock price, number of shares that you have issued to
Cornell
Capital, if at all.)
2. Please note that a selling shareholder involved in an indirect
primary offering must consider any NASD pre-filing obligations.
Please advise us of your consideration regarding the applicability
of
these provisions of the NASD rules.
3. Please amend the Form SB-2 to comply with the age of financial
statement requirements of Rule 3-10 of Regulation S-B.
Cover Page
4. Your cover page currently contains too many details. Please
limit
the amount of information you include in your cover page to
information that is required by Item 501 of Regulation S-B. For
example, you should relocate paragraphs fifth and sixth to the
summary
section of your document or your Selling Shareholders section.
Similarly, please relocate the paragraph starting with the
sentence
"With the exception of Cornell Capital Partners . . . ." to
elsewhere
in your document.
5. Please revise the third line of the cover page where you
disclose
the number of shares of common stock to say "up to 45,277,605
shares
of common stock."
6. Please revise the sentence beginning "The selling shareholders
may
be deemed underwriters . . . ." as you have disclosed that
Cornell
Capital "is" an underwriter.
7. Please remove the word "trades" or is "traded" from any action
attributed to the Bulletin Board here as well as throughout the
prospectus. While the Bulletin Board quotes stocks, it does not
trade
them.
8. Please include the current market price of your common stock as
of
the most practicable date.
Risk Factors, page 3
General
9. Do you have agreements with third parties to manufacture your
product candidates? Or to purchase products? Consider revising
your
disclosure to discuss whether you are substantially dependent on
any
manufacturing or supply agreements, identify the other party to
the
agreement(s) and file the agreement as an exhibit. If you believe
you
are not substantially dependent on your manufacturing or purchase
agreements, provide us with a supplemental analysis supporting
your
determination.
10. If you do not have any long-term manufacturing agreements,
disclose this information and disclose when any short-term supply
agreements expire.
11. If you rely on any sole source providers, consider including a
separate risk factor and identify the sole source providers,
disclosing this reliance and the impact of their failure to comply
with regulatory guidelines set forth by the FDA, DEA and other
applicable US or Chinese agencies. Any necessary disclosure may
include the potential impact of any fines or sanctions on you, as
well
as the qualitative and/or quantitative impact of the interruption
to
your business caused by their failure to meet these guidelines.
12. To the extent that you are dependent on licenses, trademarks
or
other intellectual property, please revise your disclosure to
include
a discussion of your dependence and the potential consequences to
your
operations if your rights are challenged or you default on your
obligations under any such collaboration and/or license
agreements.
13. Please include a risk factor that discusses your charter and
bylaw
provisions and how such provisions would prevent a change of
control
in management. In the alternative, advise us as to why you do not
believe a risk factor is necessary.
14. Please include a risk factor that addresses an investor`s
ability
to enforce a service of process or to enforce liabilities against
you
or your directors and officer as you and many of your officers and
directors are based in the People`s Republic of China. In the
alternative, advise us as to why you do not believe a risk factor
is
necessary.
15. We note your disclosure on page 24 under the heading
"Dependence
on Customers" that currently you have 17 customers. Further, we
note
that one customer accounted for 100% of your net sales for the
first
quarter of fiscal year 2004. Please include a risk factor
describing
the risk and consequences of your reliance on a limited number of
customers. In the alternative, advise us as to why you do not
believe
a risk factor is necessary.
Investors may not be able to adequately evaluate our business. . .
page 3
16. Please revise your risk factor heading to include disclosure,
if
true, that due to your short operating history you have yet to
generate any profits and that most of your products are still not
available for commercial sale.
17. For each drug or program, state whether you have filed
Investigational or New Drug Applications with the FDA or similar
application with foreign authorities. If not, state any
applicable
intended time of application and why you would file an
application.
If the filing of the application is itself uncertain at this
stage,
state so.
We have been the subject of a going concern opinion for the year
ended. . .,page 3
18. Please consider consolidating your discussion under this risk
factor with the discussion your first risk factor.
