DAVID M. LOEV, ATTORNEY AT LAW
2777 ALLEN PARKWAY, SUITE 1000
HOUSTON, TX 77019
TELEPHONE (713) 524-4110
FACSIMILE (713) 524-4122
September 20, 2006
Christopher Owings VIA FED-EX
Division of Corporate Finance ----------
United States Securities and Exchange Commission AND VIA EDGAR
Mail Stop 3561 -------------
100 F. Street, N.E.
Washington, D.C. 3561
Phone: (202) 551-3720
Re: Nano Holdings International, Inc.
Registration Statement on Form SB-2
Filed August 1, 2006
File No. 333-136215
Dear Mr. Owings:
We have enclosed three red-lined copies of the amended registration
statement for your review. In response to your comment letter dated August 24,
2006, Nano Holdings International, Inc. (the "Company") has the following
responses:
Prospectus Cover Page
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1. PLEASE INCLUDE HERE OR IN YOUR PROSPECTUS SUMMARY THE COMPLETE MAILING
ADDRESS AND TELEPHONE NUMBER OF YOUR PRINCIPAL EXECUTIVE OFFICES. SEE ITEM
503(B) OF REGULATION S-B.
RESPONSE:
The Company has clarified the disclosure of the mailing address and
telephone number on the cover page and has additionally added this
information to the summary section of the prospectus as you have requested.
Prospectus Summary
- ------------------
2. DELETE THE SECOND SENTENCE IN THE 1ST PARAGRAPH SINCE A SUMMARY BY ITS
NATURE IS NOT A COMPLETE DISCUSSION. INCLUSION OF THE SENTENCE IMPLIES
OMITTED INFORMATION.
RESPONSE:
The Company has deleted the second sentence of the 1st paragraph as
you requested.
3. PROMINENTLY DISCLOSE ON THE FIRST PAGE THAT YOUR AUDITORS HAVE RAISED
SUBSTANTIAL DOUBT AS TO YOUR ABILITY TO CONTINUE AS A GOING CONCERN.
RESPONSE:
The Company has disclosed that its auditors have raised a substantial
doubt as to its ability to continue as a going concern on the cover page of
the prospectus as you requested.
4. WE NOTE HERE AND OTHER PLACES IN YOUR PROSPECTUS YOUR USE OF IDENTIFIED
TERMS IN QUOTATIONS. THE MEANINGS OF THESE TERMS ARE CLEAR FROM THEIR
CONTEXT, DEFINITIONS SUCH AS THESE ARE UNNECESSARY. PLEASE DELETE. SEE RULE
42 L(C) OF REGULATION C.
RESPONSE:
The Company has revised the prospectus to delete the definition of
terms which are clear from their context as you have requested.
5. WE NOTE YOUR REFERENCE TO CANADIAN DOLLARS IN THE FIRST PARAGRAPH; HOWEVER,
THERE IS NO DISCUSSION OR INDICATION THAT YOU CONDUCT BUSINESS IN CANADA OR
THAT ANY AMOUNT IN THE PROSPECTUS IS DENOMINATED IN CANADIAN DOLLARS.
PLEASE TELL US THE PURPOSE OF THIS DISCLOSURE.
RESPONSE:
The Company has deleted the reference to Canadian dollars from the
prospectus.
Risk Factors
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6. IT APPEARS THAT YOU HAVE PROVIDED A SUMMARY OF YOUR RISK FACTORS. THIS
UNNECESSARILY REPEATS INFORMATION. YOUR RISK FACTORS DISCUSSION FOLLOWS
YOUR SUMMARY DISCUSSION. PLEASE REVISE ACCORDINGLY.
RESPONSE:
The Company has deleted the reference to the summary of the risk
factors as you have requested.
Reliance on key personnel .
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7. DELETE THE REFERENCE TO "SUCCESS" IN THE 1ST SENTENCE SINCE IT SUGGESTS AN
OUTCOME THAT IS NOT ASSURED- THIS COMMENT WOULD ALSO APPLY TO OTHER
REFERENCES AS APPROPRIATE. SEE "OUR ABILITY TO OPERATE" ON PAGE 10 AND
"DIVIDEND POLICY" ON PAGE 15.
