January 10, 2007
By facsimile to (515) 323-8509 and U.S. Mail
Mr. Brian D. Kletscher
Chairman and President
Highwater Ethanol, LLC
205 South Main Street, P.O. Box 96
Lamberton, MN 56152
Re: Highwater Ethanol, LLC
Pre-effective Amendment 1 to Registration Statement on Form
SB-2
Filed December 22, 2006
File No. 333-137482
Dear Mr. Kletscher:
We reviewed the filing and have the comments below.
Table of Contents, page 3
1. Refer to prior comment 4. As noted previously, the table of
contents must show the page number of the prospectus` various
sections or subsections. Please revise to show the page numbers.
Subscription Procedures, pages 6 and 70
2. We note your response to prior comment 1 that all promissory
notes
will be due within 20 days of the date of written notice from you.
It remains unclear, however, exactly when your investors will be
required to pay the promissory notes since you plan to deliver the
notices requiring payment "anytime after [you] receive
subscriptions
for the minimum amount of the offering." Please revise to provide
more certainty.
3. In the summary of subscription procedures on page 6, please
clarify that subscribers are required to sign the promissory notes
only until you have received the minimum aggregate offering amount
of
$45 million and that those subscribers` full payment of the
promissory notes in cash is due within 20 days of receipt of
written
notice from you. We note the disclosure on page 71 that if
subscribers purchase units after you have received subscriptions
for
the aggregate minimum offering amount of $45 million, those
subscribers will be required to pay the full purchase price
immediately upon subscriptions.
4. Please tell us where you revised the registration statement in
response to prior comment 2.
5. Please elaborate on the terms of the promissory note, including
events of default, the recourse nature of the note, and the
security
interest that investors grant to secure payment of the note.
Since
you will not accept subscriptions if there is an outstanding
balance
on the note, please explain how you can take a security interest
in
the purchaser`s units.
Escrow Procedures, page 6
6. Please reconcile disclosure here that a condition to funds
being
released from escrow is that cash proceeds from unit sales must
equal
or exceed $5 million with disclosure on page 71 that this amount
must
equal or exceed $45 million. We assume that you do not intend to
release funds from escrow until the notes associated with the
minimum
offering amount have been paid so that a minimum of $45 million,
reflecting both the initial deposit and the proceeds of the notes,
is
in escrow. Please clarify if this is the case. We note the
disclosure on page 71 that the escrow agent must receive cash
payments equal to the 90% balance of the aggregate minimum
offering
price no later than one year after the registration statement`s
effective date before releasing funds from escrow.
Site Acquisition and Development, page 31
7. Disclosure indicates that two of the options to purchase land
were
to terminate on December 31, 2006. As appropriate, revise to
reflect
the options` current status.
Federal Income Tax Consequences of Owning Our Units, page 79
8. Refer to prior comment 25 and the fourth paragraph of exhibit
8.1.
As requested previously, revise the third paragraph`s first
sentence
to indicate that the tax opinion also constitutes the tax opinion
of
Brown, Winick, Graves, Gross, Baskerville & Schoenebaum, P.L.C. on
the taxation of investors on their allocable share of Highwater
Ethanol`s income, gains, losses and deductions recognized by
Highwater Ethanol without regard to cash distributions.
9. Refer to prior comment 25. As requested previously, revise the
fourth paragraph`s first and third sentences to indicate that the
discussion here constitutes the tax opinion. It is unacceptable
to
include language such as "the statements and legal conclusions
contained in this section...are accurate in all material respects"
and "this section represents an expression of our tax counsel`s
professional judgment" when the discussion in the prospectus is
counsel`s opinion.
10. Refer to prior comment 26. As requested previously, delete
the
word "general" in the fourth paragraph`s third sentence.
Exhibit Index
11. For exhibits filed previously, indicate by footnote or
otherwise
that the exhibits have been filed previously. We note that
exhibits
3.1, 3.2, 4.1, 10.1, 10.2, 10.3, 10.4, 10.6, and 23.2 were filed
in
the initial registration statement.
Exhibits
12. We note the responses to prior comments 31 and 32. Allow us
sufficient time to review the exhibits before requesting
acceleration
of the registration statement`s effectiveness.
Exhibit 5.1
13. Refer to prior comment 33. We note the statement "Our
opinions
are based on the facts and the above documents as they exist on
the
date of this letter." Please delete. Alternatively, you must
file a
new opinion immediately before the registration statement`s
effectiveness because the opinion must speak as of that time.
14. Refer to prior comment 35. As noted previously, counsel must
consent also to being named under "Legal Matters" in the
registration
statement. Please revise.
Exhibit 10.9
15. Refer to prior comments 18 and 38. Section 18 of exhibit 10.9
states that this agreement, including the proposal and any
attachments, constitutes the entire agreement. File the proposal
and
any attachments as an exhibit to exhibit 10.9.
Other
16. It appears that not all changed materials in the amendment
have
been marked as required by Rule 310 of Regulation S-T. For
example,
refer to "Subscription Procedures" and Escrow Procedures" under
"The
Offering" in the prospectus` summary section. Please comply with
the
rule`s requirements in future filings.
Closing
File an amendment to the registration statement in response
to
the comments. To expedite our review, Highwater Ethanol may wish
to
provide us three marked courtesy copies of the amendment. Include
with the filing any supplemental information requested and a cover
letter tagged as correspondence that keys the responses to the
comments. If Highwater Ethanol 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 amendment, 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 Highwater Ethanol 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 Highwater Ethanol requests acceleration of the
registration
statement`s effectiveness, Highwater Ethanol 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 Highwater Ethanol from its full responsibility for the
adequacy and accuracy of the registration statement`s disclosures.
* Highwater Ethanol 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 Highwater Ethanol 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 comments and disclosure issues to
Edward M. Kelly, Senior Counsel, at (202) 551- 3728 or me at (202)
551-3760.
Very truly yours,
Pamela A. Long
Assistant Director
cc: Harold N. Schneebeck, Esq.
Judd W. Vande Voort, Esq.
Brown, Winick, Graves, Gross, Baskerville & Schoenebaum,
P.L.C.
666 Grand Avenue, Suite 2000
Des Moines, IA 50309-2510
Mr. Brian D. Kletscher
January 10, 2007
Page 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-7010
DIVISION OF
CORPORATION FINANCE