19. Please disclose your accumulated losses as of June 30, 2004.
Our business is subject to fluctuations which may result in
volatility
.. . .page 3
20. Discuss the potential effect of market price volatility on
your
stock and any potential effect on your operations.
21. To the extent that you have reliable historical information,
please revise to provide the highest and lowest range of the price
of
your stock during the last two fiscal years and any subsequent
interim
period to illustrate its historic volatility. Please also
disclose
the source of this information.
22. Many of the bullet points included in the risk factor warrant
separate risk factor disclosure. To the extent that these factors
have been discussed as separate risk factors, delete them from
this
discussion. To the extent that they have not been discussed as
separate risk factors, please consider including separate risk
factor
discussions addressing them.
Our success depends in part on our successful development and sale
of
products. . . ,page 4
23. If you are aware of any specific competition, products in
development or new products that your competitors provide or will
soon
provide, disclose these competitive threats and the potential
impact
of these products or product introductions on your business.
Also,
you should consider naming your most relevant competitors, whose
business activities could have a material adverse effect on your
prospects or business going forward. If there are too many
competitors
to name, please disclose the approximate number of competitors in
your
target markets.
24. Please revise this risk factor to disclose specifically how
this
risk has affected and will affect your operations, cash flows,
financial condition or business. For example, please discuss any
current or planned programs you expect to curtail if financing or
revenues are impacted by the failure of program or if you
otherwise
fail to meet governmental regulations or voluntary quality
programs.
You may wish to consider providing separate disclosure under
another
risk factor discussion addressing the success of your testing and
the
various regulatory approval processes applicable to your products.
25. Please also disclose that products you currently have for
commercial sale and when you commenced sales of that specific
product.
Our success depends in part on our ability to retain and recruit
key
personnel,. . . page 4
26. Identify the "key" executives and scientific, regulatory, and
medical advisors on whom you depend.
27. To the extent that you have experienced problems attracting
and
retaining key personnel in the recent past, please revise to
describe
these problems. Additionally, if any key employee has plans to
retire
or leave your company in the near future, please revise the
discussion
to disclose this information.
28. Please state whether you maintain employment agreements with
your
key personnel, employees or consultants and disclose the term and
termination provisions of any such contracts.
We currently do not have sufficient revenues to support our
business.
.. ., page 4
29. This risk factor appears to be discussing three separate
risks.
More specifically, the risk factor associated with your need to
raise
additional capital to continue operations; the separate risk that
if
you issued additional capital, the dilution consequences of such
an
issuance; and the separate risk that raising funds through
collaborations and licensing arrangements may impose on you.
Please
revise this section such that each risk factor is presented
separately.
30. Please revise your disclosure to describe your current
business
plans, in the short term and the long term. Include a detail of
your
current cash needs to conduct those business plans for the next 24
months. Also revise to describe any alternative business plans if
you
are unable to raise the capital required to conduct or expand your
business according to these plans.
Restrictions on currency exchange may limit our ability to
effectively
receive. . ., page 5
31. Please revise your disclosure to discuss the potential impact
of
the foreign exchange risk and foreign ownership restrictions on
your
operating results. Please also include a discussion of any
hedging
arrangements you may employ, and the impact you expect these
arrangements to have in your operating results. If you expect to
conduct operations in countries other than China within the next
24
months, please include these countries in your discussion.
32. If China is the only jurisdiction outside the US in which you
expect to conduct operations in the near future, then please
consider
revising to consolidate your discussion under the risk factor
entitled
"Changes in China`s political, social, economic or legal systems
could
materially harm our business" with this risk factor.
"Changes in China`s political, social, economic or legal systems
could
materially . . . .," page 5\
33. Please explain what, if any, specific political, social,
economic
and legal risks you have historically experienced in conducting
operations in China.
Our ability to generate revenues could suffer if the Chinese ag-
biotechnology market. . page 6
34. Please revise to discuss the length of time you anticipate it
will
take to develop the ag-biotechnology industry in China, and also
how
you expect to will fund your operations, or what other impact the
development course of the industry in China will have on your
operations.
