SEC Comment Letter for AVALON PHARMACEUTICALS INC (CIK 0001162192) — Sep 7, 2005
AVALON PHARMACEUTICALS INC (CIK 0001162192)
Date: Sept. 7, 2005 · CIK: 0001162192 · Accession: 0000000000-05-046181
AI Filing Summary & Sentiment
File numbers found in text: 333-124565
Letter
Mail Stop 6010 September 7, 2005 Kenneth C. Carter, Ph.D. President and Chief Executive Officer Avalon Pharmaceuticals, Inc. 20358 Seneca Meadows Parkway Germantown, MD 20876
Re: Avalon Pharmaceuticals, Inc. Amendment No. 3 to the Registration Statement on Form S-1 File No. 333-124565
Dear Dr. Carter:
We have reviewed your filing and have the following legal comments only. If you disagree, we will consider your explanation as to why our comment is inapplicable. Please be as detailed as necessary in your explanation. After reviewing this information, we may or may not raise additional comments. In addition, please note that accounting staff is continuing to review the filing and any comments they may have on it will be issued in a separate letter.
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.
Letter Discussion Concerning the Line of Credit Dated September 1,
1. We note the discussion you have provided in the above referenced letter and in your amended Form S-1 regarding a subordinated line of credit facility you entered into on August 30, 2005. Please provide us with a more detailed analysis supporting your belief that your financing transaction was conducted in accordance with the Securities Act of 1933, including analysis under the five-factor test enumerated in SEC Release No. 33-4552 (November 6, 1962). Your analysis should also specifically discuss why you believe the line of credit is not an equity financing as it appears you have issued to the lenders warrants to purchase preferred stock, which we understand may be convertible into common stock, and further that the company may repay any advances made on the line of credit in common stock. Your analysis should specifically discuss how the line of credit arrangement and the initial public offering are not part of a single plan of financing as it appears from your disclosure that the credit facility`s intended purpose is to support your operations pending the closing of the proposed public offering, which we understand means any advances made on the credit facility may be used toward the development of any of your products as well as for general working capital, intended purposes similar to that of your initial public offering use of proceeds disclosure. Please also provide us with analysis that the subordinated line of credit facility qualifies under Staff`s Black Box no-action letter (available June 26, 1990) and the Squandron, Ellenoff, Pleasant & Lehrer no action letter (available February 28, 1992) and include the total number of lenders participating in the offer, whether such lenders constitute QIBs and the total number of accredited investors participating in the credit facility. We may have further comments.
2. Please also provide us with a copy of the credit facility agreement as soon as possible as we cannot complete our review of this issue until we have an opportunity to review and comment, if necessary, on the credit facility agreement.
Form S-1 "Purchasers in this offering will suffer immediate dilution," page
3. Please revise this risk factor to provide disclosure that shareholders may experience further dilution if you decide to repay the line of credit in common stock. Please also provide similar disclosure in the document as appropriate, including your Capitalization and Dilution sections.
Subsequent Events, page 44
4. Please revise your disclosure to identify the lenders with whom you entered into the line of credit. Please also add disclosure that you may repay any advances you make on the line of credit in cash or in stock, at your option.
5. You indicate that as part of the credit facility, certain stockholders who did not participate in the line of credit will have their shares of preferred stock converted into common stock. Please expand your disclosure to explain why, and please identify the stockholders whose shares may be converted into shares of common stock.
* * *
Provide a letter keying your responses to the comments, and provide any requested supplemental information. If you believe complying with these comments is not appropriate, tell us why in your letter. The response letter should be uploaded to EDGAR, with the form type label "CORRESP" and linked to the registration statement file number. We may have comments after reviewing revised materials and your responses.
Please contact Song Brandon at (202) 551-3621, John Krug, Senior Attorney, at (202) 551-3862 or me at (202) 551-3710 with any questions.
