SEC Comment Letter for OPTIGENEX INC. (CIK 0001168776) — Nov 14, 2005
OPTIGENEX INC. (CIK 0001168776)
Date: Nov. 14, 2005 · CIK: 0001168776 · Accession: 0000000000-05-057340
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File numbers found in text: 333-129074
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Mail Stop 6010 November 10, 2005
Mr. Anthony Bonelli
President and Chief Executive Officer
Optigenex Inc.
750 Lexington Avenue, 6th Floor
New York, NY 10022
Re: Optigenex Inc.
Registration Statement on Form SB-2, filed October 17, 2005
File No. 333-129074
Dear Mr. Bonelli:
We have reviewed your filing and have the following
comments.
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.
General
1. Please note that where we provide examples to illustrate what
we
mean by our comments, they are examples and not complete lists.
If
our comments are applicable to portions of the filing that we have
not cited as examples, please make the appropriate changes in
accordance with our comments.
2. In your next amendment, please update the disclosure and
financial
information through September 30, 2005.
3. We note that you have assumed a conversion price of $1.92 per
share to estimate the number of shares issuable pursuant to the
convertible notes. Given that your market price is much lower, it
appears you may have to register additional shares. Please
confirm
to us that you will file a separate registration statement to
register any additional shares and revise your disclosure in the
forepart of your prospectus to clarify this fact.
4. In the second paragraph under "General" on page 1, you state
that
in clinical studies "AC - 11(R) has been shown to increase the
body`s
natural ability to repair DNA damage at the cellular level." On
page
4 you state that you "market AC - 11(R) as having clinically
proven
DNA repair and protection properties." We believe these
statements
may cause a reader to make a number of conclusions that may be
erroneous such as:
* the effects of AC -11(R) on DNA strands have been clinically
observed on the biochemical level,
* you have performed your own clinical studies of the product,
* clinical studies have proven a statistically significant effect
on
aging,
* the clinical studies were subject to review by the FDA and peer
review,
* the studies may have been replicated a number of times, and
* the product received some unspecified type of regulatory
approval.
Please identify and describe the "clinical studies" you reference
in
the prospectus and provide us copies of the studies. Please also
move this discussion to the business section where you provide a
more
complete discussion of your business.
Registration Statement Cover Page
5. Please disclose in a footnote here how you arrived at the
number
of common shares being registered that are issuable pursuant to
the
convertible notes. Please include the assumed conversion price
and
the fact that you are contractually obligated to register two
times
the number of shares issuable pursuant to the convertible notes.
6. We note that warrants are exercisable for 625,000 common shares
and you have registered 1,250,000 common shares issuable pursuant
to
the warrants pursuant to your registration rights agreement with
the
investors. If the exercise price of the warrants does not vary
based
on market prices, and you do not expect to issue additional shares
pursuant to the warrants, you should not register the additional
625,000 shares at this time.
Prospectus Cover Page
7. Please highlight your cross reference to the risk factors
section
as required by Item 501 of Regulation S-B.
Prospectus Summary, pages 1-2
8. Please explain what is meant by "ISO 9002 certification."
9. Under "Recent Developments" you explain that if "the
registration
statement is not declared effective within 120 days from the date
of
closing, we are required to pay to the investors liquidated
damages
in Common Stock or cash . . . ." Please explain what "closing"
date
you are referring to and if known, please disclose this date.
Risk Factors, pages 3-9
General
10. Please review and revise each subheading to ensure it reflects
the risk that you discuss in the text. Many of your subheadings
currently either merely state a fact about your business, such as
"The key ingredient in our product is grown and harvested only in
specific areas of South America and processed at a single facility
located in Brazil." or describe an event that may occur in the
future, such as "We may need to raise additional capital."
Succinctly state in your subheadings the risks that result from
the
facts or uncertainties.
11. Many of your risk factors as currently written are too
generic.
For example, see the following:
* "There are numerous risks relating to our research and
development
efforts." (Page 3)
* "Our operations are subject to governmental regulations, which
may
change in a manner that adversely affects our business." (Page 5)
Please revise these and any other risk factors to state and
discuss
the specific risks to your business.
