May 2, 2006
Securities and Exchange Commission
Washington D.C. 20549
Attn: John Reynolds, Assistant Director
Re: Dahua, Inc.
Amendment No. 4 to Registration Statement
On Form SB-2
File No. 333-122622
Dear Mr. Reynolds:
We are in receipt of your letter dated December 15, 2005 and have the following
responses:
General:
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1. We will file on EDGAR a redlined version of Amendment No. 4 marked to
show changes;
Prospectus Cover Page
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2. We have moved the dealer prospectus delivery obligation to the outside
back cover page of the prospectus as required by Item 502(b) of
Regulation S-B;
Prospectus Summary
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3. We have updated the disclosure throughout the prospectus to indicate
that the plumbing, electrical wiring, water supply and landscaping have
been completed;
Organization within last five years, Page 22
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4. We have removed the financial statements of Norton Industries. We have
also revised the caption of the financial statements of the operating
company to read "Dahua, Inc." instead of "Bauer Invest, Inc."
5. While preparing the consolidated financial statements of Dahua Inc. it
was discovered that $98,161 in accrued interest had been incorrectly
charged to expense in the statement of operations of Beijing Dahua Real
Estate for 2003 rather than capitalized as a cost of construction,
since the interest was from loans received for the construction of the
housing development project.
The reconciliation of the accumulated deficit account of Beijing Dahua
Real Estate Development, Ltd. as reported in the Form 8-K on February 1,
2005 to the accumulated deficit of Dahua Inc. as reported in the SB-2 is
as follows:
Dahua Inc.
Real Estate Loss before Dahua Inc. Dahua Inc.
Accumulated Minority Minority Accumulated
Description Deficit Interest Interest Deficit
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<s> <c> <c> <c> <c>
Loss from inception to 12/31/2002 $ (169,784) $ (169,784) $ (33,957) $ (135,827)
Reported loss for year ended 12/31/2003 (271,442)
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Accumulated deficit reported (441,226)
2003 Interest expense adjustment 98,161 (173,281) (34,656) (138,625)
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Account total at 12/31/2003 $ (343,065) $ (343,065) $ (68,613) $ (274,452)
The auditor will restate the prior audit and we will file an amended Form 8-K.
6. The initial Bauer financial statements treated the acquisition of
Beijing Dahua as a purchase rather than a reverse merger. We will
restate these financial statements to show reverse merger accounting,
as well as the restatement of interest expense in an amended Form 8-k.
Please see our revised financial statements;
7. We have revised disclosure to indicate that Bauer is the wholly owned
subsidiary of Norton. We have also disclosed all issuances of securities
by Norton following the business combination, and have clearly disclosed
that Norton changed its name to Dahua, Inc.;
8. The relationship among Dahua Group and Bauer and Dahua Inc. is as
follows: Prior to the acquisition, a group of shareholders owned 100%
of Dahua Group, as well as 100% of Bauer in the same shareholding
proportions. Currently, the same group of shareholders own 95% of Dahua
Inc. Yonglin Du, our CEO and President, also acts as president of
Dahua Group and Bauer, respectively. This disclosure has been added.
9. Dahua Group was the prior 100% owner of Bauer; thus the 108
shareholders of Dahua Group beneficially owned Bauer. The disclosure
has been revised to make it more clearly understood.
Description of Business Page 24
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Development of Projects Page 24
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10. The Form SB-2 filed February 8, 2005 noted that the 30 sold units
include 11 units with deposit paid, (some of deposits are 10,000 RMB,
and some are 30,000 RMB), for which we didn't sign formal purchase
contracts. In 2005, the purchasers of these 11 units chose not to
purchase our units; we then returned the deposits to them. In addition,
two purchasers of the other 19 units, which we had signed formal
contracts decided to return the units, and we then returned the money.
In the year of 2005, we sold 11 units in total. By November 14, 2005,
we had sold 28 units. By December 31, 2005, we had sold 32 units, 26
of which were reserved with clients' deposits;
Home Construction Page 25
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11. Although the contract has expired, according to Chinese law, the
company in charge of quality control of a construction product bears
life-long responsibility for the quality of such construction. Thus,
Aochend shall remain responsible for quality assurance of our
construction. We have added such disclosure;
Liquidation of Capital Resources, Page 24
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12. The amount of $7.11 million represents the amounts advanced by Dahua
Group to the Company, $.35 million represents interest accrued on those
amounts, and $7.46 million is the total loan balance shown in the
financial statements. The numbers will change from period to period. We
have different numbers as of September 30, 2005. We have revised our
disclosure so that it can be more easily understood;
13. The Statement that "Dahua Group still holds 80% of the shares" of Dahua
Real Estate was made in error. References to Dahua Group in this
sentence have been changed to Dahua, Inc.;
Critical Accounting Powers and Estimates, Page 35
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14. The requested disclosure has been added;
Certain Relationships and Related Party Transactions, Page 37
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15. We have added all requested disclosure regarding related party loans,
capital loans and lines of credit entered into and/or made to date;
Executive Compensation, Page 39
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16. We confirm that the salaries paid by Beijing Guohong have been included
in the compensation table for the past three years and the prior
officers are identified pursuant to Item 402 of Regulation S-B. The
agreements with Beijing Guohong have been disclosed under Certain
Relationships and Related Party Transactions;
Financial Statements
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Note 4 - Loans Receivable, Page 63
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17. The notes were made by the company, and were not due from any related
party. As of December 31, 2004, the age of most loans receivable was
three years so that the management decided to make allowance for them.
Also, some people who own the other loans receivable could not be
touched then so that the management decided to make allowance for them
too. We had no loans receivable at December 31, 2005.
18. In the June 30, 2005 financial statements, the $112,021 loan from Dahua
Group to Bauer was erroneously listed as an asset on the balance sheet.
The money was originally loaned by Dahua Group to Bauer in connection
with the acquisition of Norton Industries in January 2005, in which
Bauer used the money to redeem and cancel treasury stock of Norton.
Bauer's payable and Dahua's receivable shall be canceled out on
consolidation, leaving the debt to paid-in capital rather than loan
receivable. We have filed an amendment to the Form10-QSB of Dahua Inc.
for the quarter ended December 31, 2005 in which we restated the
financial statements for that quarter.
If you have any questions, please do not hesitate to contact us.
Very truly yours,
/s/ Andrea I. Weinstein
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Andrea I. Weinstein