Published on April 19, 2007
File
No. 2392-1
April
16, 2007
Mr. Russell
Mancuso
Branch
Chief
United
States Securities and Exchange Commission
Office
of
Emerging Growth Companies
Mail
Stop
3561
100
F
Street, N.E.
Washington,
D.C. 20549
|
Re:
|
Lixte
Biotechnology Holdings, Inc.
Amendment
No. 3 to Form SB-2
Filed
March 13, 2007
File
No. 333-137208
|
Dear
Mr. Mancuso:
This
is
in response to your letter dated April 3, 2007. We are concurrently filing
herewith Amendment No. 4.
General
| 1. |
Please
ensure that your document is updated throughout and internally consistent.
For example, we note your disclosure on page 31 regarding the
January 5, 2007 agreement with the University of Regensburg. However,
on page 39, you disclose that the agreement is under
negotiation.
|
Company
Response
We
have
updated and made the conforming changes.
Management’s
Discussion and Analysis of Financial Condition and Results of Operations,
page 24
| 2. |
It
appears that you are subject to penalties under the registration
rights
agreement if the registration statement is not declared effective
by a
specified date. With a view towards disclosure, please quantify the
penalty and tell us how it affects the proceeds from the transaction,
and
your liquidity. File any related
waivers.
|
Company
Response
We
have
reflected the registration penalty in the amended financials and the
Management’s Discussion and Analysis. We have filed as Exhibit 2.4 the waiver of
monetary penalties with respect to the placement agent warrants.
Mr. Russell
Mancuso
April
16,
2007
Page 2
Going
Concern, page 30
| 3. |
The
amount of net proceeds from the second closing of your private placement
completed on July 27, 2006 ($411,302) as indicated here and on page 6
of “Risk Factors” does not reconcile to the amount disclosed in
Notes 2 and 3 on pages F-9 and F-13, respectively ($446,433). Please
make all appropriate revisions.
|
Company
Response
We
have
made the revision.
Principal
Commitments, page 31
| 4. |
We
see you indicate herein that, “Pursuant to the CRADA, Lixte agreed to
provide total payments of $400,000 over the term of the CRADA, of
which
$200,000 had been paid at December 31, 2006 and
$200,000 is due and payable in April 2007.”
Please tell us whether the referenced $200,000 represents a liability
that
needs to be reflected in your most recent balance sheet. Revise the
filing
as necessary based on our concern or tell us why no revisions are
necessary.
|
Company
Response
We
have
changed the reference from “due and payable” to “scheduled for
payment.”
Presented below is a summary of the Company’s analysis as to the accounting for the second $200,000 payment under the CRADA (text denoted in italics represents emphasis added by the Company).
The
Company has reviewed CON6, and in particular, paragraph 35, which states
that
“Liabilities are probable future sacrifices of economic benefits arising from
present
obligations
of a particular entity to transfer assets or provide services to other entities
in the future as a result of past transactions or events.”
Paragraph
36 of CON6 states, in part: “A liability has three essential characteristics:
(a) it embodies a present duty or responsibility to one or more other entities
that entails settlement by probable future transfer or use of assets at a
specified or determinable date, on occurrence of a specified event, or on
demand, (b) the duty or responsibility obligates a particular entity, leaving
it
little or no discretion to avoid the future sacrifice, and
(c) the transaction or other event obligating the entity has
already happened.”
Paragraph
38 of CON6 states, in part: “Entities routinely incur most liabilities to
acquire the funds, goods, and services they need to operate and just as
routinely settle the liabilities they incur. Most liabilities are incurred
in
exchange transactions to obtain needed resources or their use, and most
liabilities incurred in exchange transactions are contractual in nature -
based
on written or oral agreements to pay cash or to provide goods or services
to
specified, or determinable entities on demand, at
specified or determinable dates, or on occurrence of specified events.”
The
Company believes that the payment obligations under the CRADA are analogous
to a
purchase order commitment that becomes a binding obligation at a mutually
agreeable date in the future when services are provided or assets are
transferred. Until the Company is receiving the services that it has contracted
for, it believes that no liability is recordable; it is a commitment until
such
time. This agreement was designed so that funds would be paid early in the
second half of the two-year agreement to fund in advance a full year of research
and development services. If, for some reason, the Company did not fund the
second $200,000 payment, no services would be provided under the agreement.
At
December 31, 2006, the CRADA represents an agreement for the Company to provide
$200,000 of consideration in the future for research and development services
to
be rendered in the future by the National Institute of Neurological Disorders
and Stroke. At December 31, 2006, no costs have been incurred or benefits
received with respect to the second half of the two-year agreement to indicate
that a transaction triggering a recordable liability has occurred.
In
addition, consistent with the tentative conclusion reached in EITF Issue
07-3,
“Accounting for Nonrefundable Advance Payments for Goods and Services to Be
Used
in Future Research and Development Activities”, on March 15, 2007, the Company
believes that the funds paid under the CRADA represent an advance on research
and development costs that have future economic benefit. As such, the Company
believes that such costs should be charged to expense when they are actually
expended by the service provider, which is, effectively, as the service provider
performs the research activities that they are contractually committed to
provide. Absent information that would indicate that a different expensing
schedule is more appropriate, the Company believes that such advances should
be
expensed over the contractual service term on a straight-line basis, which
reflects a reasonable estimate of when the underlying research and development
costs are being incurred.
Accordingly,
for the reasons enumerated above, the Company believes that its accounting
for
the CRADA is correct and appropriate at December 31, 2006.
Mr. Russell
Mancuso
April
16,
2007
Page 3
Intellectual
Property, page 34
| 5. |
We
reissue prior comment 4 which sought disclosure regarding your
agreement
to obtain exclusive commercial rights to the inventions covered
by the
patent applications. In response 19 in your letter dated
December 1, 2006, you stated that the agreement would be executed in
December 2006. Your current disclosure implies that the agreement is
not yet executed. Therefore, we reissue comment 19 in our letter
dated
October 4, 2006 which sought that you disclose when the negotiations
regarding the agreement began, the status of the negotiations,
the
principal hurdles than remain before an agreement can be reached,
and the
scope of your rights to the intellectual property if no agreement
can be
reached.
|
Company
Response
We
have
clarified the disclosure.
Government
Regulation, page 39
| 6. |
From
your current disclosure in response to prior comment 5, it appears
that
FDA regulation extends only through the “4 to 9 month” period of a
phase I trial. If this is not correct, we reissue comment
5.
|
Company
Response
We
have
made additional disclosure.
Scientific
Advisory Committee, page 42
| 7. |
We
reissue prior comment 6. From the table of contents of your prospectus
this disclosure continues to appear in the “Management” portion of your
document and you discuss compensation of the committee as part of
your
executive compensation disclosure. Also, the advisory committee disclosure
is surrounded by management disclosure, with the biographies of your
board
preceding your disclosure regarding the advisory committee, and audit
committee and executive compensation disclosure
following.
|
Company
Response
We
have
changed the Table of Contents and placed the Advisory Committee disclosure
after
the Compensation disclosure.
Rule
144, page 46
| 8. |
We
note your reference to the weekly trading volume. Please revise your
disclosure to be consistent with question and answer 113.02 in the
April 2, 2007 interpretations regarding rule 144 available on our web
site at .
|
Company
Response
We
have
made the change in response to your comments.
* * *
Mr. Russell
Mancuso
April
16,
2007
Page 4
All
questions and comments regarding the foregoing should be addressed to me at
(310) 789-1290.
Very
truly yours,
/s/
David
L. Ficksman
DLF/wp