RESPONSE:
The Company has deleted the reference to the "success" of the Company
in the risk factors to which you referred as you requested.
Our ability to operate successfully
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8. THE RISK YOU DESCRIBE APPEARS TO BE A RISK THAT COULD APPLY EQUALLY TO
OTHER BUSINESSES THAT ARE SIMILARLY SITUATED AND IS THEREFORE A GENERIC
RISK FACED BY MANY BUSINESSES. GENERALLY, GENERIC RISKS SHOULD NOT BE
INCLUDED IN YOUR RISK FACTOR SECTION. IN THIS REGARD, THE RISK FACTOR ON
PAGE 12 ENTITLED "WE DEPEND HEAVILY ON OUR ABILITY TO MARKET OUR PRODUCTS,"
ALSO APPEARS TO BE A GENERIC RISK. PLEASE EITHER ELIMINATE THESE GENERIC
RISKS, OR REVISE THEM TO STATE SPECIFIC MATERIAL RISKS TO YOUR COMPANY OR
TO THE PURCHASERS IN THIS OFFERING.
RESPONSE:
The Company has deleted the generic risk factors to which you
referred.
We have a limited operating history
- -----------------------------------
9. PLEASE ELIMINATE THE DISCLOSURE INDICATING THAT YOUR OPERATING HISTORY
SINCE INCEPTION HAS SHOWN A CONTINUALLY UPWARD TREND SINCE IT MITIGATES THE
RISK.
RESPONSE:
The Company has deleted the disclosure that its operating history
since inception has "shown a continually upward trend" as you requested.
Effect of government regulations
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10. IT APPEARS THAT THIS RISK FACTOR AND THE RISK FACTOR THAT IMMEDIATELY
FOLLOWS ARE DISCUSSING THE SAME RISK. PLEASE REVISE THESE RISK FACTORS TO
BETTER DISTINGUISH THE REGULATORY RISKS FACED BY YOU.
RESPONSE:
The Company has revised the risks factors to which you referred to
create one risk factor, which better distinguishes the risks which the
Company faces.
11. WE NOTE YOUR DISCLOSURE ON PAGE 22 THAT MARION BARNES OWNS THE TRADEMARK
FOR "SHOTSKI'S" AND THAT YOU DO NOT HAVE A WRITTEN LICENSE AGREEMENT TO USE
THE TRADEMARK. THIS APPEARS TO BE A POTENTIALLY MATERIAL NEGATIVE FACT AND
DISCLOSURE SHOULD BE ADDED TO YOUR RISK FACTORS.
RESPONSE:
In response to your question, the Company has entered into a one-year
non revocable, renewable Trademark Licensing Agreement with Mr. Barnes to
license the use of the "Shotski's" trademark, which Licensing Agreement
terms are disclosed in the amended Registration Statement and which
Licensing Agreement is attached to the filing as Exhibit 10.5. As the
Company has no reason to believe that Mr. Barnes will not continue to renew
the licensing agreement for additional one-year terms, the Company does not
believe that any risk factor disclosure regarding the licensing agreement
is warranted.
Directors. Executive Officers. Promoters. Control Persons and Employees
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12. PLEASE REVISE TO DESCRIBE THE BUSINESS EXPERIENCE OF EACH DIRECTOR AND
EXECUTIVE OFFICER FOR THE PAST FIVE YEARS, OR CLARIFY YOUR DISCLOSURE BY
ADDING DATES OR THE DURATION OF EMPLOYMENT. REFER TO ITEM 40L(A)(4) OF
REGULATION S-B. DELETE THE PLURAL REFERENCE TO DIRECTORS SINCE YOU ONLY
HAVE 1 DIRECTOR. EXPAND THE LAST PARAGRAPH OF THIS SECTION ON PAGE 17 TO
INDICATE WHETHER THE NAMED PERSONS ARE COMPENSATED. STATE THAT YOU DO NOT
HAVE ANY EMPLOYMENT CONTRACTS IF TRUE.