12. In addition many of your risk factors use general phrases such
as
"adversely affects our business" and "our business could suffer."
These vague, generic phrases are subject to varying
interpretations
and, therefore, do not adequately explain the risk or concern to
which you refer. Please revise your disclosure to describe, and
if
practicable to quantify, the specific and immediate effects to
investors of each risk that you have identified.
13. Please provide an appropriate subheading for the risk factor
regarding intellectual property on page 6.
14. We note that you have 100,000,000 shares of authorized common
stock and only 10,375,699 shares are currently issued and
outstanding
and you have assumed that only 16,792,366 shares will be issued
and
outstanding after the offering. Please also add a risk factor
that
addresses the risks of having such a large number of authorized
but
unissued common stock, including the risks that your management
may
issue additional stock without further stockholder approval,
thereby
causing dilution of current company stockholders.
"We may need to raise additional capital." Page 3
15. Please revise your disclosure in this risk factor to briefly
describe your "business plan." This additional disclosure will
help
investors better understand the impact of a change in your capital
resources or expenditures.
16. To the extent practicable, please quantify the amount of funds
you need for your operations and capital requirements for the next
12
months.
17. Please incorporate into this discussion the rate at which you
are
currently burning cash on a monthly basis.
"Other than limited sales through our website, we do not market
our
own products, and intend to rely on third parties to sell our
products." Page 4
18. To the extent that you are substantially dependent on any
third
party, please name that person in the risk factor. If you are not
substantially dependent on any such third party, disclose the
approximate number of relevant parties. We note your statement on
page 14 that you currently use iVillage to market your product.
"We rely on outside suppliers and other independent contractors."
Page 4
19. Please name the one product manufacturer and one processing
contractor you refer to in this risk factor.
"If we lose key employees and consultants . . . ." Page 6
20. Please name all of your "key employees and consultants" and
their
positions with the company.
21. To the extent that you have experienced problems attracting
and
retaining key employees or consultants in the recent past, please
revise to describe these problems. Additionally, if any key
employee
has plans to retire or leave your company in the near future,
please
revise the discussion to disclose this information.
22. Please state whether you maintain employment contracts with
key
employees or consultants and disclose any termination payments if
applicable.
23. Please disclose if you maintain any key man life insurance on
any
key employee.
"If we are unable to compete effectively with existing or new
competitors . . . ." Page 6
24. Please revise to identify the key competitors you expect to
compete with for market share and their relative position in the
market.
"There Are A Large Number Of Shares Underlying Our Callable
Secured
Convertible Notes, And Warrants . . . ." Page 7
25. This risk factor appears to be discussing the same risk as the
risk factor that follows. Please combine your discussion into one
risk factor.
26. Please recalculate the number of shares issuable pursuant to
the
convertible notes based upon the number you would have to issue as
of
the date of the prospectus. This may change as you file new
amendments.
"There is a limited market for our common stock . . . ." Page 8
27. Please revise to disclose your current trading volume.
"Our stock price may be volatile. . ." Page 8
28. To illustrate the fluctuations of your stock price, please
provide a range for your common stock price since March 17, 2005.
Disclosure of the high and low price during this time period is
sufficient.
29. Please explain your statement that you have had "no revenues
to
date." Based on your financial statements, it appears you have
had
some limited revenue.
"Our common stock is deemed to be penny stock . . . ." Pages 8-9
30. Please expand to discuss the specific legal remedies available
to
investors of penny stocks.
Management`s Discussion and Analysis or Plan of Operation, pages
10-
13
31. Currently, your MD&A does not contain an "overview." In our
recent MD&A Release No. 33-8350; 34-48960; FR-72 (December 19,
2003),
we strongly encourage companies to provide an overview to their
MD&A.
According to the release, an overview should "provide a balanced,
executive-level discussion that identifies the most important
themes
or other significant matters with which management is concerned
primarily in evaluating the company`s financial condition and
operating results." We believe your MD&A would benefit from a
brief
overview of the most important themes and significant matters with
which management is concerned. For example, you could address
whether you believe the reduction in retail prices of your
supplement
products is a significant matter with which management is
concerned.
