Mail Stop 6010 December 22, 2005
Mr. Jing Jing Long
President
Tank Sports, Inc.
10925 Schmidt Road
El Monte, California 91733
Re: Tank Sports, Inc
File No. 333-129910
Filed November 23, 2005
Dear Mr. Long:
We have reviewed your filing 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 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.
General
1. Please note that where we provide examples to illustrate what
we
mean by our comments, they are examples and not exhaustive lists.
If
our comments are applicable to portions of the filing that we have
not cited as examples, make the appropriate changes in accordance
with our comments.
2. In your response letter, please state our comment and then
explain
each change that has been made in response to a comment. In
addition, you should also reference each page number in which
disclosure has been revised in response to a comment so that we
can
easily place your revised disclosure in its proper context.
3. Please provide the independent accountants` report by Kabani &
Company on your financial statements as of February 28, 2005 and
for
each of the years in the two-year period ended February 28, 2005.
4. Please provide information required by Item 304 of Regulation
S-B.
Prospectus Summary
Our Business, page 6
5. In the summary you state that you market, sell and distribute
recreational and transportation motorcycles, all-terrain vehicles,
dirt bikes, scooters and Go carts. However, in your risk factor
section on page 11 you state that your sales consisted solely of
cruiser motorcycles in the year ended February 28, 2005. Please
revise the disclosure in the summary and elsewhere in the
prospectus
as may be appropriate to reconcile these contradictory statements.
You should also expand the risk factor on page 11 by providing the
distribution of sales by product classes in the 6 month interim
period ended on August 31, 2005.
6. In the summary you state that you also sell your products
internationally in Mexico, Jamaica, Ecuador and Finland. However,
in
the risk factor on page 13 you indicate that you intend to engage
in
international sales in the future. Please reconcile these
contradictory statements and revise wherever appropriate
throughout
the prospectus.
The Offering, page 6
7. Please remove this section from the prospectus as you have
already
provided the same information on the cover page of the prospectus.
You should avoid repetitive disclosures in the prospectus. Please
refer to Rule 421 of Regulation C.
Risk Factors
Sales of A Substantial Number of Shares...., page 8
8. This risk factor is written as if a market for your shares
currently exists. Please qualify your statements as to the
possible
effect of sales of shares on the market price by prefacing it with
language that indicates that these effects could occur only if and
when a market for your common stock is established.
Additional issuances..., p. 8
9. Disclose whether the company has any plans to issue additional
securities. Include the number of shares of common stock you
might
be obligated to issue pursuant to all outstanding options,
warrants,
convertible securities and contractual obligations.
Our Auditors Have Issued a "Going-Concern" Qualification...., page
9
10. In the last sentence of this risk factor you refer to the
shareholders being "materially and adversely affected". Please
revise
the last sentence to disclose the specific and likely effect of
failure to obtain alternative sources of cash and generate
positive
cash flow. Throughout the risk factors section, in both the risk
factor captions and in the text of the risk factors, you refer to
the
company, its business or its shareholders being harmed or
shareholders and/or the company being adversely affected. Please
replace all these references with disclosure explaining the
immediate, actual or specific effect on the company and/or its
shareholders.
Failure to retain our existing management team..., p. 9
11. If any of your key employees has plans to leave the company in
the near future, you should disclose this fact in this section.
We are also dependent for our success on our ability to attract
and
retain..., page 9
12. To the extent that you have experienced problems attracting
and
retaining key personnel in the recent past, please revise to
describe
these problems.
Our business may be negatively impacted..., p. 10
13. Please disclose any history of problems that you have faced of
the type described by this risk factor.
Economic, political, military or other events..., p. 10
14. Please consider whether this risk factor is appropriate for
the
company. Did the September 11 attacks materially alter sales or
any
other aspect of the company`s operations? Has political or
military
instability created problems for the company in the past? Are the
risks posed to the company from international operations already
captured in "Our international manufacturing operations..." on
page
11?