RESPONSE:
The Company has deleted the plural reference to "directors," and has
indicated that none of its Directors or officers has any employment
contracts with the Company nor do any officers or Directors draw a salary
from the Company. Furthermore, the Company has disclosed the full business
experience of each director and executive officer listed for the last five
years as is required under Regulation S-B.
Employees.
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13. REVISE THIS SECTION TO CLARIFY YOUR MEANING OF "FULL-TIME EMPLOYEES". PAGE
16 INDICATES MR. RECTOR SPENDS APPROXIMATELY 10 HOURS PER WORK ON COMPANY
ACTIVITIES.
RESPONSE:
The Company has revised the "Employees" section of the amended
registration statement to clarify that the Company has two (2) fulltime
employees other than Mr. Rector, who is not a full-time employee, due to
the fact that he spends only ten (10) hours per week on Company matters.
Indemnification of Directors and Officers
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14. PLEASE EXPAND YOUR DISCLOSURE TO DESCRIBE ANY INDEMNIFICATION PROVISIONS
FOR YOUR DIRECTORS AND OFFICERS AGAINST LIABILITY UNDER THE SECURITIES ACT,
IN ADDITION, PROVIDE THE UNDERTAKING IN THE FIRST SENTENCE OF ITEM 512(E)
OF REGULATION S-B. SEE ITEM 510 OF REGULATION S-B.
RESPONSE:
The Company has revised this section to state that its Bylaws and
Certificate of Incorporation contain no specific indemnification provisions
for its officers or Directors against liability under the Securities Act of
1933. Additionally, the Company has revised this section to include the
undertaking in the first sentence of Item 512(e) of Regulation S-B as you
requested.
Description of Business
- -----------------------
15. INDICATE WHETHER THE ACQUISITION OF SUNSHINE WAS AT ARMS LENGTH. IF NOT,
INDICATE THE CIRCUMSTANCES OF THE TRANSACTION AND THE MANNER IN WHICH THE
EXCHANGE RATE WAS DETERMINED.
RESPONSE:
The Company has indicated that the acquisition of Sunshine was at arms
length and that the exchange rate of the exchange was determined by the
mutual agreement of the Company and Sunshine based on the estimated value
of Sunshine.
16. EXPAND THIS SECTION TO DISCUSS THE COMPANY'S PAYMENT TERMS TO SUPPLIERS AS
WELL AS CUSTOMERS. PROVIDE ADDITIONAL INFORMATION REGARDING THE COMPANY'S
SALES PRACTICES/EFFORTS, INCLUDING IDENTIFYING THE STATES WITH WHICH THE
COMPANY ONLY HAS PARTIAL DISTRIBUTION INCLUDING THE REASON(S) FOR THE
LIMITATION. DO YOU HAVE ANY PLANS, INTENTIONS TO EXPAND SALES EFFORTS?
RESPONSE:
The Company has revised the description of the Company's payment terms
to its suppliers and customers as you requested. Additionally, the Company
has identified the states with which it has only partial distribution.
Management's Discussion and Analysis of Financial Condition and Results of
- --------------------------------------------------------------------------
Operations
- ----------
17. PLEASE INCLUDE A DISCUSSION OF ANY KNOWN TRENDS, EVENTS OR UNCERTAINTIES
THAT HAVE HAD, OR ARE REASONABLY LIKELY TO HAVE A MATERIAL IMPACT ON YOUR
SHORT-TERM OR LONG-TERM LIQUIDITY AND REVENUES OR RESULTS OF OPERATIONS.
ADDITIONALLY, CONSIDER INCLUDING AN EXECUTIVE-LEVEL OVERVIEW THAT PROVIDES
CONTEXT FOR THE REMAINDER OF THE DISCUSSION. REFER TO SEC RELEASE NO.
33-8350 AND ITEM 303(B) OF REGULATION S-B.
RESPONSE:
The Company has included a discussion of its known trends and
uncertainties and has expanded its description of management's plan of
operations for approximately the next 12 months.
