SEC Company Response from HUMAN BIOSYSTEMS INC (CIK 0001070181) — Nov 22, 2005
HUMAN BIOSYSTEMS INC (CIK 0001070181)
Date: Nov. 22, 2005 · CIK: 0001070181 · Accession: 0001091818-05-000384
AI Filing Summary & Sentiment
File numbers found in text: 333-128991
Referenced dates: October 25, 2005
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Silicon Valley Law Group
November 22, 2005
VIA FEDERAL EXPRESS; FILED VIA EDGAR - CORRESPONDENCE
Securities and Exchange Commission
100 F Street, NE
Washington, D.C. 20549
Attn: Michael Reedich, Esq.
Division of Corporate Finance
Mail Stop 6010
Re: Human BioSystems
Registration Statement on Form SB-2
File No. 333-128991
Dear Mr. Reedich:
On behalf of Human BioSystems, a California corporation (the "Company"), we have
been authorized to present the following responses to that certain letter from
the Staff dated October 25, 2005 (the "Comment Letter"), relating to the
Company's Registration Statement on Form SB-2 (File No. 333-128991) (the
"Registration Statement").
Concurrently herewith, the Company is filing with the Commission Amendment No. 1
to the Registration Statement ("Amendment No. 1"), which also responds to the
Comment Letter.
The Staff's comments have been set forth below in italics, and the following
paragraphs have been numbered to correspond to the numeration of the Comment
Letter.
We and our Chief Executive Officer are the subject of SEC and Justice Department
proceedings for securities fraud.
1. You state, "the issues involved in this matter were resolved over two years
ago to the full satisfaction of all investors." Please explain what this means.
For example, were there restitution payments? If so, how much was repaid and to
whom.
In June 2000, the Company undertook a rescission offer to those shareholders who
had purchased shares of common stock and warrants in September 1999 and February
2000 private placements. The rescission offer was made due to the Company's
alleged failure to adequately disclose a commission paid to an unlicensed broker
in the private placements. Approximately 427,300 shares of common stock were
sold in the two private placements for aggregate proceeds of $640,950.
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Holders of 222,900 shares of common stock accepted the rescission offer. They
were required to return their stock certificates and warrants to the Company.
The other shareholders elected not to rescind their stock purchases. The
Company paid an aggregate of approximately $300,000 in cash to rescinding
shareholders, but could not afford to pay the balance of the rescission offer in
cash. The balance of the funds due to shareholders electing to rescind was
represented by promissory notes from the Company, with interest at the rate of
10% per annum, payable upon the earlier of (i) one year from the date of the
note or (ii) the Company's receipt of funding sufficient to permit repayment of
the principal and interest on the notes.
In 2000 and 2001, holders of $67,500 in principal and interest in the above-
referenced promissory notes elected to convert their notes to an aggregate of
206,700 shares of the Company's common stock. The remainder of the rescinding
holders were paid in full in cash prior to December 31, 2002.
As all of the shareholders electing to rescind have now been paid in full
(whether in cash or in shares of the Company's common stock), the Company
believes that the issues raised by the alleged failure to disclose have been
fully resolved. In addition, as the resolution was effected over two years ago,
the Company does not believe that disclosure of the added information set forth
above would be helpful to investors and therefore has not modified the
disclosure in Amendment No. 1.
2. Please disclose when the deferred prosecution agreement was entered. Also,
supplementally, provide us with a copy of your motion for a change of venue.
Pursuant to your request, we have modified the "Risk Factors" and "Legal
Proceedings" sections of Amendment No. 1 to indicate that the deferred
prosecution agreement was entered into in January 2005. Also pursuant to your
request, a copy of the Notion of Motion and Motion for Transfer of Venue (the
"Motion") is enclosed in the copy of this letter to be sent via Federal Express
as supplemental information. We have been informed by Mr. Masuda's counsel that
the Motion was denied in October 2004, and have modified our disclosure
accordingly.
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Liquidity and Capital Resources
3. We note the disclosure in the Liquidity subsection concerning your loan
agreement with Mr. Ben David. Please explain in your filing why Mr. Ben David
was given stock certificates in connection with the transaction. Your
disclosure and the loan agreement appear to indicate that certificates
representing the shares you were to issue to him upon funding the loan should
have been placed in escrow. Further, please state whether or not the share
certificates you gave him contained legends regarding share transfer.
Management of the Company has explained that a stock certificate was delivered
to Mr. Ben David pursuant to the arrangement documented in the Loan Agreement
and Escrow Agreement between the Company and Mr. Ben David. Pursuant to these
Agreements, a certificate representing the shares was delivered to Mr. Ben David
to hold until funds for repayment of the Euro $2,300,000 loan were delivered to
the escrow agent. The parties intended that when the loan funds were delivered
by Mr. Ben David to the escrow agent, Mr. Ben David would also deliver the
certificate to the escrow agent, and the escrow agent would disburse the funds
and the certificate to the appropriate parties. The Company timely delivered
the certificate to Mr. Ben David, but he never delivered the funds to the escrow
agent.
We have been informed by the Company that the certificate delivered to Mr. Ben
David did contain a legend restricting transfer of the shares.
We have modified the disclosures regarding the Ben David transaction in the
sections of the prospectus captioned "Management's Discussion and Analysis or
Plan of Operation - Liquidity and Capital Resources" and "Business - Background"
to reflect the foregoing discussion.
4. Also as to the Ben David transaction, please state how many shares Mr. Ben
David sold or transferred.
The Company does not currently know how many shares Mr. Ben David has sold or
transferred. Prior to the Company's termination of the Loan Agreement in
January 2005, it had permitted Ben David to exchange the original stock
certificate for three certificates (one to Ben David and one to each of two of
his affiliates, Geneva Equities and Shearson Foundation). After terminating the
Loan Agreement, the Company requested the return of all three stock
certificates. Ben David returned the one in his name (for an aggregate of
8,000,000 shares of common stock), but indicated that he no longer had the other
two certificates. To date, the Company has not been able to secure the return
of the other two certificates.
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5. As to the exchange offer, please state the number of shares to which the
offer pertains [and the business and legal purposes for the offer]. Also, state
as of the most recent practicable date the number of shares that have been
tendered for exchange.
Pursuant to your request, we have modified the disclosure in the two above-
referenced sections of the prospectus to provide this information.
6. Please state whether or not Mr. Ben David is or has been over the past two
years an affiliate of the registrant or any of its current or former affiliates.
Pursuant to your request, we have modified the above-referenced disclosure in
the "Management's Discussion and Analysis or Plan of Operation - Liquidity and
Capital Resources" section of the prospectus to indicate that Mr. Ben David is
not currently and has not been over the past two years, an affiliate of the
Company or any of its current or former affiliates.
Principal Shareholders
7. We note your July 2004 sale of securities to Langley. We further note that
Langley filed a report on Schedule 13G in July 2004 stating that it beneficially
owned over 15% of your common stock. Please disclose Langley's ownership in the
Principal Stockholders [sic] table.
Pursuant to your request, we have added Langley's ownership (currently
calculated at approximately 11% of the Company's outstanding common stock) to
the Principal Shareholders table.
Please contact me if you have any questions or comments regarding this response
or Amendment No. 1 to the Registration Statement.
Very truly yours,
SILICON VALLEY LAW GROUP
A Law Corporation
/s/ Cathryn S. Gawne
By:___________________________
Cathryn S. Gawne, Esq.
Enclosures
cc: Mr. Harry Masuda
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