Our operating results could be negatively impacted..., p.l1
15. You have introduced this risk factor by indicating that "if"
your
sales are concentrated. Given that 100% of sales are coming from
one
sales category, you should refer to the concentration of sales as
a
fact rather than a possibility.
Our business could be harmed if our contract manufacturers..., p.
12
16. We note that your header refers to violation of labor laws.
However, the body of the risk factor appears to describe the posed
risks as being related to your reputation. Isn`t it possible that
your contract manufacturers will comply fully with the labor laws
of
their country but still engage in conduct that affects your
reputation?
If applicable, please consider dividing this risk into 2 separate
risk factors. The first risk factor would relate to your
inability
to control your contract manufacturers. This risk factor might
disclose a number of different potential problems associated with
this lack of control, including some that are not currently
disclosed, such as product quality, product liability, timeliness
of
shipments, and other potential hazards.
The second risk factor should describe any risks to your
reputation
or other potential problems associated with labor laws, including
the
legal consequences if your contract manufacturers fail to comply
with
labor laws.
17. If your agreements with your contract manufacturers are
material
to the business, please file them as exhibits to the registration
statement. In addition, you should describe all material terms of
those agreements in the Business section.
Our business is subject to seasonality..., p. 13
18. Please disclose any problems you have faced in the past as a
result of the risks posed in this risk factor.
Management`s Discussion and Analysis or Plan of Operation, page 15
19. An objective of MD&A is to provide information about the
quality
and potential variability of earnings and cash flow and the impact
of
known trends, demands, commitments and uncertainties to facilitate
investors` determination of the likelihood that past performance
is
indicative of future performance. We note that your MD&A does not
explain the factors that determine your operating results,
particularly the significant growth in revenue and operating
profit
for the six month period ended August 31, 2005. Also, while you
refer
to your working capital deficit and cash and cash equivalent
balances
at August 31, 2005, you do not discuss the impact of your recent
revenue growth on liquidity and capital resources. Please expand
your
MD&A discussion so that investors can understand the key variable
and
other qualitative and quantitative factors that determine your
results of operations and cash flows.
20. Please discuss off balance sheet arrangements as required by
Item
303 (c) of Regulation S-B.
21. Disclosure of critical accounting estimates should provide
investors with a fuller understanding of the uncertainties in
applying critical accounting policies and the likelihood that
materially different amounts would be reported under different
conditions or using different assumptions. It should include
quantification of the related variability in operating results
that
you expect to be reasonably likely to occur. Please provide us
information about the uncertainties in applying your critical
accounting policies, the historical accuracy of these critical
accounting estimates, a quantification of their sensitivity to
changes in key assumptions and the expected likelihood of material
changes in the future.
22. Please expand your critical accounting policy for revenue
recognition as follows:
* Describe your contractual arrangements with
dealers/distributors.
* Explain your product return policy and how you estimate product
returns for new products.
* For all years presented, disclose the nature and amounts of all
significant adjustments to revenue (e.g., product returns,
chargebacks, incentives, fees, rebates, etc.), particularly for
significant recent product launches, in your comparisons of
results
from operations. In your analysis, please consider
*
the Commissions Interpretative MD&A Guidance (Release No. 33-8350
dated December 19, 2003).
* If applicable, please disclose and discuss any shipments made to
dealers/distributors wherein such shipments are as a result of
incentives and/or in excess of the dealer/distributor`s ordinary
course of business inventory level. Discuss your revenue
recognition
policy for such shipments.
* Quantify the amount of changes in estimates in estimated
returns,
chargebacks, rebates and other significant reserves in subsequent
periods or explicitly state that no material revisions were
recognized, if true.
Business, p. 19
Industry background
Motorcycles
23. Please explain who MIC is the first time you reference them.
24. You have included data that suggest international demand for
motorcycles will increase. However, we note that the company does
not sell its products in the nations that appear to be driving the
increased demand. To avoid confusion for investors, you should
either delete this data or explain its relevance to investors.
