Diamond Ranch
Foods
555 West Street, New York, New York 10014
(212) 807-7600 telephone (212) 807-7252 facsimile
October 25, 2005
U.S. Securities and Exchange Commission Division of Corporation Finance 450
Fifth Street, N.W.
Washington, D.C. 20549
ATTN: Michael Clampitt or Kathryn McHale
RE: DIAMOND RANCH FOODS, LTD.
AMENDMENT NUMBER TWO TO REGISTRATION STATEMENT ON FORM 10-SB
FILED JULY 15, 2005
FILE NO. 000-51206
Dear Sir or Madam:
This correspondence is submitted in response to your letter dated
August 26, 2005 regarding the July 15, 2005 filing of Form 10-SB/A for Diamond
Ranch Foods, Ltd. ("DFDR"). Please note that our document has been revised for
re-filing pursuant to your comments and that additional disclosure is provided
below:
Description of Business, page 3
1. You have stated that no agreements were made with the officers and
directors of Jerry's, Inc., and yet, immediately subsequent to the
acquisition of MBC Foods, no officers and directors of Jerry's, Inc.
remained part of the company. Please explain the circumstances under
which MBC officers and directors became the sole directors and officers
of Jerry's, Inc.
RESPONSE: WHEN JERRY'S INC. ACQUIRED MBC FOODS, INC., THE OFFICERS AND
DIRECTORS OF JERRY'S INC. RESIGNED IN-ORDER-TO PURSUE PRIVATE BUSINESS
INTERESTS. AT THAT TIME, THE MBC OFFICERS AND DIRECTORS BECAME THE SOLE
DIRECTORS AND OFFICERS OF THE COMPANY.
Item 2 - Management's Discussion and Analysis or Plan of Operation
General
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2. MD&A is intended to give the investor an opportunity to look at the
company through the eyes of management by providing both a short and
long-term analysis of the business of the company. Please revise MD&A
to discuss and explain the following:
o Shrinking gross profit margins.
o Future needs for cash.
o Means of funding using factoring arrangements.
o Plans to achieve profitable operations.
RESPONSE: WE HAVE REVISED OUR FORM 10-SB/A TO INCLUDE THE ABOVE POINTS
THROUGHOUT THE MD&A SECTION STARTING ON PAGE 9.
Cost of Sales and Gross Profit, page 10
3. Please refer to prior comment #11. We could not locate your analysis of
general and administrative expenses. Please revise to disaggregate,
compare and contrast the major components of general and administrative
expenses for all periods presented with the comparable prior periods,
and explain those differences.
RESPONSE: THE ANALYSIS OF GENERAL AND ADMINISTRATIVE EXPENSES REQUESTED
PER THIS COMMENT HAS BEEN MADE IN OUR REVISED FORM 10-SB/A AND IS
LOCATED IN ITS OWN SECTION UNDER ITEM 2 ON PAGE 10.
4. Please revise to disclose what impairment factors existed during the
period ended December 31, 2004 that caused you to conclude that your
intangible asset related to the Steiger Meats acquisition needed to be
written off. Please refer to SFAS 142.
RESPONSE: IN THE OPINION OF OUR AUDITORS, THERE WAS NO VALUE TO THE
CUSTOMER LISTS AND THE COST OF DETERMINING THE FAIR MARKET VALUE WOULD
BE IN EXCESS OF $10,000. THIS AMOUNT WAS DETERMINED TO BE PROHIBITIVELY
EXPENSIVE AND WAS THEREFORE WRITTEN OFF.
Sales and Collection Procedures, page 11
5. Please revise to disclose the mechanics of your secured financing
arrangements. Explain how and why you account for receivables factored.
RESPONSE: WE HAVE REVISED OUR FORM 10-SB/A UNDER THE SALES AND
COLLECTION PROCEDURES SECTION ON PAGE 11 TO DISCLOSE THE MECHANICS OF
OUR SECURED FINANCING ARRANGEMENTS AND HOW AND WHY WE ACCOUNT FOR
RECEIVABLES FACTORED.