We may not be able to adequately protect our intellectual property
rights. . . page 6
35. For each drug or program, please identify the foreign
regulatory
agencies from which you currently intend to seek approval or
protection, and state how far you have progressed in filing the
applications.
36. Revise to disclose your dependence upon, the duration of, and
effect of all patents, trademarks, and licenses.
We may become involved in intellectual property litigation, . .
page 6
37. Expand your discussion to include the number of patents you
have,
the number of patent applications you have filed and which
countries
you have filed them in, as well as the number of patents licensed
to
you. Identify any products in development to which these patents
and
patent applications attach. In your discussion, briefly describe
your
patents for any key products and the expiration date of such
patents.
38. To the extent that you have received any communications,
allegations, complaints, and threats of litigation related to the
possibility that you might have infringed patents held by others,
include a discussion of the potential infringement and potential
consequences. The consequences should include the expense of
litigation as well as the consequences if it is determined that
you
are infringing on a third party`s intellectual property.
We face technical risks associated with commercializing our
technology. . .page 7
39. In addition, in your Business section, please disclose your
broad
plan, including strategies, to compete in your industry.
"If an active trading market for our securities does not remain in
existence. . . .", page 7
40. Please disclose the current trading volume of your common
stock as
well as the price per share as of a recent date. Please also
disclose
the number of shareholders you had as of a recent date.
We are controlled by two existing stockholders, whose interests
may
differ. . .,page 7
41. We note that numerous empirical studies have concluded that
anti-
takeover measures do not preclude unsolicited takeovers, have no
major
effect on the stock price of public companies not subject to
takeover
speculation, and actually lead to higher takeover premiums for
target
companies. See, for example, R. Comment & G. Schwert, Poison or
Placebo? Evidence on the Deterrence and Wealth Effects of Modern
Anti-
takeover Measures, 39 Journal of Financial Economics 3 (1995).
Accordingly, it does not appear that the risk, as framed by the
company, is an actual risk to investors. The exact risk should be
clear from the caption, and accompanying discussion must explain
how
the disclosed risk affects the issuer or the offering. It appears
that the more significant risk to investors is how these measures
may
prevent or frustrate any attempt to replace or remove the current
management of the company by shareholders. Please revise this
subheading and risk factor to more clearly disclose the actual
risks
of this and any other applicable anti-takeover measures, or delete
the
risk factor.
The potential designation of our common stock as a "penny stock"
could
impact. . ., page 8
42. Consider revising your disclosure to consolidate your
discussion
in this risk factor with your discussion in the risk factor
entitled,
"Broker-dealer requirements imposed by the designation of our
stock as
a `penny-stock` may affect the trading market for our common
stock."
43. We note your disclosure that your common stock "could be
considered to be a penny-stock." Given the price of your common
stock, please indicate if you are a penny stock company or not.
We do not intend to pay dividends in the foreseeable future, page
8
44. Please revise to clearly state that readers should not rely on
an
investment in your company if they require dividend income and an
income to them would only come from any rise in the market price
of
your stock, which is uncertain and unpredictable.
Future sales by our stockholders may negatively affect our stock
price
and our . . . ., page 8
45. Please revise to include the number of your presently
outstanding
shares, the number that is freely tradable and the number that is
subject to Rule 144. In addition, please disclose the number of
shares
you have currently registered for resale by selling shareholder.
Existing stockholders will experience significant dilution from
our
sale of . . . ., page 8
46. Please disclose the number of shares you are registering in
this
registration statement. Please also disclose your stock price as
of a
recent date.
47. Please quantify the dilution your existing shareholders would
experience if you were to draw down on the full $10,000,000
million
under the investment agreement at the current market risk.
We may not be able to access sufficient funds under the equity
line of
credit . . . ., page 9
48. Please add that the maximum amount you may draw down under the
Standby Agreement is $10 million.
Use of Proceeds, page 11
49. Please disclose more specific information as to the use of
funds
for your manufacturing facility construction. For example, when
will
you commence construction, and at what site will construction take
place? What is the approximate cost for building the facility?