Description of property, p.24
25. Disclose the name of your landlord and explain its affiliation
to
the company.
Executive Compensation, page 26
26. Please advise us as to whether the registrant has any
compensation or employment agreements with any of the three
individuals included in the table. If so, describe the material
terms
and file the agreements as exhibits to the registration statement.
Certain relationships and related transactions, p. 26
27. For each transaction or agreement disclosed, please file your
agreements as exhibits to the registration statement.
28. For each transaction or agreement, disclose all material terms
or
provisions or other relevant information. For example, you
reference
a $90,000 loan but you provide no information regarding the
interest
rate or maturity or what the company did with the proceeds of the
loan. You provide information regarding two leases but you do not
provide any information about the location, size or nature of the
facilities or the uses and adequacy of the facility for the
company.
We also note that the second of the two leases was for
substantially
higher monthly payments. Please clarify if both leases pertain to
the
same property or facility and explain why the substantial increase
in
lease payments occurred after the company entered into the second
lease agreement.
Security ownership of certain beneficial owners, p. 27
29. The beneficial ownership table should include shares that
could
be obtained by individuals within the next 60 days. See Rule 13d-
3.
If this is true for the ownership you have currently listed, you
should represent that such shares are included in the table. If
the
table does not reflect shares that could be obtained within 60
days,
you should revise the table to include this information and then
provide the representation.
Plan of distribution, p. 28
30. Please explain how the $1.00 per share price was determined to
be
the fixed price for the shares.
Selling Shareholders, p. 30
31. Please explain how the selling shareholders originally
obtained
their shares.
Financial Statements
Notes to Financial Statements
Note 2. Summary of Significant Accounting Policies, page 40
32. We note an apparent contradiction in your revenue recognition
accounting policy. You state sales revenue is recognized at the
date
of shipment to customers and when delivery is completed. Please
clarify this accounting policy disclosure.
33. We note that you account for inventory at the lower of cost or
market. A departure from the cost basis for inventory pricing is
required if the utility of the goods is impaired by damage,
deterioration, obsolescence, changes in price levels or other
causes.
Please describe the nature of such inventory impairments and
quantify
related adjustments for each period presented, including write
downs
relating to damage, obsolescence and returned products. Tell us
the
basis for your determination of market value and the location of
your
inventory at August 31, 2005.
34. You state that all motorcycle and ATV products are
manufactured
under contracts with firms located in China and Mexico. Please
describe the key terms of your contractual arrangements with these
manufacturers, including purchase commitments, pricing, product
warranties, product returns and contingent obligations. In
addition,
please clarify how you determine title transfer and revenue
recognition for products shipped directly from these contract
manufacturers to your distributors/customers. Tell us how you
account
for product returns made by your distributors/customers and
warranty
claims made to these contract manufacturers.
35. We note that you have not provided a liability or disclosure
related to product warranties. Please tell us the terms of your
product warranties to distributors/customers, costs incurred in
connection with these obligations for each period presented and
why
you have not recorded a liability for these obligations.
36. We note that you provide no disclosure of threatened
litigation
or historical claims and assessments. Please describe the terms of
your product liability insurance program, quantify related costs
incurred for each period presented and tell us the basis for your
decision to exclude disclosure described in SFAS 5.
Signature Page
37. Your signature page must include the signature of your Chief
Accounting Officer and your Chief Financial Officer.
As appropriate, please amend your filing 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 as 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.
You may contact Frank Wyman at (202) 551-3660 or Kevin
Woody,
at (202) 551-3629 if you have questions regarding comments on the
financial statements and related matters. Please contact Zafar
Hasan
at (202) 551-3653 or me at (202) 551-3715 with any other
questions.
Sincerely,
Jeffrey Riedler
Assistant Director
cc: William O`Neal
The O`Neal Law Firm
17100 East Shea Boulevard
Suite 400-D
Fountain Hills, Arizona 85268
F: 480-816-9241
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Mr. Jing Jing Long
Tank Sports, Inc.
December 22, 2005
Page 1