LETTERHEAD OF ANDREWS KURTH LLP
Andrews Kurth LLP
1717 Main Street,
Suite 3700
Dallas, Texas 75201
Ronald L. Brown
214.659.4469 Direct
214.651.4819 Fax
ronbrown@andrewskurth.com
December 12, 2008
Securities and Exchange Commission
Division of Corporate Finance
100 F. Street N.E.
Washington, D.C. 20549
Attention: Mr. Larry Spirgel
Mail Stop 3720
Re: China Voice Holding Corp.
Registration Statement on Form 10-12G
Filed October 29, 2008
File No. 000-53366
Dear Mr. Spirgel:
We are filing today Amendment No. Two to the referenced Form 10 for the
Company and are responding to each of your comments in your letter dated
December 5, 2008 as discussed below.
We are also sending courtesy copies of the Form 10, marked to show
changes from the prior filing. Page references described in this letter pertain
to the clean courtesy copy and not necessarily to either the marked version or
the Edgar version. Each of your comments is re-written below followed by the
Company's response.
Item 1. Business, Page 1
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Company Overview, page 1
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1. We note your revised disclosure on page six providing a breakdown of
revenues by segment and country. However, we still believe you should
revise your Overview on page one to clearly disclose at the beginning
of this section that substantially all of your revenues have been
Mr. Larry Spirgel
December 12, 2008
Page 2
generated by your U. S. operations to date and that Chinese operations
have only generated nominal revenues. Additionally, you should clearly
disclose here that your calling card distribution business generates
the substantial majority of your revenues.
Disclosure has been added in the Company overview.
Foreign. Companies, page 3
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2. We note your response to comment two in our letter dated November 14,
2008. However, you have not explained to us why you do not believe you
are required to file the material agreements, other than the Technology
Agreement which appears to be filed, establishing your control of
Candidsoft as exhibits to your registration statement. Please provide
this explanation in your response letter or file the agreements as
exhibits.
The acquisition agreement was filed as Exhibit 2.3.1. The Trust
Agreement has been added as Exhibit 2.3.3.
3. We note your statement in footnote (1) to the organizational chart that
Mr. Chun U Xing retained ownership of record in Candidsoft. We also
note in paragraph 1 of footnote (1) that you are holding 100% of the
stock certificates of Candidsoft endorsed in blank. Based on this
disclosure, it appears that you do not own an equity interest in
Candidsoft. Please clearly disclose that neither you nor Voium
Technologies own any record equity interest in Candidsoft, but instead
you control and derive benefits from Candidsoft only through
contractual arrangements. Also include risk factor disclosure regarding
the Chinese regulations that require this operating structure and
highlighting the risks, challenges, and uncertainties related to this
operating structure.
Disclosure has been added after the chart, as well as an additional
risk factor.
Products and Services, page 4
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Telecommunications Services, page 5
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4. We note your response to comment three in our letter dated November 14,
2008. Although your revised disclosure describes the Network Operations
Center, the nature and scope of your network is still unclear to us.
Please provide more detailed, disclosure about the nature and scope of
your network and explain how the network enables you to provide and
sell the VoIP wholesale termination services of this segment.
More detailed disclosure has been added.
Mr. Larry Spirgel
December 12, 2008
Page 3
Customers and Certain Contracts. page 9
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5. Please disclose the amount of revenues you have generated in recent
periods, as a percentage of your total revenues, from the listed
Chinese government customers in the aggregate.
Because the amounts for each are not yet material, an aggregate figure
has been added.
6. Please add risk factor disclosure regarding the fact that most of your
government contracts in China are cancelable by the government
customers. Also clarify whether or not your agreement with China Netcom
is cancelable by China Netcom.
Language has been added.
Future Prospective Operations. page 11
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7. Please disclose, as you do on page eight and nine, that you do not
expect to commit resources to your Essential Software Security and WRIO
technologies until the second half of 2009.
Such disclosure has been added.
Item IA. Risk Factors, page 12
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Termination of relationships with key suppliers...page 15
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8. Please expand this risk factor to discuss the term and termination
provisions of the Prepaid Power Distribution contract, Additionally,
since Prepaid Power Distribution accounted for 37% of total revenues in
fiscal 2008, please explain to us why you disclose in Note 11 to your
financial statements that you did not have any customers that accounted
for greater than ten percent of your revenues. Finally, we note that
you have not included the exhibits to your agreement with Prepaid Power
Distribution as filed as Exhibit 10.6 to the registration statement.
Please re-file this agreement with all exhibits and other attachments.
We have revised Note 11 and the risk factor disclosure. Although the
Prepaid contract refers to Exhibits, such Exhibits were never attached
because of their volume and changing nature.
