View:
Mail Stop 7010
July 27, 2005
via U.S. mail and Facsimile
Javier W. Baz
Chief Executive Officer
Lifeline Therapeutics, Inc.
6400 South Fiddler`s Green Circle
Suite 1750
Englewood, Colorado 80111
Re: Lifeline Therapeutics, Inc.
Form SB-2 filed June 30, 2005
File No. 333-126288
Form 10-QSB for the quarters ended September 30, 2004, December
31,
2004 and March 31, 2005
File No. 000-30489
Dear Mr. Baz:
We have the following comments on the above filing. Where
indicated, we think you should revise your document in response to
these comments. If you disagree, we will consider your
explanation
as to why our comment is inapplicable or a revision is
unnecessary.
Please be as detailed as necessary in your explanation. In some
of
our comments, we may ask you to provide us with supplemental
information so we may better understand your disclosure. After
reviewing this information, we may or may not raise additional
comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
Form SB-2 filed June 30, 2005
Prospectus Cover Page
1. Please revise the cover page to give your company`s name
greater
prominence than your product name to avoid confusion as to the
issuer`s identity.
Inside Front Cover Page, page ii
2. Information may only be incorporated by reference into a
prospectus as specifically provided for by Rule 411. Please
revise
your statement in the last paragraph accordingly.
Prospectus Summary, page 1
3. Revise this section to include the company`s website,
www.lifelinetherapeutics.com. In this regard, we note that you
currently only make reference to the website for your product.
4. Briefly note that you are a development stage company and that
your financial statements have expressed substantial doubt about
your
ability to continue as a going concern.
A Note About Forward-Looking Statements, page 3
5. Please delete the reference to Section 27A of the Securities
Act
of 1933 and Section 21E of the Securities Exchange Act of 1934.
The
Private Securities Litigation Reform Act safe harbor is not
available
for statements made by Lifeline Therapeutics because the safe
harbor
is not available for an initial public offering or to a company
issuing penny stock. You should delete similar references to the
safe harbor elsewhere in the registration statement and in future
periodic reports, as well as the reference on your website.
Risk Factors, page 4
6. Throughout this section, you state that you "cannot assure" or
"there can be no assurance [of]" various facts. The real risk,
however, is not your inability to assure the reader. Please
revise
so that the risk is clear.
7. Include a risk factor regarding the fact that the company does
not
manufacture Protandim and discuss the risks of outsourcing the
manufacturing of your only product.
The Company has a lack of operating history..., page 4
8. Please quantify and state your losses to date. Revise this
risk
factor to clarify for investors when you will need the additional
funding. Indicate how long you will be able to fund operations
with
currently available funds.
Future laws or regulations may hinder..., page 6
9. Please explain the term DSHEA and briefly describe how you
would
be adversely impacted if this law were modified or repealed.
We are dependent on our key personnel..., page 7
10. We note your statement that the company depends on the future
performance of members of your management team, including William
Driscoll. We also note that Mr. Driscoll has resigned from the
company recently. Please update your disclosures here and
elsewhere
in the prospectus accordingly, and revise the risk factor to
discuss
how Mr. Driscoll`s resignation will affect the company and its
operations.
We intend to donate 10% of our pre-tax earnings..., page 7
11. You state that you will make contributions to charities in the
form of cash or inventory of your product; however, we note a
statement on your website that you intend to contribute stock to
charity. In addition, it appears in the selling shareholder table
that shares of stock have already been donated to the Lifeline
Orphan
Foundation. Please revise this risk factor to state, if true,
that
you intend to make future contributions of stock to charity.
Include
a discussion of how future contributions of stock to charity may
dilute shareholders` ownership of the company`s common stock.
Sales of a substantial number of shares..., page 8
12. Revise to clarify whether the shares you refer to as
restricted
shares held by existing stockholders are the same as the shares
being
registered for resale in this registration statement or in
addition
to the shares being registered for resale.
