Via Facsimile and U.S. Mail
Mail Stop 6010
December 12, 2005
Mr. Weidong Yin
President, Chief Executive Officer and Director
Sinovac Biotech Ltd.
39 Shangdi Xi Road
Haidian District
Beijing, P.R.C. 100085
Re: Sinovac Biotech Ltd.
Form 20-F/A for Fiscal Year Ended December 31, 2004
Filed November 29, 2005
File No. 1-32371
Dear Mr. Yin:
We have reviewed the above amendment and your November 21,
2005
response letter to our October 12, 2005 comment letter and have
the
following 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 ask you to provide us
with
more information so we may better understand your disclosure.
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 20-F Amendment No. 3 for the year ended December 31, 2004
Item 3: Key Information, page 2
A. Selected Financial Information, page 2
1. Please clearly label the fiscal years, which have been
restated.
Also, we note that Sinovac China was incorporated on April 28,
2001.
Please provide selected financial data for the fiscal year ended
December 31, 2001 or disclose, and explain to us, why information
for
this fiscal year has been omitted. Please refer to Item 3A to
Form
20-F and the related Instructions to Item 3A.
Item 5: Operating and Financial Review Prospects, page 32
A: The Company, page 32
2. Your disclosure states that the Company has restated its
financial
statements for the year ended December 31, 2004. Please expand
your
disclosures to clarify that the financial statements for the three
years ended December 31, 2004 have been restated.
Item 15: Controls and Procedures, page 66
3. We note the restatement of your financial statements as
indicated
in Note 2 on page 80. Please revise your controls and procedures
disclosure to specifically address the impact of these
restatements
on your evaluation of your disclosure controls and procedures. If
true, please specifically indicate why you believe your disclosure
controls and procedures are still effective in light of your
restatements. In addition, please file currently dated management
certifications with your amendment.
Item 17: Financial Statements, page 71
Report of Independent Registered Public Accounting Firm, page 72
4. It appears Ernst & Young LLP is relying on Interpretation 15 to
AU
508 in issuing an audit report solely on the audit work they
performed on the adjustments to restate the 2004, 2003 and 2002
financial statements originally reported on by Moore Stephens
Ellis
Foster Ltd. It is unclear why this literature is applicable in
this
situation. In this regard, we note that footnote 2 to
Interpretation
15 to AU 508 states that "a firm is considered to have ceased
operations when it no longer issues audit opinions either in its
own
name or in the name of a successor firm." Please tell us the
following:
a. Whether the legal entity of Moore Stephens Ellis Foster Ltd.
still
exists, even if just in the form of a shell company. If so,
please
tell us whether the legal entity still has liability insurance.
b. It appears that Moore Stephens Ellis Foster Ltd. has reissued
its
audit report for inclusion in the 20-F/A since this report is not
labeled as a "copy." If so, please tell us why Moore Stephens
Ellis
Foster Ltd. could not perform the required restatement
adjustments.
c. Tell us whether Ernst & Young LLP plans to assume
responsibility
for any of the audit reports previously issued by Moore Stephens
Ellis Foster Ltd.
d. Assuming Interpretation 15 to AU 508 is the applicable
literature,
please tell us how Ernst & Young LLP thought it was appropriate to
issue an audit report on just the restatement adjustments applied
to
each of the past three years of the financial statements, without
auditing the current period financial statements. In this regard,
we
note that paragraph 75 to AU 9508 states clearly that if the prior
period financial statements have been restated, and the successor
auditor is requested to report on those financial statements
without
also reporting on the current-period financial statements, the
successor auditor would need to re-audit the prior-period
financial
statements in order to report on them.
e. Finally, paragraph 70 of AU 9508 states that in some instances,
a
re-audit of the financial statements is required, as opposed to
just
having the successor auditor audit the restatement adjustments
(assuming Interpretation 15 to AU 508 is the applicable
literature).
AU 9508 further states that "a re-audit ordinarily is necessary"
when
the restatement relates to the correction of an error. Tell us
how
Ernst & Young LLP considered this literature in deciding to only
audit the required restatement adjustments related to the
correction
of an error.
5. Please have Ernst & Young LLP remove the reference to the
Securities and Exchange Commission in their report.
Consolidated Statements of Operations, page 77
6. Please revise your presentation of government research grants
to
either net the amounts against your research and development
expenses
as you previously classified them or include them as a separate
line
item in revenues. If you chose the latter presentation, please
revise your presentation in Item 3 and revise your results of
operations discussion in Item 5 to clearly identify and analyze
gross
profit from your product sales separately from government research
grant revenue.
Note 2: Restatements, page 80
7. Please expand your disclosure to discuss the revision of share
information in your statements of stockholder`s equity and in your
earnings per share computations resulting from the retroactive
restatement of equivalent shares received in the reverse
acquisition
transaction.
As appropriate, please amend your Form 20-F for the year
ended
December 31, 2004 and respond to these comments within 10 business
days or tell us when you will respond. 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 information. Detailed
cover letters greatly facilitate our review. Please file the
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.
If you have any questions, please contact Mark Brunhofer,
Staff
Accountant, at (202) 551-3638 or Donald Abbott, Senior Staff
Accountant, at (202) 551-3608. In this regard, do not hesitate to
contact me, at (202) 551-3679.
Sincerely,
Jim B. Rosenberg
Senior Assistant Chief Accountant
cc via facsimile only: Mr. Michael T. Shannon, Esq.
Devlin & Jensen
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Mr. Weidong Yin
Sinovac Biotech Ltd.
December 12, 2005
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