Item 2. Financial Information, page 24
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Management's Discussion and Analysis of Financial Condition and Results of
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Operations, page 24
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Comparisons by Period, page 26
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Mr. Larry Spirgel
December 12, 2008
Page 4
Years Ended June 30, 2008 and 2007, page 28
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Quarters Ended September 30, 2008 and 2007, page 28
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9. Please provide more detailed disclosure about the specific drivers of
revenue growth during the past year and most recent quarter in your
calling card distribution segment, your telecommunications service
segment, and your advanced hardware distribution segment. Identify and
quantify the material factors, such as increases in volume and/or
pricing of products or services sold, introduction of new products or
services, entrance into new markets., establishment of new distribution
channels, or otherwise, that contributed to such growth.
Additional information is provided.
Liquidity and Cash Resources, page 28
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10. Please discuss in more detail the assumptions underlying your
projections for increased sales and operating profits in the business
segments identified on page 29. Also explain the specific reasons why
you believe it is reasonable to make such assumptions.
Additional information has been provided.
11. We note that the company projects it will need to raise an additional
$600,000 to continue operating at current levels. Please disclose when
you believe you will need to raise this money in order to continue
operating. Also discuss the status of your efforts to raise this
financing.
Additional information has been provided.
Item 7. Certain Relationships and Director Independence, page 38
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Related Party Notes, page 39
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12. Disclose, or cross-reference your Item 10 disclosure of, the issuances
of shares to your CEO pursuant to an earn-out agreement at various
times in the last two years and interim period.
Disclosure has been added.
Mr. Larry Spirgel
December 12, 2008
Page 5
Preferred Stock, page 39
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13. We note from your interim financial statements that you paid $454,000
to an affiliated entity on September 30, 2008 to redeem preferred
stock. Please disclose this payment or explain to us why disclosure is
not required pursuant to Regulation S-K Item 404(d).
This redemption was added under the caption "Preferred Stock".
Report of Independent Registered Public Accounting Firm, page F-1
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14. We note your response to comment 23 in our letter dated November 14,
2008. Based on your response, it appears that the majority of your
assets, including your corporate office, and revenues are in the United
States. Therefore, it appears to us that you should revise the filing
to have an auditor licensed in the United States to re-audit your
financial statements.
The Company maintains that it is permitted to use Cheung & Co. as its
auditors. Cheung & Co. conducted a very thorough job in completing the
audits for 2007 and 2008, including sending a six person staff to
Florida and California for field work and auditing of financial
statements. They also conducted field work in the Company's Beijing
offices. Regarding the Company's mix of business in the United States
and China, the attached schedule shows the percentage of assets,
historical revenues, projected revenues and projected contributions to
overhead from our operations in China.
Note 1. Revenue Recognition, page F-17
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15. We note your response to prior comments 26 and 27. You state that you
are "responsible for the fulfillment" in the arrangement. Please:
o Tell us what you mean by this statement.
"Responsible for Fulfillment" means having responsibility to deliver a
functioning pre-paid card to the customer.
o Tell us who is obligated to provide the actual telecommunications
services underlying the calling cards.
Third Party Carriers which have sponsored the cards are responsible to
deliver the actual Telecommunications Service.
o Also, tell us whether you have any further obligations, including
the right of return, related to prepaid calling cards and prepaid
cellular products after the title is passed at the time of
shipment or delivery. If so, tell us the nature of your
obligations.
Mr. Larry Spirgel
December 12, 2008
Page 6
The Company has no further obligation after title has passed at the
time of shipment and delivery, except for replacement of any defective
card.
Consolidated Balance Sheets, page F40
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16. Please revise to delete the debit minority interest balance under
paragraph 15 of ARB 51.
The balance sheet has been revised.
Finally, we advise you on behalf of the Company that:
(i) The company is responsible for the adequacy and accuracy of the
disclosure in the filing;
(ii) Staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action with respect to
the filing; and
(iii) The company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the federal
securities laws of the United States.
Please contact the undersigned with your further questions and
comments.
Sincerely,
/s/ Ronald L. Brown
Ronald L. Brown
CHVC
Business and Assets in China
China
Assets Amount Per Total
- ------ ------ --- -----
6/30/07 11,870,574 73.4 16,162,786
6/30/08 13,196,828 54.9 24,043,271
9/30/08 13,069,438 59.4 21,987,902
Historical Revenue
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6/30/07 716,070 30.6 2,342,233
6/30/08 947,380 2.6 36,433,747
Projected Revenues
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6/30/09 4,563,000 5.2 88,399,000
6/30/10 68,454,000 37.6 182,043,000
6/30/11 221,138,000 59.3 373,120,000
Projected Contribution To Overhead
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6/30/09 2,115,000 60.8 3,480,000
6/30/10 37,358,000 93.8 39,813,000
6/30/11 122,392,000 97.0 126,236,000