August 2, 2005
By facsimile to (214) 953-5822 and U.S. Mail
Mr. Xiangqian Li
Chairman, President, and Chief Executive Officer
China BAK Battery, Inc.
BAK Industrial Park
No. 1 BAK Street
Kuichong Town, Longgang District
Shenzhen, People`s Republic of China
RE: China BAK Battery, Inc., formerly known as Medina Coffee,
Inc.
Pre-effective Amendments 1 and 2 to Registration Statement on
Form SB-2
Filed June 22 and 27, 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 Mr. Li:
We reviewed the filings and have the comments below.
SB-2/A 1 and 2
1. If applicable, comments on the SB-2/A1 and 2 are comments on
the
10-KSB and subsequent Exchange Act reports and vice versa.
Risk Factors, page 4
2. Refer to prior comment 6. As requested previously, revise the
ninth factor.
3. We assume that inclusion of the words "could be" in the thirty-
first risk factor`s heading are inadvertent. Please delete.
Suppliers, page 29
4. Expand your disclosure to discuss any material contracts that
you
have entered into with your suppliers relating to energy and
materials used in the production of your products.
Description of Our Capital Stock, page 37
5. Remove from this section`s first paragraph the statement that
the
description of China BAK Battery`s capital stock is "qualified in
its
entirety" by information outside the prospectus. This section
should
include all of the disclosure required by Item 202 of Regulation
S-B.
Selling Stockholders, page 38
6. Refer to (28) after the names of Robert G. and Judith T. Rader
in
the table. We are unable to locate the related footnote
disclosure.
Please revise.
Report of Independent Registered Public Accounting Firm, page F-1
7. 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.
Financial Statements
8. Update your disclosures here and elsewhere in the filing to
include financial information through June 30, 2005.
9. As requested previously, provide us the summarized balance
sheet
of Medina Coffee, the shell company immediately before the
transaction with BAK International, the operating company. Also
provide us the summarized balance sheet of BAK International
immediately before the transaction with Medina Coffee.
Statements of Changes in Stockholders` Equity, page F-4
10. Confirm to us that BAK Battery did not issue or retire any
shares
of its common stock during the period from September 30, 2002
through
September 30, 2004.
11. We read your July 21, 2005 correspondence and your response to
prior comment 35. Based on your response, it appears that five
shareholders, representing 1.85% of the shares of BAK Battery
immediately before the transaction with BAK International, did not
receive shares of BAK International upon the consummation of the
transaction. Expand your disclosure to include in a footnote the
effect that the transaction had on these shareholders and the
accounting treatment used to eliminate these shares, including the
line items impacted and their related amounts.
12. We read your July 21, 2005 correspondence and your response to
prior comment 35. Based on section III of your correspondence, it
appears that 1,013,554 shares of common stock were issued to
shareholders that were not initially shareholders of BAK Battery
or
BAK International. These shareholders are numbered 12-18 in the
table in section III of your correspondence. Disclose in a
footnote
how and when you reflected or intend to reflect the issuance of
these
shares. Also disclose the value that these shares were or will be
issued at in your statement of stockholders` equity, including the
line items impacted and their related amounts. Also disclose the
accounting treatment used to record the transaction in accordance
with U.S. GAAP.
13. You state on page F-8 that BAK International acquired 100% of
the
outstanding shares of BAK Battery for a total consideration of
$11.5
million on November 6, 2004. However, you disclosed in note 14 to
the financial statements that during the year ended September 30,
2004 the existing stockholders contributed cash in the amount of
$10,875,918 that was recorded as an increase to additional paid-in
capital in your financial statements. You stated in your response
to
prior comment 35 that the $11.5 million was recorded as if it had
occurred during the year ended September 30, 2004. Tell us the
accounting guidance that you used in determining that this should
be
recorded in the year ended September 20, 2004 rather than during
the
year ended September 30, 2005. Also tell us how this was
reflected
in your statements of cash flows.
14. You stated in your response to prior comment 35 that you
received
$11.5 million from the BAK International shareholders. Based on
your
current disclosure, it appears that you have only recorded
approximately $10.9 million as contribution of cash by
stockholders.
Expand your disclosure to include an explanation for the apparent
$0.6 million difference.