32. Please revise your MD&A so that there is more focus on
analysis
as also required by our recent MD&A Release No. 33-8350; 34-48960;
FR-72 (December 19, 2003). In that release, we explained that
"MD&A
requires . . . an `analysis` of known material trends, events,
demands, commitments and uncertainties. MD&A should not be merely
a
restatement of financial statement information in a narrative
form. .
. . A thorough analysis often will involve discussing both the
intermediate effects of those matters and the reasons underlying
those intermediate effects." For example, see the following:
* Please explain the reasons for the $47,000 return of the bulk
AC-
11(R) and discuss any ongoing implications of this return.
* Please explain the reason for the reduction in retail prices and
whether you believe this is a trend.
* Please explain the reason for the 28% decrease in bulk sales for
the 3 month comparison (excluding the $47,000 return), and the 77%
increase for the 6 month comparison.
Please review your entire MD&A and revise accordingly. We may
have
further comments.
33. Please disclose your critical accounting estimates to provide
investors with a fuller understanding of the uncertainties in
applying critical accounting policies and the likelihood
materially
different amounts would be reported under different conditions or
using different assumptions. Include quantification of the related
variability in operating results that you expect to be reasonably
likely to occur. Please disclose information about the
uncertainties
in applying your critical accounting policies, the historical
accuracy of your critical accounting estimates, a quantification
of
their sensitivity to changes in key assumptions and the expected
likelihood of material changes in the future. Please refer to our
MD&A Release No. 33-8350; 34-48960; FR-72 (December 19, 2003).
34. We note that your product sales began in the fourth quarter of
2003 and that you accepted a $47,000 product return not in
accordance
with your standard return policy. Please expand your critical
accounting policy for product sales recognition and related
dilution
estimates as follows:
* Explain your product return policy and how you estimate product
returns of new products (e.g. levels of inventory in the
distribution
channel, estimated shelf life, price changes from competitors and
expected introductions of new products).
* For all years presented, disclose the nature and amounts of all
significant dilutions from revenue (e.g., product returns,
chargebacks, incentives, fees, rebates, etc.,), particularly for
significant recent product launches, in your comparisons of
results
from operations. In your analysis, please consider the guidance
in
our MD&A Release No. 33-8350; 34-48960; FR-72 (December 19, 2003).
* If applicable, please disclose and discuss any shipments made to
channel partners wherein such shipments are as a result of
incentives
and/or in excess of the channel partner`s ordinary course of
business
inventory level. Discuss your revenue recognition policy for such
shipments.
* Quantify the amount of changes in estimates in estimated
returns,
chargebacks, rebates and other significant dilution reserves in
subsequent periods or explicitly state that no material revisions
were recognized, if true.
35. You provide qualitative explanations for changes in results of
operations without disclosing the amounts for all of the
significant
factors causing these changes. For example, you do not quantify
the
professional fees related to scientific research. In general,
please
expand your discussion to more systematically quantify these
amounts
so that investors can better understand your results of
operations.
Liquidity and Capital Resources, pages 12-13
36. Please state the date on which the convertible notes will be
due.
37. Please describe your accounting for the issuance of
convertible
notes and warrants in August 2005 to be reflected in your interim
financial statements for the nine months ended September 30, 2005,
including how you plan to apply the relevant provisions of SFAS
150,
SFAS 133, EITF 00-19 and ASR 268.
38. Please describe how you expect to repay the $4 million in
convertible notes if investors decide not to convert them to
common
stock. Also, expand your disclosure for the $3.5 million royalty
obligation related to the Thiol and Nicoplex technologies so that
investors have a clearer understanding of the timing of related
payments.
39. In view of your limited operations to date, please provide a
discussion of your future prospects, including your expected
sources
of revenue, cash flows and operating margins implicit in your
business model.
Business, pages 14-17
Overview, page 14
40. Your business section should describe the development of your
business, including any material acquisitions. Please expand the
overview of your business to describe the acquisitions from
Giampapa
Institute and CampaMed LLC. We note that you discuss these
acquisitions in footnote 4 to the financial statements.
Retail S