Selling Security Holders, page 9
13. Please revise your disclosures to identify the person or
persons
who have voting or investment control over the company`s
securities
that each non-public entity owns. See Interpretation 4S. of
Regulation S-K Item 507 in the March 1999 supplement of the manual
of
publicly available CF telephone interpretations.
Plan of Distribution, page 17
14. Revise to state that to the extent the Keating Securities
executes any transactions for the selling security holders,
Keating
Securities will be an underwriter.
15. Your disclosure suggests that selling security holders may
engage
broker-dealers or agents in effecting sales. However you also say
that Keating will execute any transactions for sales of securities
offered on behalf of any selling stockholders. Please reconcile.
If
you or the selling security holders have some arrangement with
Keating at this time, please discuss this in the filing.
16. We note the statement that a prospectus supplement will be
filed
to name any underwriter that will be used. If the shares are to
be
offered through an underwriter, the underwriter should be named
prior
to effectiveness. To the extent that the name of an underwriter
is
not known prior to effectiveness, a post-effective amendment
should
be filed to name the underwriter and update the plan of
distribution.
Business, page 18
17. We note your discussion of a contract manufacturing agreement
with The Chemins Company on page 20. It appears that this is a
material contract and should therefore be filed as an exhibit to
the
registration statement. Please file this contract with your next
amendment or tell us why you believe it is not material.
18. You disclose that Chemins delivers product to you based on
your
purchase orders and additional payments. Please disclose the
material terms of your contract, such as the length of the
contract,
nature of any purchase commitments, and any non-refundable
deposits.
The disclosure should clearly state how much additional cash must
be
paid to the supplier in order for you to receive the million
bottles
of product. State also whether you must complete your order by a
certain date or risk losing your $1.2 million deposit.
19. On page 20, you state that animal studies have been conducted
using Protandim and that scientists at the University of Colorado
Health Sciences Center have agreed to perform pre-clinical and
human
trials of Protandim on your behalf. Please discuss the purpose of
undertaking these studies. Please clarify whether the testing you
describe is required by, or will be reported to the FDA.
20. Please clarify the current status of the testing that
University
of Colorado Health Sciences Center is conducting. You state that
they have agreed to perform pre-clinical and human trials, but
also
that they are currently in the second phase of human testing.
Please
clarify the nature and stage of the testing that has been and is
currently being conducted, and describe the outcome of such
testing.
21. Revise to clarify, if true, that you are not seeking
regulatory
approval of Protandim from the FDA.
22. Describe the material terms of your agreement with the
University
of Colorado Health Sciences Center to conduct testing of
Protandim.
File any such agreement as an exhibit to the registration
statement.
Intellectual Property, Patents, and Royalty Agreements, page 23
23. Please state when you anticipate a decision on the grant or
denial of your patent and trademark applications.
Government Approval and Regulations, page 24
24. We note your discussion of dietary supplements and that any
supplement containing a new dietary ingredient must notify the FDA
before marketing the supplement. Please state whether Protandim
contains a new dietary ingredient and if it does, whether you
notified the FDA and provided it with any required information.
Employees, page 26
25. State the number of employees that you currently employ and
how
many are full-time employees.
Property, page 26
26. The description of property should include a discussion of any
space where you conduct your business, including any office
facilities.
Risk of Environmental Liabilities, page 26
27. We note from your disclosure that there remains a risk that
there
may be environmental liabilities associated with your former
property
interests in Montana for which you may be liable. Revise your
disclosure to include the required disclosures set forth in
Question
2 and 3 to SAB Topic 5Y or disclose that the likelihood of a
material
unfavorable outcome is remote.
Management`s Discussion and Analysis, page 26
Plan of Operation, page 29
28. We note the bulleted list of items that you intend to
accomplish,
including obtaining necessary governmental licenses and initiating
public relations and marketing plans. We also note that you have
already sold Protandim and have purchased advertisements on the
internet. Please update this section accordingly. If any
licenses
to distribute Protandim are necessary or were obtained, please so
state.