15. Provide us a shareholder list for BAK International
immediately
before the transaction with Medina Coffee. Include in your
response
the names of the shareholders and the corresponding number of
shares
held by each shareholder.
16. Based on the information that you provided in your July 21,
2005
correspondence, it appears that the information in exhibit B
includes
transactional information that relates to the private placement
discussed on page F-23 of your Form SB-2/A. If these shares in
the
private placement were not issuances of BAK International as we
assume and included in the list requested above for the
shareholder
list of BAK International immediately before the transaction with
Medina Coffee, tell us which entity issued these shares. Also
tell
us what accounting consideration you gave to these issuances in
recording the transaction between BAK International and Medina
Coffee.
17. Your response to prior comment 36 states that you have
40,978,533
total outstanding shares of common stock. However, your
statements
of changes in stockholders` equity indicate your total outstanding
shares of common stock to be 39,826,075. The 1,152,458 share
discrepancy appears to be the post-transaction shares effectively
issued to the former shareholders of Medina Coffee. Disclose the
date of the effective issuance of these shares, the number of
shares
effectively issued, the value that they were or will be reflected
at
in your statement of shareholders` equity, and the line items
impacted, including the related amounts.
Notes to Financial Statements, page F-7
18. Expand your disclosures to include also notes to the financial
statements for the period ended March 31, 2005.
Note 4. Summary of Principal Accounting Policies
N. Revenue Recognition, Returns and Warranties, page F-13
19. We read your response to prior comment 50 and your revised
disclosure. Your response does not address how you determined
that
it was appropriate to record the amount relating to the warranty
reserve at the end of the year rather than when the sales occur.
Please advise.
Note 7. Long-Term Assets, page F-19
20. Expand your disclosure to discuss the types of indirect costs
that you capitalize.
Information not Required in the Prospectus, page II-1
21. Refer to prior comment 57. As requested previously, disclose
that China BAK Battery does not maintain the insurance.
Recent Sales of Unregistered Securities, page II-1
22. Refer to prior comment 58. As requested previously, state the
value of the 39,826,075 shares of common stock issued in the stock
exchange transaction on January 20, 2005.
Exhibits 10.3 and 10.4
23. Refer to prior comment 60. As noted previously, absent an
order
granting confidential treatment, Item 601(b)(10) of Regulation S-B
requires the filing of material contracts, including attachments,
in
their entirety. Attachments include, for example, annexes,
appendices, exhibits, and schedules. Refer to section 1 of
exhibit
10.3 and sections 1.3 and 2(a) of exhibit 10.4, and revise or
advise.
Exhibits 10.5, 10.6, 10.7, 10.8, 10.9, 10.10, 10.11, 10.12, 10.13,
10.14, 10.15, 10.16, 10.17, 10.18, 10.19, 10.21, 10.22, 10.23,
10.24,
10.25, 10.26, 10.27, 10.28, 10.29, 10.30, 10.31, 10.32, 10.33,
10.34,
10.35, 10.36, 10.37, 10.38, 10.39, 10.40, 10.42, 10.42, 10.43,
10.44,
10.45, and 10.46
24. Refer to prior comment 61. For each exhibit specified above,
tell us why China BAK Battery is not required under paragraph
(c)(2)(iv) or paragraph (c)(2)(v) of Rule 403 of Regulation C
under
the Securities Act to submit a fair and accurate English
translation
of the entire foreign language document. For example, it appears
that Mr. Xiangqian Li, a director and officer of China BAK
Battery,
is a party to the agreements filed as exhibits 10.11, 10.13,
10.15,
10.23, 10.30, 10.33, and 10.44 and that Jilin Province Huaruan
Technology Company, Ltd., a corporation owned by Mr. Li, is a
party
to the agreements filed as exhibits 10.9, 10.11, 10.13, 10.15,
10.18,
and 10.41. Note that paragraph c(3)(ii) of Rule 403 is applicable
only if China BAK Battery is able to satisfy paragraph c(3)(i)(A)
of
Rule 403 or paragraph c(3)(i)(B) of Rule 403.
25. Refer to prior comment 62. As noted previously, if a English
summary of a foreign language document is submitted under Rule
403(c)(3) of Regulation C under the Securities Act, the English
summary must fairly and accurately:
* Summarize the terms of each material provision of the foreign
language document.
* Describe the terms that have been omitted or abridged.