Liquidity and Capital Resources
- -------------------------------
18. WE NOTE YOUR STATEMENT THAT YOU BELIEVE YOU WILL BE ABLE TO CONTINUE YOUR
BUSINESS OPERATIONS FOR THE NEXT TWELVE MONTHS WITH THE CASH YOU HAVE ON
HAND-HOWEVER, IN NOTE 3 TO NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AT MARCH 31, 2006 ON PAGE F-L6 YOU INDICATE THAT YOU PLAN AND NEED TO RAISE
$100,000. IN THIS REGARD, PLEASE EXPAND YOU DISCLOSURE HERE TO INCLUDE YOUR
PLANS TO RAISE ADDITIONAL CAPITAL.
RESPONSE:
The Company has no immediate plans to raise any addition capital and
the previous disclosure regarding the Company's plans to raise $100,000 of
additional capital has been removed from the Company's notes to financial
statements.
Description of Property
- -----------------------
19. PLEASE INDICATE WHETHER THE LEASE IS WITH UNAFFILIATED PARTIES.
RESPONSE:
The Company has disclosed that the lease is with an unaffiliated
party.
Certain Relationships and Related Transactions
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20. EXPAND THIS SECTION TO INDICATE THE SERVICES RENDERED BY VIKING INVESTMENT
GROUP, INC.
RESPONSE:
The Company has added the disclosure you requested.
Description of Capital Stock
- ----------------------------
21. PLEASE DISCLOSE WHETHER ANY PROVISION IN YOUR CHARTER OR BY-LAWS WOULD
DELAY, DEFER OR PREVENT A CHANGE OF CONTROL. REFER TO ITEM 202(4) OF
REGULATION S-B.
RESPONSE:
The Company has amended the registration statement to include the
information you requested.
Plan of Distribution and Selling Shareholders
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22. PLEASE CONFIRM THAT YOU HAVE INFORMED THE SELLING SHAREHOLDERS OF THEIR
DUTIES AND OBLIGATIONS PURSUANT TO REGULATION M, SPECIFICALLY RULE 102,
WITH RESPECT TO THE DISTRIBUTION OF THE SECURITIES BEING REGISTERED
PURSUANT TO THE REGISTRATION STATEMENT. IN ADDITION, PLEASE CONFIRM THAT
ANY PROSPECTIVE "DISTRIBUTION PARTICIPANT," AS SUCH TERM IS DEFINED UNDER
REGULATION M, WILL BE INFORMED OF SUCH DUTIES AND OBLIGATIONS.
RESPONSE:
The Company is currently in the progress of obtaining certifications
form all the Selling Shareholders that that such Shareholders are aware of
their obligations pursuant to Regulation M. Additionally, language
regarding the Selling Shareholders requirements regarding Regulation M has
been added to the Plan of Distribution Section of the Registration
Statement.
Available Information
- ---------------------
23. PLEASE REVISE YOUR DISCLOSURE TO INDICATE THE SEC'S NEW ADDRESS AT 100 F
STREET, N.E. WASHINGTON, D.C. 20549.
RESPONSE:
The Company has clarified the SEC's new address as you have requested.
Consolidated Financial Statements
- ---------------------------------
24. PLEASE UPDATE THE FINANCIAL STATEMENTS AND RELATED FINANCIAL INFORMATION
INCLUDED IN THE FILING AS REQUIRED BY ITEM 310(G) OF REGULATION S-B.
RESPONSE:
The amended registration statement contains updated interim financial
information as required by Item 310(g) of Regulation S-B.
25. WE NOTE ON PAGE 27 THAT MR. RECTOR PROVIDES OFFICE SPACE IN HIS HOME FREE
OF CHARGE. WE ALSO NOTE THAT MR. RECTOR DOES NOT APPEAR TO BE DRAWING A
SALARY FOR THE 10 HOURS PER WEEK HE SPENDS ON COMPANY MATTERS. PLEASE TELL
US AND DISCLOSE WHETHER ANY OTHER SERVICE IS PROVIDED BY ANY EMPLOYEE TO
THE COMPANY FREE OF CHARGE. PLEASE BE ADVISED THAT THE VALUE OF ANY FREE
SERVICE AND RENT MUST BE RECORDED AS EXPENSES IN YOUR STATEMENT OF
OPERATIONS, EVEN THOUGH THERE HAS BEEN NO CASH OUTLAY. EITHER TELL US WHERE
THESE EXPENSES ARE RECORDED OR REVISE YOUR FINANCIALS ACCORDINGLY. REFER TO
SAB TOPIC 5:T.