Sincerely,
Jeffrey Riedler
Assistant Director
Show Raw Text
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<FILENAME>filename1.txt
<TEXT>
Mail Stop 6010
September 7, 2005
Kenneth C. Carter, Ph.D.
President and Chief Executive Officer
Avalon Pharmaceuticals, Inc.
20358 Seneca Meadows Parkway
Germantown, MD 20876
Re: Avalon Pharmaceuticals, Inc.
Amendment No. 3 to the Registration Statement on Form S-1
File No. 333-124565
Dear Dr. Carter:
We have reviewed your filing and have the following legal
comments only. If you disagree, we will consider your explanation
as
to why our comment is inapplicable. Please be as detailed as
necessary in your explanation. After reviewing this information,
we
may or may not raise additional comments. In addition, please note
that accounting staff is continuing to review the filing and any
comments they may have on it will be issued in a separate letter.
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.
Letter Discussion Concerning the Line of Credit Dated September 1,
2005
1. We note the discussion you have provided in the above
referenced
letter and in your amended Form S-1 regarding a subordinated line
of
credit facility you entered into on August 30, 2005. Please
provide
us with a more detailed analysis supporting your belief that your
financing transaction was conducted in accordance with the
Securities
Act of 1933, including analysis under the five-factor test
enumerated
in SEC Release No. 33-4552 (November 6, 1962). Your analysis
should
also specifically discuss why you believe the line of credit is
not
an equity financing as it appears you have issued to the lenders
warrants to purchase preferred stock, which we understand may be
convertible into common stock, and further that the company may
repay
any advances made on the line of credit in common stock. Your
analysis should specifically discuss how the line of credit
arrangement and the initial public offering are not part of a
single
plan of financing as it appears from your disclosure that the
credit
facility`s intended purpose is to support your operations pending
the
closing of the proposed public offering, which we understand means
any advances made on the credit facility may be used toward the
development of any of your products as well as for general working
capital, intended purposes similar to that of your initial public
offering use of proceeds disclosure.
Please also provide us with analysis that the subordinated
line
of credit facility qualifies under Staff`s Black Box no-action
letter
(available June 26, 1990) and the Squandron, Ellenoff, Pleasant &
Lehrer no action letter (available February 28, 1992) and include
the
total number of lenders participating in the offer, whether such
lenders constitute QIBs and the total number of accredited
investors
participating in the credit facility. We may have further
comments.
2. Please also provide us with a copy of the credit facility
agreement as soon as possible as we cannot complete our review of
this issue until we have an opportunity to review and comment, if
necessary, on the credit facility agreement.
Form S-1
"Purchasers in this offering will suffer immediate dilution," page
23
3. Please revise this risk factor to provide disclosure that
shareholders may experience further dilution if you decide to
repay
the line of credit in common stock. Please also provide similar
disclosure in the document as appropriate, including your
Capitalization and Dilution sections.
Subsequent Events, page 44
4. Please revise your disclosure to identify the lenders with whom
you entered into the line of credit. Please also add disclosure
that
you may repay any advances you make on the line of credit in cash
or
in stock, at your option.
5. You indicate that as part of the credit facility, certain
stockholders who did not participate in the line of credit will
have
their shares of preferred stock converted into common stock.
Please
expand your disclosure to explain why, and please identify the
stockholders whose shares may be converted into shares of common
stock.
* * *
Provide a letter keying your responses to the comments, and
provide any requested supplemental information. If you believe
complying with these comments is not appropriate, tell us why in
your
letter. The response letter should be uploaded to EDGAR, with the
form type label "CORRESP" and linked to the registration statement
file number. We may have comments after reviewing revised
materials
and your responses.
Please contact Song Brandon at (202) 551-3621, John Krug,
Senior Attorney, at (202) 551-3862 or me at (202) 551-3710 with
any
questions.
Sincerely,
Jeffrey Riedler
Assistant Director
cc: Michael J. Silver, Esq.
Stephanie D. Marks, Esq.
Hogan & Hartson LLP
111 South Calvert Street
Baltimore, MD 21202
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