50. We note the disclosure in the table under the category
"General
Administrative and Operation Expenses." More specifically, it
appears
your expenses related to administrative costs will increase as the
amount of your gross proceeds increases. Please supplementally
explain to us why.
51. We note your disclosure that you intend to repay a short-term
note. Please identify the party you intend to repay this note.
In
addition, in your Liquidity and Capital Resources section, please
provide a description of the loan you owe to such party, including
the
amount, date you entered into the agreement, the terms of the
note/loan, and maturity date. To the extent applicable, please
also
disclose this information in your Certain Relationships and
Related
Transactions section of the document. We also note that the
interest
rate and maturity as well as the use of proceeds of the
indebtedness
should be disclosed in your Use of Proceeds section if this debt
was
incurred within one year. See instruction 1 to Item 504 of
Regulation
S-B.
Selling Stockholders, p. 11 and Plan of Distribution, p. 15
52. Please revise your disclosure to confirm that any change in
selling stockholders will be identified in prospectus
supplement(s),
as applicable, prior to the sale or transfer of securities.
Normally,
absent circumstances indicating that the change is material,
revisions
in identified stockholders may be reflected by the filing of a
Rule
424(b) prospectus supplement describing the change and setting
forth
the information required by Item 507 of Regulation S-B. Of
course,
this assumes the change does not involve increasing the number of
shares or dollar amount registered, or include shares from a
transaction other than the one to which the original filing
related.
Please note that the ability to reflect changes in selling
stockholders by Rule 424 does not permit the names of known
selling
stockholders to be omitted from any original filing.
53. If any selling securityholder enters into an agreement with an
underwriter to do a firm commitment offering, the staff views this
as
a material change in the plan of distribution which requires a
post-
effective amendment. The Staff must declare the filing effective
prior to commencement of the offering. Confirm to us that you
will
file a post-effective amendment if any selling securityholder
enters
into a firm commitment offering agreement with an underwriter.
54. We note that you state that any selling stockholders that are
broker-dealers or affiliated persons of broker-dealers "may also
be
deemed to be" underwriters and that compensation to this may be
deemed
to be underwriting commissions or discounts. If any selling
stockholders are broker-dealers or affiliated persons, state in
the
prospectus that they "are" underwriters.
55. In addition, with respect to Cornell Capital, please revise to
make clear that Cornell Capital "is" an underwriter.
56. We note in the selling stockholder table that several selling
stockholders are non-natural persons. If the entity is nonpublic,
please revise to identify the natural person(s) with dispositive,
voting or investment control of the entity.
57. We note in the selling securityholder table that several
selling
stockholders are non-natural persons. If any selling
securityholder
is an affiliate of a broker-dealer, either state that the selling
securityholder is an underwriter or represent that the selling
stockholders purchased securities in the ordinary course of
business,
and at the time of purchase of the securities to be resold, the
selling securityholder had no agreement or understanding, directly
or
indirectly, with any person to distribute the securities. Please
also
state that to the extent that you become aware that any selling
stockholders did not acquire their securities in the ordinary
course
of business or did have such an agreement or understanding, you
will
file an amendment to this registration statement to designate such
affiliate as an "underwriter" within the meaning of the Securities
Act.
58. Please advise us of the business of Cornell Capital Partners,
Westpark Capital, Inc., and Newbridge Securities Corporation,
respectively.
59. Please advise us of the affiliation or relationship, if any,
between Cornell Capital, Westpark Capital, Inc., and Newbridge
Securities and any of your directors and executive officers.
Issuance of Warrant, page 12
60. Please disclose the aggregate dollar value of the common stock
to
be issued upon the exercise of the warrant.
Issuance of Convertible Notes, page 12
61. Please disclose the aggregate dollar value of the 2 million
shares
of common stock issued to Tze Ming Hsu.
Equity Line of Credit, page 13
62. Please clarify what you mean by the statement Cornell "will
retain
4% of each advance...." Please reconcile this statement with the
statement that Cornell "will pay 99% of the market price, which is
defined as the lowest volume weighted average price...." We may
have
additional comments.