RESPONSE:
Mr. Rector began providing the free services and free rent to the
Company upon the acquisition of Sunshine Group Ltd. on December 31, 2005.
Accordingly, the Company believes that no expense needs to be recorded for
the fiscal year ending December 31, 2005. The Company's June 30, 2006
unaudited financial statements reflect 10 hours per week of uncompensated
services valued at $150 per hour, which is the rate Mr. Rector normally
charges for such services. They also reflect $250 per month of
uncompensated rent as the value of the minimal office space provided by Mr.
Rector to the Company.
In addition to Mr. Rector, Mr. Barnes, the President of Sunshine is
providing services to the Company free of charge and as such, $3,000 per
month has been included in expenses for the years ended December 31, 2004
and 2005, and the three and six months ended June 30, 2006.
Report of Independent Registered Public Accounting Firm
- -------------------------------------------------------
26. THE REPORT REFERS TO AND EXPRESSES AN OPINION ON A BALANCE SHEET NOT
INCLUDED IN THE FILING. PLEASE HAVE YOUR INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM REVISE ITS REPORT TO REFER TO AND EXPRESS AN OPINION ON THE
FINANCIAL STATEMENTS INCLUDED IN THE FILING. PLEASE REFER TO AUDITING
STANDARDS CODIFICATION SECTION 508.
RESPONSE:
A revised audit has been obtained from out independent registered
public accounting firm and is included in the amended Form SB-2.
Consolidated Statements of Stockholders' Equity (Deficit)
- ---------------------------------------------------------
27. PLEASE TELL US WHAT CONTRIBUTED CAPITAL DURING EACH YEAR PRESENTED
REPRESENTS. IF CONTRIBUTED CAPITAL REPRESENTS MEMBER CONTRIBUTIONS, TELL US
WHY SHARES OF COMMON STOCK ISSUED TO THE MEMBERS OF SUNSHINE GROUP LLC IN
THE MERGER WERE NOT ALLOCATED TO THE CONTRIBUTED CAPITAL TRANSACTIONS ON AN
EQUIVALENT BASIS OR REVISE ACCORDINGLY. TO THE EXTENT THAT SHARES OF COMMON
STOCK ISSUED TO THE MEMBERS OF SUNSHINE GROUP LLC SHOULD HAVE BEEN
ALLOCATED TO THE CONTRIBUTED-CAPITAL TRANSACTIONS, PLEASE APPROPRIATELY
REVISE YOUR EARNINGS PER SHARE CALCULATIONS. ADDITIONALLY, CONSIDER
DISCLOSING THE NATURE OF THE CAPITAL TRANSACTIONS IN THE NOTES TO FINANCIAL
STATEMENTS.
RESPONSE:
As explained in Note 1 to the financial statements, the members of
Sunshine Group LLC became the controlling shareholders of the Company after
the acquisition of Sunshine. Accordingly, the Company has presented the
financial statements of Sunshine as the historical financial statements of
the Company and the acquisition as a recapitalization. Therefore the
members' equity is presented in terms of shares rather than units for
purposes of computing earnings per share.
The contributions of capital were additional funds provided by members
of Sunshine and not the sale of additional member units. Therefore the
allocation of shares to the capital contribution is not appropriate. Also
the calculation of earnings per share has been appropriately computed.
28. [NO QUESTION WAS PROVIDED]
Notes to the Consolidated Financial Statements
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29. PLEASE DISCLOSE THE TERMS, INCLUDING RATE OF INTEREST AND MATURITY, OF
NOTES PAYABLE REFLECTED IN THE BALANCE SHEET. THE ADDITIONAL DISCLOSURES
SHOULD BE SIMILAR TO THE DISCLOSURES IN YOUR UNAUDITED INTERIM FINANCIAL
STATEMENTS.
RESPONSE:
The disclosure you requested has been added as Note 4 to the Company's
audited financial statements as of December 31, 2005.