29. Based upon available information, it appears that you have an
agreement with GNC to carry your product in its stores. Include a
discussion of this agreement in the prospectus and file it as an
exhibit to the registration statement, or tell us why you believe
it
is not a material contract.
30. Discuss the availability of any raw materials necessary for
the
production of Protandim.
31. We note that you have considered creating a pharmaceutical
division to continue further testing of Protandim, develop a drug
discovery and development program, and proceed through the FDA
approval process. Please disclose whether you have considered a
timetable for the creation of a pharmaceutical division and how
you
would fund that division.
Critical Accounting Policies, page 30
Revenue Recognition, page 30
32. We note that you offer a 30-day money back guarantee, for
which
you record estimates of returns based upon historic and industry
data. You disclose that you commenced sales on February 2005,
which
does not appear would provide you with sufficient relevant
historical
experience on which to estimate your returns. Other indicators
that
would suggest that future returns cannot be reasonably predicted
include the absence of a large volume of relatively homogeneous
transactions and the newness of your product. Refer to SAB Topic
13-
3b, Interpretative Response (b) to Question 1 for guidance.
Please
tell us why you believe, based on the guidance, that it is
appropriate for you to record sales when the product is shipped to
the customer and not when the guarantee period has lapsed.
33. Please tell us and provide disclosure in your filing regarding
the total number of bottles sold and bottles subsequently
returned,
including the dollar value of the returns.
Security Ownership of Certain Beneficial Owners and Management,
page
33
34. Information in this table for Messrs. Leigh and Streets is
inconsistent with the information in the selling security holder
table. We also note that the beneficial ownership table is as of
May
31, 2005 while the selling security holder table is as of June 17.
Please update both tables to the most recent practicable date and
reconcile any inconsistencies.
35. Please explain how the selling shareholders acquired the
shares
being registered for resale that are other than shares underlying
bridge warrants, placement agent warrants and unit warrants. It
does
not appear that all 6,322,001 shares that are currently
outstanding
and registered for resale can be accounted for by the private
placement you conducted in March through May 2005.
36. Please include all shares owned of record by Lifeline Orphan
Foundation in the total number of shares shown in the table to be
beneficially owned by Mr. Myhill. Then disclose in a footnote the
number of shares that the Foundation owns and over which Mr.
Myhill
has voting or dispositive power. This table should reflect
beneficial ownership within the meaning of Rule 13d-3. We
understand
that Mr. Myhill is a trustee of the Foundation, and according to
information on your website, its executive director as well.
Similarly, please revise the selling security holder table to
include
a footnote that discusses the beneficial ownership of the shares
held
of record by the Foundation.
Description of Securities, page 37
37. It appears that the form of warrant agreements include an
adjustment mechanism to be used to adjust the number of shares
issuable upon a change in the exercise price when the warrant is
exercised in order to protect against dilution. Given that it
appears you intend to rely upon Rule 416 to register an
indeterminable number of common shares to be issued as a result of
this provision, please provide a description of this adjustment
mechanism.
Market for Common Equity and Related Stockholder Matters, page 38
38. It appears that you have a limited and sporadic trading market
for your shares. As such, you should include all of the
information
required by Item 201(a)(2) of Regulation S-B.
Additional Information, page 40
39. Qualification of information within the prospectus by
reference
to information outside the prospectus is only appropriate where a
summary or outline of a
document is required or where provided in the appropriate form.
See
Rule 411(a) of Regulation C. Please revise this section
accordingly.
Financial Statements, page F-8
40. We note the company has an obligation to register the common
stock issued in the private placement and the common shares
underlying the warrants issued to the bridge note holders;
however,
there does not appear to be a discussion of this obligation in the
prospectus. Please revise the section entitled "Market for Common
Equity and Related Stockholder Matters" accordingly and file any
corresponding agreement as an exhibit. See Item 201 of Regulation
S-
B.