63. Please revise your discussion to include the following
information:
* The percentage of outstanding securities that the shares
registered
under this registration statement represent; and
* Any conditions to closing that might enable the Cornell Capital
Partners to avoid their obligation to purchase shares under the
agreement.
64. It is unclear whether or not the NASD would require
shareholder
approval of the issuance of shares under the equity line. Please
provide us your analysis. If shareholder approval is required, so
state in a separate finance-related risk factor and disclose
whether
Cornell Capital is able to vote any of the shares it acquires
under
the equity line agreement in a subsequent vote approving the
equity
line. Refer to the NASD`s Interpretive Material Regarding Future
Priced Securities.
65. Please expand the discussion to include alternative financing
methods you considered prior to entering into the arrangement with
Cornell and why you ultimately selected the standby equity
distribution agreement.
Directors, Executive Officers, Promoters and Control Persons, page
16
66. For each director and executive officer of the company, please
revise your disclosure to set forth the information required by
Item
401 of Regulation S-B, including the person`s business experience
during the past five years; and other directorships held in
reporting
companies naming each company. Currently, the business
description of
many of your directors and officers do not appear to meet the
requirements of item 401 of Regulation S-B.
Security Ownership of Certain Beneficial Owners and Management,
pages
17-18
67. We note in the beneficial ownership table that several
stockholders are non-natural persons. If the entity is nonpublic,
please revise to identify the natural person(s) with dispositive,
voting or investment control of the entity.
Description of Securities, page 19
68. Your current disclosure does not appear to provide all the
information required by Item 202 of Regulation S-B. For example,
your
disclosure must provide any provision in your charter or bylaws
that
would delay, defer or prevent a change in control. To the extent
that
no such provisions exist, please so indicate. Please revise your
disclosure to comply with Item 202.
Description of Business, page 19
69. It is unclear what products you currently have available for
commercial sale and what products are in the development stage.
Please revise to include a brief description of all of your
products
currently available for commercial sale. Your discussion should
include when you commenced sales and the target markets. With
respect
to products currently in development, please describe such
proposed
products, what regulatory approvals you need to commence
commercial
sales and when you expect to commence commercial sales.
70. We note your limited discussions regarding potential research
relationships with several universities in China and the U.S. To
the
extent you have entered into any agreements with such parties,
please
file the agreements as exhibits to the registration statement. In
addition, please expand the Business section to add disclosure
describing the material terms of any material collaborations and
license agreements. Where applicable, please be sure that you
have
disclosed the following information for each:
* All material rights and obligations of the parties to the
agreement;
* Payments received/made to date;
* Additional aggregate potential payments;
* Any revenue sharing arrangements; and
* Expiration date and termination provisions.
Please note that aggregate licensing and aggregate milestone
payments
should be disclosed and quantified. If you determine that any
such
arrangements is not material and therefore, no additional
disclosure
is warranted, please explain why the relevant business arrangement
is
not material.
71. Please disclose the number of full time and part time
employees
you currently have. In addition, please disclose the status of
your
relations with your employees.
Business and Operations, page 20
72. We note your disclosure that you are "acquiring technologies
to
reduce research and development costs and shorten
commercialization
cycles." Please describe what specific technologies you are
acquiring. In addition, if the acquisition of such technologies
is
material to your operations, please describe file the agreements
as
exhibits and provide a description of the material terms of the
agreements.
Market Overview, page 22
73. Please provide us with appropriate annotated documentary
support
from which the information contained in this section was derived.
Facilities and Equipment, page 23
74. Please indicate where your manufacturing needs take place.
For
example, do you outsource all of your manufacturing needs or they
conducted in-house? To the extent your manufacturing needs are
conducted by third parties, please describe the terms of the
business
arrangements. If you have any agreements with such parties,
please
also file them as agreements to this registration statement.
Sources of Raw Materials, page 23
75. Please identify the suppliers of your major raw materials. To
the
extent you have any agreements you with such suppliers, please
file
the agreements as exhibits, and provide a description of the
material
terms of the agreements. Please also indicate historically if
such
supplier has sufficiently met your supply needs, and whether or
not
you have alternative sources of suppliers for your major raw
materials.
