SecProbe.io

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Mail Stop 0306

February 9, 2005

VIA U.S. MAIL AND FAX (520) 512-8019

Mr. Shaun D. McMeans
Chief Operating Officer and Chief Financial Officer
LXU Healthcare, Inc.
3708 East Columbia Street
Tucson, Arizona 85714

	Re:	LXU Healthcare, Inc.
		Form 10-K for the year ended June 30, 2004

Dear Mr. McMeans:

      We have reviewed your filings and have the following
comments.
We have limited our review to only your financial statements and
related disclosures and will make no further review of your
documents. Where indicated, we think you should revise your
documents
in future filings 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
filings.
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 10-K for the year ended June 30, 2004

Liquidity and Capital Resources - Page 32

1. We noted that your Liquidity and Capital Resources discussion
in
Management`s Discussion & Analysis is, in part, a recitation of
your
cash flow in narrative form. In accordance with Item 303 of
Regulation S-K please revise future filings to discuss the factors
that drive cash flows rather than simply discuss the line items
that
appear on the cash flow statement.  In addition, discuss those
items
which management specifically believes may be indicators of the
company`s liquidity condition in both the short term and long
term.

Consolidated Statement of Operations - Page F-4

2. Revise future filings to present revenues from the sale of
products and revenues from the provision of services separately in
the income statement in accordance with Rule 5-03(b)(1) of
Regulation
S-X.  See paragraph 19 of EITF 99-19.

Note 2. Summary of Significant Accounting Policies

Revenue Recognition - Page F-10

3. In a supplemental response please tell us how you have
concluded
to recognize revenue gross for when you have the inventory on hand
and net when you do not stock the vendor`s products.  Please
provide
us with a complete EITF 99-19 analysis on how you determined a
gross
presentation versus a net presentation for both types of revenue.
We
note on page 10 where you state that you provide all of the
fulfillment services for the revenue you record on a gross basis.
Please cite the other factors in EITF 99-19 when determining to
record revenues gross versus net.

4. We note from page 28 in your MD&A that the company offers
discounts and rebates to customers:

* Explain the nature of your discounts and rebates and how you
account for the programs. Cite the accounting literature upon
which
you relied.

* Address how the company considers these concessions with respect
to
the fixed and determinable criteria of SAB 104.

* Please quantify the total price concessions recognized in each
period presented, including the interim periods.

5. We also noted in the Business section that the company provides
additional services and "solutions" to customers as well as hands
on
training of clinicians and medical personnel related to use of
your
products. Tell us and expand your revenue recognition policy in
future filings to address the following:

* Please tell us the nature of any additional services and post
shipment obligations that the company provides to its customers,
and

* Provide details of whether the revenue arrangements have
multiple
deliverable and the impact of EITF 00-21.

Loss Per Common Share - Page F-12

6. We noted that the company did not include any of the options or
warrants outstanding in the computation of dilutive earnings per
share and that you state that all outstanding options and warrants
are antidilutive. However, we also noted that approximately 7.5
million shares were issued in fiscal 2002 at $.32 per share and an
additional 1.3 million shares were issued in fiscal 2003 at $.32
per
share. Tell us how it was determined that these shares were anti-
dilutive.

Note 8. Preferred Stock - Page F-17

7. Supplementally tell us how you concluded that the Series G
Preferred Stock should be reclassified to a liability under SFAS
150.
Include references to paragraphs 9 and 10 as well as A1 - A9 in
Appendix A.

* Tell us how you determined whether the shares were conditional
or
unconditional obligations of the company during the period in
which
the holder may convert shares at their option.

* Please explain the terms of the conversion that is at the option
of
the holder. We noted that "each share of Series G Stock is
convertible into 100 shares of common stock, subject to
adjustment,
at the option of the holder."

8. We noted that you recorded a beneficial conversion feature
related
to your Series G Preferred Stock in December 2002. Provide details
of
the calculation of the $1 million charge and discuss how the
conversion price was determined.  How did you determine your
commitment date? Please also tell us the guidance upon which you
relied.

9. In this regard, we note that you also issued warrants to
purchase
3.3 million shares of common stock at $.01 per share in connection
with the issuance of the Series G Convertible Preferred Stock.
Supplementally and in detail explain how you valued, recorded and
accounted for these warrants. Demonstrate that your accounting
complies with GAAP.

Note 9. Stock Options and Warrants - Page F-15

10. We noted that the company recapitalized its equity structure
in
August 2002 and several series of preferred stock were converted
to
common stock. In addition, the company issued warrants to purchase
common stock at $.01 per share to the holders of certain series of
preferred stock in connection with the conversion. Tell us how you
accounted for the recapitalization, cite the accounting literature
upon which you based your accounting. Lastly, tell us the deemed
fair
value of the common stock on the various dates the warrants were
issued.

11. We noted that the company repriced and/ or adjusted the
exercise
price of warrants as follows:

* The exercise prices on warrants to purchase 140,330 shares of
common stock previously issued to certain preferred stockholders
were
repriced from $1.68 per share to $.01 per share.

* The exercise price on previously issued warrants to purchase
1,751,130 was "adjusted" from $1.00 per share to $.01 per share.

* The exercise price on 1,625,000 warrants to purchase common
stock
previously issued to certain Series E stockholders was repriced
from
$1.00 per share to $.01 per share.

Please tell us how you accounted for repricing these warrants and
cite the accounting literature on which you based your accounting.

Note 13. Business Segments - Page F-24

12. We noted that the company reports three operating segments,
however, we also noted the Business section of the document where
you
state, "Today, we have two primary businesses: Specialty Medical
Distribution and the Manufactured Products Division...." Following
this statement, you provide further description of the company`s
business based on these two primary businesses and reference
Footnote
13. Please clarify to investors how these two discussions relate
to
each other and how management reviews the business. Revise in
future
filings so that this information is consistent to aid investors in
understanding managements focus regarding the business.

*    *    *    *

      As appropriate, please respond to these comments within 10
business days or tell us when you will provide us with a response.
Please furnish a cover letter that keys your responses to our
comments and provides any requested supplemental information.
Detailed cover letters greatly facilitate our review.  Please file
your cover letter on EDGAR.  Please understand that we may have
additional comments after reviewing your 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.
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.

      In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that

?	the company is responsible for the adequacy and accuracy of
the
disclosure in the filings;
?	staff comments or changes to disclosure in response to staff
comments in the filings reviewed by the staff do not foreclose the
Commission from taking any action with respect to the filing; and
?	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.

      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 our review of your filing or in
response to our comments on your filing.

      You may contact Julie Sherman, Staff Accountant, at (202)
824-
5506 or me at (202) 942-2813 if you have questions.  In this
regard,
do not hesitate to contact Martin James, the Senior Assistant
Chief
Accountant, at (202) 942-1984.

							Sincerely,

							Daniel Gordon
							Branch Chief

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Mr. Shaun D. McMeans
LXU Healthcare, Inc.
February 9, 2005
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