Statement of Cash Flows, page F-4
41. We note you include payment of a noncompete agreement as a
financing activity. Please tell us how you made this
determination
and the authoritative literature supporting your accounting.
Item 25. Other Expenses of Issuance and Distribution, page II-2
42. It appears that the NASD filing fee you reference has not been
included in the table of fees provided. Please advise or revise.
Item 26. Recent Sales of Unregistered Securities, page II-2
43. Please file the agreement that you entered into with the
placement agent as an exhibit to the registration statement.
Item 27. Exhibits, page II-4
44. Please file Exhibit 5.1 with your next amendment or as soon as
possible. Please understand that we will need time to review this
exhibit prior to the registration statement becoming effective.
Form 10-QSB for the quarters ended September 30, 2004, December
31,
2004, and March 31, 2005
Item 2. Management`s Discussion and Analysis
45. In this section, we note that you refer to the closing price
of
your stock, "per NASDAQ"; however, it appears that your stock is
not
and has not been listed on the NASDAQ. Please advise, and if
necessary, revise to delete such references in future filings.
Item 3. Controls and Procedures
46. In future filings, revise this section to state that
management
has evaluated the effectiveness of the disclosure controls and
procedures as of the end of the period covered by the report. See
Item 307 of Regulation S-B. Revise your certifications
accordingly.
47. We note the statement that there has been "no significant
changes
in the Company`s internal controls...subsequent to the date the
Company carried out its evaluation." In future filings, revise to
state, if true, that no change occurred during the last fiscal
quarter that materially affected, or is reasonably likely to
materially affect, the company`s internal controls. See Item
308(c)
of Regulation S-B.
Closing Comments
As appropriate, please amend your registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested supplemental information.
Detailed cover letters greatly facilitate our review. Please
understand that we may have additional comments after reviewing
your
amendment and responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
Notwithstanding our comments, in the event the company
requests
acceleration of the effective date of the pending registration
statement, it should furnish a letter, at the time of such
request,
acknowledging that:
? should the Commission or the staff, acting pursuant to
delegated
authority, declare the filing effective, it does not foreclose the
Commission from taking any action with respect to the filing;
? the action of the Commission or the staff, acting pursuant to
delegated authority, in declaring the filing effective, does not
relieve the company from its full responsibility for the adequacy
and
accuracy of the disclosure in the filing; and
? the company may not assert this action as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in connection with our review of
your
filing or in response to our comments on your filing.
We will consider a written request for acceleration of the
effective date of the registration statement as a confirmation of
the
fact that those requesting acceleration are aware of their
respective
responsibilities under the Securities Act of 1933 and the
Securities
Exchange Act of 1934 as they relate to the proposed public
offering
of the securities specified in the above registration statement.
We
will act on the request and, pursuant to delegated authority,
grant
acceleration of the effective date.
We direct your attention to Rules 460 and 461 regarding
requesting acceleration of a registration statement. Please allow
adequate time after the filing of any amendment for further review
before submitting a request for acceleration. Please provide this
request at least two business days in advance of the requested
effective date.
You may contact Tracy McKoy, Staff Accountant, at (202) 551-
3772 or, in her absence, Al Pavot, Senior Staff Accountant, at
(202)
551-3738 if you have questions regarding comments on the financial
statements and related matters. Please contact Tamara Brightwell,
Staff Attorney, at (202) 551-3751 or, in her absence, the
undersigned
at (202) 551-3760.
Sincerely,
Pamela A. Long
Assistant Director
cc: Alan Talesnick, Esq.
Jon S. Ploetz, Esq.
Patton Boggs LLP
1660 Lincoln Street, Suite 1900
Denver, Colorado 80264
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Mr. Javier Baz
Lifeline Therapeutics, Inc.
July 27, 2005
Page 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-7010
DIVISION OF
CORPORATION FINANCE