30. PLEASE DISCLOSE THE PERTINENT RIGHTS AND PRIVILEGES OF YOUR CAPITAL STOCK.
IN DOING SO, REFER TO YOUR DISCLOSURE ON PAGE 28-30. PLEASE ALSO REFER TO
SFAS 129.
RESPONSE:
31. WE NOTE ON PAGE 27 THAT YOU ENTERED INTO A WAREHOUSE FACILITY LEASE
AGREEMENT SUBSEQUENT TO YEAR END. PLEASE DISCLOSE THE SIGNIFICANT TERMS OF
THIS LEASE. PLEASE REFER TO PARAGRAPH 16.D. OF SFAS 13.
RESPONSE:
The disclosure you rested has been added as Note 5 to the Company's
audited financial statements as of December 31, 2005.
Note 2 - Summary of Significant Accounting Policies
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32. PLEASE DISCLOSE YOUR POLICY FOR CLASSIFYING SHIPPING AND HANDLING COSTS IN
THE STATEMENTS OF OPERATIONS. IF SHIPPING COSTS OR HANDLING COSTS ARE NOT
CLASSIFIED IN COST OF GOODS SOLD, DISCLOSE THE AMOUNT(S) OF THESE COSTS AND
THE LINE ITEM THAT INCLUDES THEM. ALSO CONFIRM TO US THAT AMOUNTS BILLED TO
CUSTOMERS AS SHIPPING AND HANDLING FEES ARE INCLUDED IN PRODUCT SALES.
REFER TO E1TF 00-10.
RESPONSE:
The disclosure you requested has been added as item k to Note 2 to the
Company's audited financial statements as of December 31, 2005. The Company
also confirms that amounts billed to customers as shipping and handling
fees are included in product sales.
33. PLEASE DISCLOSE THE TYPES OF EXPENSES THAT YOU INCLUDE IN THE COST OF GOODS
SOLD LINE ITEM AND THE GENERAL AND ADMINISTRATIVE LINE ITEM. IN DOING SO,
PLEASE DISCLOSE SPECIFICALLY WHETHER YOU INCLUDE INBOUND FREIGHT CHARGES,
RECEIVING COSTS, INSPECTION COSTS, WAREHOUSING COSTS, INTERNAL TRANSFER
COSTS AND THE OTHER COSTS OF YOUR DISTRIBUTION NETWORK IN COST OF GOODS
SOLD. WITH THE EXCEPTION OF WAREHOUSING COSTS, IF YOU CURRENTLY EXCLUDE A
PORTION OF THESE COSTS FROM COST OF SALES, PLEASE PROVIDE CAUTIONARY
DISCLOSURE IN MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS THAT YOUR GROSS MARGINS MAY NOT BE COMPARABLE TO
OTHERS, SINCE SOME ENTITIES INCLUDE ALL OF THE COSTS RELATED TO THEIR
DISTRIBUTION NETWORK IN COST OF GOODS SOLD AND OTHERS LIKE YOU EXCLUDE ALL
OR A PORTION OF THEM FROM GROSS MARGIN, INCLUDING THEM INSTEAD IN A LINE
ITEM SUCH AS GENERAL AND ADMINISTRATIVE EXPENSE. TO THE EXTENT THE EXCLUDED
COSTS ARE MATERIAL TO YOUR OPERATING RESULTS, PLEASE QUANTIFY THE EXCLUDED
AMOUNTS.
RESPONSE:
The disclosure you requested has been added as items k and l to Note 2
to the Company's audited financial statements as of December 31, 2005. No
cautionary disclosure has been added to the Management's Discussion and
Analysis of Financial Condition and Results of Operations because all of
the costs have been included in costs of goods sold.
b. Revenue Recognition
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34. PLEASE REVISE TO DISCLOSE THE NATURE OF YOUR REVENUES, WHETHER YOU
RECOGNIZE PRODUCT SALES UPON DELIVERY TO THE CUSTOMER'S DELIVERY SITE OR
UPON SHIPMENT, OR BOTH, AND WHEN CUSTOMERS TAKE TITLE AND ASSUME THE RISKS
AND REWARDS OF OWNERSHIP. IF SHIPPING TERMS VARY AMONG YOUR DISTRIBUTION
CHANNELS, PLEASE DISCLOSE YOUR POLICY FOR EACH MAJOR DISTRIBUTION CHANNEL.