Dependence on Customers, page 24
76. Please identify each customer that accounted for more than 10%
of
your revenues.
Management`s Discussion and Analysis, page 24
General
77. Your accounts receivable appear to be building up and include
about a quarter`s worth of sales. In your critical accounting
policies
for accounts receivable, please discuss the payment terms of your
sales and whether and to what extent you allow returns. Disclose
the
age of receivables and/or days sales in accounts receivable. If
you
allow returns, disclose the dollar amount of sales that as of the
balance sheet are subject to return and your accounting policy.
Assuming you record revenue (as it doesn`t appear that you have
any
deferred revenue) on sales subject to return, disclose how you are
able to reasonably estimate returns by addressing in your
disclosure
the factors in paragraph 8 of FAS 48.
78. Expand disclosure for the patent acquired from China
Agricultural
University including the term of the patent and any limitations on
its
exclusive use by the Company. Disclose the expected effect on
financial position and operations. Clarify at what amount you will
record the shares issued for the patent. It would appear that
amount
would be the value of the company`s shares on the measurement date
as
determined by FAS 123 and EITF 96-18.
79. Discuss known events, trends or uncertainties in PRC
regulation
and government policy and the expected effects on financial
position,
operations and cash flows. In this disclosure address the
uncertainties in the company`s ability to receive cash or other
assets
from it`s Chinese subsidiary either in the form of a dividend or
otherwise and the company`s ability or inability therefore to use
cash
or other assets from the Chinese subsidiary for the company`s
corporate purposes including for dividends to the company`s
shareholders.
Amortization of Beneficial Conversion Feature of Convertible Note
Payable, page 27
80. Please revise to include that the lender exercised its
conversion
rights on June 8, 2004 and a total of two million shares were
issued.
We note you have provided this disclosure on page 12 of the
document.
Net Loss, page 27
81. We note the increase in your net loss for the three month
period
ended March 31, 2004 are attributable to multiple factors, please
discuss and quantify the impact of each such factor.
Liquidity and Capital Resources, page 28
82. Please describe the amount you have spent on construction of
your
new manufacturing facility and approximately how more you will
need to
spend to complete construction. Please also disclose that you
expect
construction will be complete in 2005.
83. You reference to short-term borrowings aggregating $283,930
and
long-term borrowings of $1,236,256. Please revise your disclosure
to
include the material terms of such borrowings, including the
identies
of the lenders, the date you entered into the borrowings, the
maturity
date, and the amount outstanding as of a recent date. Please also
file the agreements as exhibits to your registration statement.
84. We also note your disclosure that the loan from the People`s
Republic of China is a non-interest bearing loan. Please provide
us
the circumstances under which you were able to receive a non-
interest
bearing loan from the Chinese government. To the extent
applicable,
please also disclose this information in your Certain
Relationships
and Related Transactions section of the document.
Description of Property, page 31
85. Please disclose if you intend to renew your lease for your
City of
Industry property. In addition, please file the lease agreement
as an
exhibit.
Certain Relationships and Related Transactions, page 31
86. Please revise to indicate whether each of the related party
transactions is on terms as favorable as could have been obtained
from
unaffiliated third parties.
Executive Compensation, page 33
87. We note your disclosure that your former CEO and CFO George
Christopulos resigned on March 12, 2004. It also appears that
since
that date, you have hired two individuals to serve as CEO and CFO,
respectively. Please provide the compensation terms for each
individual in this section.
Compensation of Directors, page 33
88. We note your disclosure that at present, non-employee
directors
generally do not receive compensation for their services to the
Company. This statement seems to be inconsistent with your
statement
on page 26 under "Directors` Compensation" that you paid $8,699
for
the three months ended March 31, 2004 for director compensations,
and
with your disclosure on page 27 that directors` compensation was
$347,110 for the twelve months ended December 31, 2003. Please
explain
the inconsistency to us.