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Going Concern Opinion by Company Auditors, page 13
6. Please revise to provide enhanced disclosure concerning your future
acquisitions including disclosure of the feasibility of raising capital
through debt or equity transactions given your negative cash flows.
RESPONSE: WE HAVE REVISED OUR FORM 10-SB/A IN THE LAST PARAGRAPH OF THE
GOING CONCERN OPINION BY COMPANY AUDITORS SECTION ON PAGE 14 TO PROVIDE
ENHANCED DISCLOSURE OF OUR FUTURE ACQUISITIONS AND OUR FEASIBILITY OF
RAISING CAPITAL DESPITE OUR NEGATIVE CASH FLOWS.
7. Please revise to provide disclosure of financing terms that are
expected to be finalized in order for your business to continue as a
going concern.
RESPONSE: WE HAVE REVISED OUR FORM 10-SB/A IN THE LAST PARAGRAPH OF THE
GOING CONCERN OPINION BY COMPANY AUDITORS SECTION ON PAGE 14 TO PROVIDE
DISCLOSURE OF THE EXPECTED FINANCING TERMS WE INTEND TO FINALIZE FOR
OUR BUSINESS TO CONTINUE AS A GOING CONCERN.
Recent Sales of Unregistered Securities, page 19
8. In response to comment 14, you have omitted the number and nature of
purchasers involved in several of the transactions. Please review our
prior comment 14 and revise disclosure to include this information for
each transaction, including the acquisition that took place on May 1,
2004.
RESPONSE: WE HAVE REVIEWED YOUR PRIOR COMMENT 14 AND REVISED OUR
DISCLOSURE IN THIS FORM 10-SB/A TO INCLUDE THE NUMBER AND NATURE OF
PURCHASERS INVOLVED IN THE VARIOUS SALES OF UNREGISTERED SECURITIES.
9. In response to comment 18, you have stated that 600,000 shares were
issued for investor relations services. This contract ended on June 30,
2005. Please disclose whether this contract has been extended and if
so, under what terms.
RESPONSE: THE CONTRACT ENDED ON JUNE 30, 2005 AND WAS NOT RENEWED. WE
HAVE REVISED OUR FORM 10-SB/A ON PAGE 21 TO REFLECT THE EXPIRATION OF
THIS CONTRACT.
10. In addition, in response to comment 18, you have given the stock,
issued in exchange for investment relations services and in exchange
for an independent research report, the value of $0.00025 per share.
Please explain how you determined this value given your disclosure on
page 18 regarding bids and quotes for your stock during the same
period.
RESPONSE: THE STOCK ISSUED IN EXCHANGE FOR INVESTOR RELATIONS SERVICES
AND FOR THE INDEPENDENT RESEARCH REPORT WAS VALUED AT $0.00025, INSTEAD
OF THE BID QUOTES REPORTED DURING THE SAME TIME PERIOD, BECAUSE THE
STOCK HAD A LIMITED TRADING HISTORY AND MANAGEMENT FELT THAT THE
CURRENT MARKET PRICE AT THAT TIME WAS NOT REFLECTIVE OF A LIQUID
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MARKET. THE JUNE 3, 2004 SALE TO TEN (10) ACCREDITED INVESTORS WAS
BASED ON A $0.00025 PER SHARE PRICE, AND SINCE THE RESTRICTED SHARES
WERE ISSUED TO THE RESPECTIVE ENTITIES AT RELATIVELY THE SAME TIME,
MANAGEMENT FELT IT REASONABLE TO ISSUE THE RESTRICTED SHARES BASED ON
THE SAME PER SHARE VALUE AS THAT PAID BY THE ACCREDITED INVESTORS.