ADDITIONALLY, PLEASE DISCLOSE YOUR SALES RETURNS POLICY.
RESPONSE:
Note 2 b of the Company's December 31, 2005, audited financial
statements has been expanded to provide the additional disclosure
requested. The Company only has one distribution channel which is the one
disclosed.
f. Research _and Development
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35. YOUR DISCLOSURE REGARDING RESEARCH AND DEVELOPMENT EXPENSES FOR THE PERIODS
PRESENTED IS INCONSISTENT WITH THE DISCLOSURE ON PAGE 23 WHICH STATES THAT
YOU SPENT APPROXIMATELY $2,500 PER YEAR ON RESEARCH AND DEVELOPMENT
ACTIVITIES DURING EACH OF THE LAST TWO FISCAL YEARS ENDED DECEMBER 31, 2005
AND 2004. PLEASE CORRECT THIS INCONSISTENCY.
RESPONSE:
Note 2 f of the Company's audited December 31, 2005 financial
statements has been corrected to eliminate this inconsistency.
Note 3 - Going Concern
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36. THE LAST SENTENCE IN THE FIRST PARAGRAPH OF THIS FOOTNOTE IS CONFUSING.
PLEASE REVISE APPROPRIATELY.
RESPONSE:
The wording has been revised as requested.
Report of Independent Registered Public Accounting Firm
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37. PLEASE HAVE YOUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM REVISE THEIR
REVIEW REPORT TO REMOVE THE REFERENCE TO THE STATEMENTS OF RETAINED
EARNINGS AND INSTEAD, REFERENCE THE CONSOLIDATED STATEMENTS OF
STOCKHOLDERS' EQUITY (DEFICIT).
RESPONSE:
A revised audit has been obtained from out independent registered
public accounting firm and is included in the amended Form SB-2.
Notes to the Consolidated Financial Statements
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Note 2 - Summary of Significant Accounting Policies
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38. PLEASE REVISE TO ADDRESS THE ABOVE COMMENTS REGARDING NOTE 2 IN YOUR
AUDITED FINANCIAL STATEMENTS.
RESPONSE:
Note 2 has been revised as disclosed above.
c. Income Taxes
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39. PLEASE EXPLAIN TO US THE BASIS FOR YOUR ELECTION AS A CORPORATION TO FILE
FEDERAL AND STATE INCOME TAXES AS A LIMITED LIABILITY COMPANY, IN DOING SO,
CITE THE SECTION OF THE INTERNAL REVENUE CODE AND/OR OTHER REGULATIONS THAT
PROVIDES FOR THE ELECTION IN ADDITION, PLEASE TELL US WHY YON MEET THE
CONDITIONS, IF ANY, CONTAINED IN THE REGULATIONS CITED TO FILE AS A LIMITED
LIABILITY COMPANY.
RESPONSE:
Sunshine Group LLC is a limited liability company and filed its tax
return as such until it was acquired by Nano Holdings, Inc. on December 31,
2005. We have added additional disclosure to Note 2 c. to clarify the tax
treatment for the consolidated entities subsequent to the acquisition.
Note 4 - Notes Payable
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40. YOU DISCLOSE THAT THE NOTES ARE PAYABLE ON DEMAND. HOWEVER, YOU DISCLOSE IN
