March 14, 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 3 to Registration Statement on Form
SB-2
Filed March 6, 2007
File No. 333-137482
Dear Mr. Kletscher:
We reviewed the filing and have the comments below.
General
1. Provide updated financial statements and related disclosures,
as
necessary, to comply with Item 310(g) of Regulation S-B.
Risk Factors, page 12
2. We note that the independent public accountants` report
includes a
going concern paragraph. Include as a discrete risk factor
disclosure of the going concern paragraph and discussion of the
attendant risks to investors in Highwater Ethanol.
Dilution, page 27
3. Revise your dilution calculations to properly reduce the
minimum
and maximum proceeds by the remaining estimated offering costs.
Your
current calculation reflects this amount as additional net
tangible
net worth.
Certain Relationships and Related Transactions, page 68
4. Disclosure that Highwater Ethanol has not entered into
transactions with related parties is inconsistent with disclosures
in
the financial statements` note 6 on page F-8 that a member is
providing legal services to Highwater Ethanol and Highwater
Ethanol
is compensating three governors for consulting services. Please
reconcile the disclosures, and ensure that you include the
disclosures required by Item 404 of Regulation S-B in the
prospectus.
Federal Income Tax Consequences of Owning Our Units, page 80
5. The disclaimer in the fourth paragraph that "The tax
consequences
to us and our members...are not addressed in our tax counsel`s
opinion" is inconsistent with the requirement under the federal
securities laws that the tax opinion`s function is to inform
investors of the tax consequences that they can reasonably expect
from an investment in Highwater Ethanol. See Item 12(A) of
Industry
Guide 5. Further, the disclaimer is inconsistent with the
statement
"That section is the opinion of counsel on all material federal
income tax consequences to prospective Unit holders of the
ownership
and disposition of Units" in the fourth paragraph of the short
form
opinion filed as exhibit 8.1. Since the tax opinion must address
and
express a firm conclusion for each material federal income tax
consequence, please revise.
6. Refer to prior comment 9. The statement at the top of page 81
that "this section is an opinion of our tax counsel`s professional
judgment regarding the federal income tax consequences of owning
our
units" is inconsistent with the requirement for you to state
clearly
that the opinion contained in this section constitutes tax
counsel`s
opinion. As drafted, the statement implies that you are providing
merely an opinion on your tax counsel`s professional judgment.
Please revise.
Partnership Status, page 81
7. The tax treatment depends upon the legal conclusion of whether
Highwater Ethanol is a partnership or a corporation. Since
counsel
must opine on these matters as part of its tax opinion and cannot
assume them, please delete the word "Accordingly" in the second
sentence.
Tax Consequences Upon Disposition of Units, page 85
8. Refer to prior comment 10. As noted previously, the word
"generally" may imply that investors cannot rely on the
disclosure.
Please delete the word "generally" in the second paragraph`s first
sentence.
Exhibits 5.1 and 8.1
9. We wish to remind you that Highwater Ethanol must file executed
opinions before the registration statement`s effectiveness. Refer
to
comment 32 in our October 17, 2006 letter.
Exhibit 10.17
10. It appears that you omitted figure 1, aerial photo of
Lamberton,
Minnesota, from the filing. As stated in comment 38 in our
October
17, 2007 letter, 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. See also
Item
304(e) of Regulation S-B. Please refile the exhibit in its
entirety.
Other
11. Refer to prior comment 14. It appears that you marked as
changed
materials some materials that were not changed in pre-effective
amendment 3 to the registration statement. For example, refer to
the
risk factor`s caption "We have not received certain permits...."
on
page 19. As requested previously, please comply with the
requirements of Rule 310 of Regulation S-T 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 accounting comments to Bret A.
Johnson, Staff Accountant, at (202) 551-3753 or W. John Cash,
Accounting Branch Chief, at (202) 551-3768. You may
direct questions on other comments and disclosure issues to Edward
M.
Kelly, Senior Counsel, at (202) 551- 3728 or me at (202) 551-3760.
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
March 14, 2007
Page 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-7010
DIVISION OF
CORPORATION FINANCE