It does not appear that you have described the terms that have
been
omitted or abridged in the exhibits specified above as required by
paragraph c(3)(ii)(B) of Rule 403. Please revise.
10-KSB
Item 5. Market for Common Equity, Related Stockholder Matters and
Small Business Issuer Purchases of Equity Securities
26. Refer to prior comment 10. The range of closing high and low
bid
prices of China BAK Battery`s common stock for the third and
fourth
quarters 2004 appear to have been inverted in the table so that
the
high bid prices appear in the column for the low bid prices and
vice
versa. Please revise.
Item 8A. Controls and Procedures
27. Disclosure controls and procedures are now defined in Exchange
Act Rules 13a-15(e) and 15d-15(e) rather than Rule 13a-14(c).
Your
disclosure controls and procedures should have been evaluated as
of
the end of the period as opposed to within 90 days of the filing
being made. Also, you should disclose whether there were any
changes
in your internal controls during the quarter. See Item 307 of
Regulation S-B, and revise your disclosure.
Signatures
28. China BAK Battery`s controller or principal accounting officer
also must sign the 10-KSB. Further, any person who occupies more
than one of the specified positions, for example, principal
financial
officer and controller or principal accounting officer, must
indicate
each capacity in which he signs the 10-KSB. See General
Instruction
C.2. of Form 10-KSB, and revise in future filings.
Closing
File amendments to the SB-2, the December 31, 2004 10-KSB,
and
the March 31, 2005 10-QSB in response to the comments. To
expedite
our review, China BAK Battery may wish to provide us three marked
courtesy copies of the amendments. Include with the filings any
supplemental information requested and a cover letter tagged as
correspondence that keys the responses to the comments. If China
BAK
Battery thinks that compliance with any of the comments is
inappropriate, provide the basis in the letter. We may have
additional comments after review of the amendments, the responses
to
the comments, and any supplemental information.
We urge all persons responsible for the accuracy and adequacy
of
the disclosure in the registration statement reviewed by us to
ensure
that they have provided all information investors require for an
informed decision. Since China BAK Battery and its management are
in
possession of all facts relating to the disclosure in the
registration statement, they are responsible for the adequacy and
accuracy of the disclosures that they have made.
If China BAK Battery requests acceleration of the
registration
statement`s effectiveness, China BAK Battery should furnish a
letter
at the time of the request, acknowledging that:
* Should the Commission or the staff acting by delegated authority
declare the registration statement effective, it does not
foreclose
the Commission from taking any action on the filing.
* The action of the Commission or the staff acting by delegated
authority in declaring the registration statement effective does
not
relieve China BAK Battery from its full responsibility for the
adequacy and accuracy of the registration statement`s disclosures.
* China BAK Battery may not assert our comments or the declaration
of
the registration statement`s effectiveness as a defense in any
proceedings initiated by the Commission or any person under the
United States` federal securities laws.
The Commission`s Division of Enforcement has access to all
information that China BAK Battery provides us in our review of
the
registration statement or in response to our comments on the
registration statement.
We will consider a written request for acceleration of the
registration statement`s effectiveness under Rule 461 of
Regulation C
under the Securities Act as confirmation that those requesting
acceleration are aware of their responsibilities under the
Securities
Act and the Exchange Act as they relate to the proposed public
offering of the securities specified in the registration
statement.
We will act on the request and by delegated authority grant
acceleration of the registration statement`s effectiveness.
You may direct questions on accounting comments to Meagan
Caldwell, Staff Accountant, at (202)551-3754 or Rufus G. Decker
III,
Accounting Branch Chief, at (202) 551-
3769. You may direct questions on other comments and disclosure
issues to Edward M. Kelly, Senior Counsel, at (202) 551-3728 or me
at
(202) 551-3767.
Very truly yours,
Jennifer R. Hardy
Legal
Branch Chief
cc: Nevada Agency and Trust Company
Agent for Service, China BAK Battery, Inc., f/k/a Medina
Coffee,
Inc.
50 West Liberty Street, Suite 880
Reno, NV 89501
George L. Diamond, Esq.
Jackson Walker L.L.P.
901 Main Street, Suite 6000
Dallas, TX 75202
Mr. Xiangqian Li
August 2, 2005
Page 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
DIVISION OF
CORPORATION FINANCE