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS ON PAGE 26 THAT THE NOTES AND RELATED ACCRUED INTEREST ARE
PAYABLE ON JULY 31, 2007. WE ALSO NOTE THAT THE PROMISSORY NOTES DATED JULY
31, 2006 FILED AS EXHIBITS 10.2 AND 10.3 TO THE REGISTRATION STATEMENT
MATURE ON JULY 31, 2007. WE ASSUME THAT THE PAYMENT TERMS OF THE NOTES WERE
MODIFIED WHEN YOU MEMORIALIZED THE TERMS OF THE LOANS ORIGINALLY MADE ON
NOVEMBER 20, 2005 AND FEBRUARY 14, 2006 AND ISSUED THE NOTES. IF OUR
ASSUMPTION IS CORRECT, PLEASE REVISE YOUR DISCLOSURE ON PAGE 26 TO DISCUSS
THE ORIGINAL PAYMENT TERMS AND THE MODIFICATION UPON ISSUANCE OF THE
PROMISSORY NOTES. IF OUR ASSUMPTION IS INCORRECT, TELL US WHY THE
OBLIGATIONS ARE NOT CLASSIFIED AS LONG-TERM OBLIGATIONS AT DECEMBER 31,
2004 AND MARCH 31, 2006.
RESPONSE:
You are correct; the payment terms of the Notes were changed when
memorialized by promissory notes and the previous incorrect disclosures in
the registration statement regarding the Notes have been revised in
connection with the actual terms of the promissory notes as memorialized.
41. YOU DISCLOSE THAT YOU EXPECT THE NOTES TO BE CONVERTED INTO COMMON STOCK
UPON THE COMPLETION OF THE REGISTRATION OF YOUR SHARES. HOWEVER, THE
PROMISSORY NOTES FILED AS EXHIBITS 10.2 AND 10.3 DO NOT CONTAIN CONVERSION
FEATURES. PLEASE ADVISE. IF YOU HAVE REACHED AN AGREEMENT WITH THE CREDITOR
REGARDING CONVERSION, PLEASE DISCLOSE THE CONVERSION PRICE AND OTHER TERMS
OF THE CONVERSION FEATURE. PLEASE REFER TO PARAGRAPH 4 OF SFAS 129. PLEASE
ALSO FILE THE AGREEMENT, IF ANY, REGARDING THE CONVERSION FEATURE AS AN
EXHIBIT TO THE REGISTRATION STATEMENT. ALSO, PLEASE CLARIFY YOUR
DISCLOSURE, IF TRUE, THAT YOU EXPECT THE NOTES TO BE CONVERTED INTO YOUR
COMMON STOCK UPON THE REGISTRATION OF YOUR SHARES AND NOT UPON THE
REGISTRATION OF THE NOTE HOLDERS' SHARES.
RESPONSE:
Note 4 to the Company's audited December 31, 2005, financial
statements has been revised to reflect the terms of the promissory notes as
filed in Exhibits 10.2 and 10.3. The promissory notes do not contain
conversion features as originally anticipated.
Prospectus Back Cover
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42. PLEASE REVISE THE OUTSIDE BACK COVER PAGE OF YOUR PROSPECTUS TO INCLUDE THE
DEALER PROSPECTUS DELIVERY OBLIGATION DISCLOSURE LANGUAGE IN ACCORDANCE
WITH 502(B) OF REGULATION S-B.
RESPONSE:
The Company has revised the back cover of the prospectus to include
the dealer prospectus delivery obligation disclosure language in accordance
with Section 502(b) of Regulation S-B as you requested.
Signature
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43. PLEASE AMEND YOUR FILING TO INCLUDE YOUR CONTROLLER/PRINCIPAL ACCOUNTING
OFFICER'S SIGNATURE.
RESPONSE:
The Company has amended its filing accordingly.
Exhibit 23.1
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44. PLEASE HAVE YOUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM REVISE THEIR
CONSENT TO REFER TO THE FINANCIAL STATEMENTS INCLUDED IN THE FILING. IN
DOING SO, PLEASE REFER TO THE RELATED CONSOLIDATED STATEMENTS OF
OPERATIONS, STOCKHOLDERS' EQUITY (DEFICIT) AND CASH FLOWS FOR EACH OF THE
YEARS IN THE TWO YEAR PERIOD ENDED DECEMBER 31, 2005. PLEASE REFER TO THE
COMMENT ABOVE REGARDING THE AUDIT REPORT OF YOUR INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM.
RESPONSE:
The Company's independent registered public accounting firm has
revised its consent accordingly.
Very Truly Yours,
/s/ John S. Gillies
------------------------------
John S. Gillies,
Associate,
David M. Loev, Attorney at Law