Mail Stop 3561
September 22, 2005
Donald C. Harms, Esq.
McKenzie Bay International, Ltd.
37899 Twelve Mile Road
Suite 300
Farmington Hills, MI 48331
Re: McKenzie Bay International, Ltd.
Post-Effective Amendment No. 3 to Registration Statement on Form
SB-2
Filed September 6, 2005
File No. 333-119493
Dear Mr. Harms:
We have limited our review of your filing to the issues
addressed in our comments. Where indicated, we think you should
revise your document in response to these comments. 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 information so we may better understand
your
disclosure. After reviewing this information, we may 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.
1. We note your response to comment 1 of our letter dated August
25,
2005 that the warrants to be issued to Spencer Clarke will have
fixed
exercise prices. It seems that the exercise price of the warrants
to
be issued to Spencer Clarke will be the price that Cornell Capital
pays to McKenzie Bay for each respective purchase under the
standby
equity distribution agreement. Since the price that Cornell
Capital
pays to McKenzie Bay is tied to the market price of the underlying
common shares, it appears inappropriate to register common shares
underlying the warrants.
2. We note your response to comment 2 of our comment letter dated
August 25, 2005. The common shares underlying the equity line are
tied to the market price. As a result, the number of common
shares
to be issued may depend on the price of the common stock.
Accordingly, please confirm to us as follows:
* the shares of common stock you have registered is a good faith
estimate of the maximum number of shares you may issue;
* you will not rely on Rule 416 if a decrease in the price of the
common stock results in you having insufficient shares; and
* you will file a new registration statement to cover the resale
of
any additional shares in the event that the number of shares
actually
issued exceeds the number of shares that you have included in the
registration fee table.
3. Please refer to comment 6 in our letter dated August 25, 2005.
The revised disclosure provided under the section entitled "Loans
from Cornell Capital Partners" remains confusing as to the
relationship between the 12% promissory notes and the standby
equity
distribution agreement, each of which you entered into with
Cornell
Capital Partners. In particular, the purpose for issuing the
promissory notes given the existing standby equity distribution
agreement remains unclear. Please revise accordingly. In
addition,
please be aware that if the promissory notes enabled you to
receive
proceeds from Cornell Capital that you otherwise were unable to
receive under the terms of the standby equity distribution
agreement,
then issuing the promissory notes may have amounted to a
renegotiation of the standby equity distribution agreement.
4. Also, although the prospectus` revised disclosure does not
convey
this information, it appears from the relevant exhibits that David
Gonzalez, Esq. acts as escrow agent in connection with the standby
equity distribution agreement as well as the promissory notes.
Specifically, the escrow agreement sets forth that Mr. Gonzalez
was
outside counsel to Cornell Capital. Currently, however, we note
that
Mr. Gonzales is a managing partner of Cornell Capital. We further
note that the escrow agreement empowers Mr. Gonzalez with various
responsibilities, such as the ability in Section 7 to - in his
sole
discretion - resolve disputes, suspend performance, or seek
judicial
guidance. In view of the affiliate relationship between Cornell
Capital as investor and Mr. Gonzalez as escrow agent, it appears
that
Cornell Capital is exercising actual or potential discretion as to
whether it will perform its obligation under the standby equity
distribution agreement. Please provide us with your analysis as
to
whether this affiliate relationship is inconsistent with our
position
regarding equity lines of credit set forth in the March 31, 2001
Quarterly Update to our Current Issues and Rulemaking Projects
Outline.
5. Further, we note that the terms of the escrow agreement provide
that you and Cornell Capital must submit joint written directions
to
the escrow agent prior to disbursement of funds or common stock
under
the standby equity line agreement. It appears that the joint
written
directions provision empower Cornell Capital with actual or
potential
discretion as whether it will perform its obligation under the
standby equity distribution agreement. Please provide us with
your
analysis as to whether the joint written directions provisions are
inconsistent with our position regarding equity lines of credit
set
forth in the March 31, 2001 Quarterly Update to our Current Issues
and Rulemaking Projects Outline.
6. We note your response to comments 5-7 in our comment letter
dated
August 25, 2005. Please note that you should clarify the
description
and material terms relating to the standby equity line agreement
and
notes in the appropriate sections in future periodic reports.
* * * * *
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
letter with your amendment that keys your responses to our
comments
and provides any requested information. Detailed letters greatly
facilitate our review. Please understand that we may have
additional
comments after reviewing your amendment and responses to our
comments.
You may contact Michael Moran, Accounting Branch Chief, at
(202) 551-3841 if you have questions regarding
comments on the financial statements and related matters. Please
contact Howard Baik, Attorney-Advisor, at (202) 551-3317, David
Mittelman, Legal Branch Chief, at (202) 551-3214, or me at (202)
551-
3720 with any other questions.
Sincerely,
H. Christopher Owings
Assistant Director
cc: Jonathan B. Reisman, Esq.
Reisman & Associates, P.A.
Fax: (928) 569-8195
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Donald C. Harms, Esq.
McKenzie Bay International, Ltd.
September 22, 2005
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