Part F/S
General
11. Please provide separate disclosure in the notes to the financial
statements regarding your sale of subsidiary. Refer to SFAS 144 and
address the following in your disclosure:
o Provide a calculation of the gain on sale.
RESPONSE: PLEASE NOTE THAT IN THE FINANCIAL STATEMENTS ACCOMPANYING OUR
REVISED FORM 10-SB/A SEPARATE DISCLOSURE HAS BEEN PROVIDED IN NOTE 11
REGARDING THE SALE OF OUR SUBSIDIARY.
o Discuss the facts and circumstances of the sale. Please frame
your discussion in the context of paragraph 30 of SFAS 144.
RESPONSE: PLEASE NOTE THAT THE FACTS AND CIRCUMSTANCES OF THE SALE OF
OUR SUBSIDIARY HAVE BEEN DISCLOSED IN NOTE 11 OF THE ACCOMPANYING
FINANCIAL STATEMENTS.
o Disclose how you valued the assets and liabilities. Please
frame your discussion in the context of paragraphs 34 - 37 of
SFAS 144.
RESPONSE: PLEASE NOTE THAT NOTE 11 OF THE ACCOMPANYING FINANCIAL
STATEMENTS CONTAINS THE DISCLOSURE OF HOW OUR ACCOUNTANTS VALUED THE
ASSETS AND LIABILITIES OF THE SALE.
o Revise your financial statements to provide the disclosures
required by paragraphs 41 - 43 of SFAS 144.
RESPONSE: OUR ACCOUNTANTS HAVE REVIEWED PARAGRAPHS 41-43 OF SFAS 144
AND DO NOT BELIEVE THAT THESE PARAGRAPHS APPLY AS WE ARE STILL IN THE
SAME BUSINESS AND NO OPERATIONS WERE DISPOSED OF.
Balance Sheets, page F-4
12. Please tell us why your factoring line of credit balance exceeds your
accounts receivable balance. Consider this in light of the disclosures
that you have provided regarding your factoring arrangements.
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RESPONSE: OUR ACCOUNTANTS HAVE MADE THE ADJUSTMENTS TO THE FACTORING
LINE OF CREDIT SECTION OF NOTE 6 OF THE BALANCE SHEET TO SEPARATE THE
FACTORED PAYABLES FROM THE ADDITIONAL LINE OF CREDIT.
Note 6 - Notes Payable
Factoring Line of Credit, page F-15
13. You disclose in Note 6 that your factors will purchase portions of the
Company's accounts receivable. Please revise your disclosure to clearly
distinguish your factoring arrangements as either secured financings or
sales of assets. Consider how these arrangements meet the requirements
of SFAS 140 for sales treatment or as deferred financing arrangements.
RESPONSE: OUR ACCOUNTANTS HAVE REVISED OUR DISCLOSURE IN NOTE 6 TO
CLEARLY DISTINGUISH OUR FACTORING ARRANGEMENTS.
14. Please tell us how you accounted for the discount provided to your
factor for purchasing accounts receivable.
RESPONSE: OUR ACCOUNTANTS HAVE MADE ADJUSTMENTS TO NOTE 6 TO ACCOUNT
FOR THE DISCOUNT PROVIDED TO OUR FACTOR FOR PURCHASING ACCOUNTS
RECEIVABLE.
Note 7- Related Party Transactions, page F-16
15. Please tell us why you believe shareholders loans of $199,700 are not,
in substance, capital contributions. Consider this in light of your
deficiencies in liquidity.
RESPONSE: OUR ACCOUNTANTS HAVE ADJUSTED THE BALANCE SHEET TO RECLASSIFY
SHAREHOLDERS LOANS IN THE AMOUNT OF $199,700 FROM THE LIABILITY SECTION
TO THE EQUITY SECTION.
Thank you for all courtesies and cooperation extended in this matter.
Very truly yours,
DIAMOND RANCH FOODS, LTD.
By: /s/ Joseph Maggio
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Joseph Maggio
Chairman and CEO
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