2004 Stock Incentive Plan, page 33
89. Please disclose if you have any made any grants under your
Stock
Option Plan.
Consolidated Financial Statements Three Months ended March 31,
2004
Note 5. Convertible Note Payable
90. Your treatment of the beneficial conversion feature of
$500,000
within stockholders` equity does not appear to comply with EITF
98-5
and 00-27. The amount of the beneficial conversion feature should
reduce the note payable similar to a debt discount with the offset
to
additional paid in capital. The note payable is then accreted to
its
redemption amount from the date of issuance through the September
25,
2004 maturity date. Please revise the March 31, 2004 and June 30,
2004
balance sheets included in the SB-2 filing and in your Forms 10-
QSB
for March 31 and June 30, 2004.
Consolidated Financial Statements year ended December 31, 2003
Note 1. Organization and Basis of Presentation
91. Please provide earnings (loss) per share disclosure. Please
ensure
that the December 31, 2003 and 2002 financial statements
retroactively
reflect the recapitalization as a result of the reverse merger as
reflected in the 2004 interim financial statements. In this
regard,
all share and per share amounts (not limited to earnings (loss)
per
share) throughout both the 2004 interim and the 2003 and 2002
annual
financial statements and elsewhere in the filing should be
consistently presented in assuming retroactive effect of the
reverse
merger and any stock splits.
Signature Page
92. Your principal financial officer and either a controller or
chief
accounting officer must sign the registration statement. Your next
amendment and all subsequent amendments must contain this
signature.
If a person acts in more than one of these capacities, the
signature
page must indicate all of the capacities in which they are
signing.
Please revise.
Item 26. Recent Sales of Unregistered Securities, page 66
93. Please disclose the nature and value of consideration as well
as
the aggregate offering price for each of the offerings described
in
this section.
Securities Exchange Act of 1934 Filings
94. In all future filings required under the Securities Exchange
Act
of 1934, please comply with the comments set forth above as
applicable.
* * *
As appropriate, please amend your registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested supplemental information.
Detailed cover letters greatly facilitate our review. Please file
your cover letter on EDGAR under the form type label CORRESP.
Please
understand that we may have additional comments after reviewing
your
amendment and responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have
made.
Notwithstanding our comments, in the event the company
requests
acceleration of the effective date of the pending registration
statement, it should furnish a letter, at the time of such
request,
acknowledging that
* should the Commission or the staff, acting pursuant to delegated
authority, declare the filing effective, it does not foreclose the
Commission from taking any action with respect to the filing;
* the action of the Commission or the staff, acting pursuant to
delegated authority, in declaring the filing effective, does not
relieve the company from its full responsibility for the adequacy
and
accuracy of the disclosure in the filing; and
* the company may not assert this action as defense in any
proceeding
initiated by the Commission or any person under the federal
securities
laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division
of Corporation Finance in connection with our review of your
filing or
in response to our comments on your filing.
We will consider a written request for acceleration of the
effective date of the registration statement as a confirmation of
the
fact that those requesting acceleration are aware of their
respective
responsibilities under the Securities Act of 1933 and the
Securities
Exchange Act of 1934 as they relate to the proposed public
offering of
the securities specified in the above registration statement. We
will
act on the request and, pursuant to delegated authority, grant
acceleration of the effective date.
We direct your attention to Rules 460 and 461 regarding
requesting acceleration of a registration statement. Please allow
adequate time after the filing of any amendment for further review
before submitting a request for acceleration. Please provide this
request at least two business days in advance of the requested
effective date.
Please contact Jennifer Rawert, Attorney Adviser at (202)
824-
5309, Song Brandon at 202-942-2831 or me at (202) 942-1840 with
any
questions related to the comments above or other related matters.
Sincerely,
Jeffrey Riedler
Assistant Director
cc: V. Joseph Stubbs, Esq.
Stubbs Alderton & Markiles, LLP
15821 Venture Boulevard, Suite 525
Encino, California 91436
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James Nian Zhan
Kiwa Bio-Tech Products Group Corporation
September 3, 2004
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