Mail Stop 6010
May 24, 2005
Mr. Mark A. Samuels
Chief Executive Officer
Spectrx, Inc.
4955 Avalon Ridge Parkway, Suite 300
Norcross, Georgia 30071
Re: Spectrx, Inc.
Form 10-KSB for the Fiscal Year Ended December 31, 2004
File No. 000-22179
Dear Mr. Samuels:
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
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
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-KSB for the Fiscal Year Ended December 31, 2004
General
1. We note that you have filed your quarterly Exchange Act reports
during fiscal 2004 under Regulation S-X. We then note that you
filed your annual Exchange Act report as of December 31, 2004
under
Regulation S-B. Please note that a reporting company may only
file
Exchange Act reports under Regulation S-B at the beginning of a
fiscal year. You cannot enter the Regulation S-B system during a
fiscal year if you have already filed Exchange Act reports for
periods included in that fiscal year under Regulation S-X. Please
revise this filing to meet the requirements of Regulation S-X. A
reporting company may enter the S-B system if it meets both the
revenue and public float test for each of the last two fiscal
years.
Item 6. Management`s Discussion and Analysis of Financial or Plan
of
Operation
2. We note your disclosure that revenue decreased in fiscal 2004
compared to fiscal 2003 related to a change in the way that you
accounted for earnout payments related to the BiliChek disposable.
This disclosure is vague and unclear. Tell us and revise this
filing
to clarify if this is a change in accounting policies. Explain to
us
how you are now accounting for earnout payments and how you were
previously accounting for these payments. Support your conclusion
that your accounting is appropriate with reference to accounting
literature.
Item 7. Financial Statements and Supplementary Data
Financial Statements
Consolidated Statement of Operations
3. We note that you classified the gain on the sale of your
Bilichek
product line of $4.2 million and $1.1 million for year ended
December
31, 2004 and 2003 as non-operating revenue. Revise this filing to
properly classify this gain as a component of operating income
(loss). Refer to paragraph 45 of SFAS 144.
Notes to Consolidated Financial Statements
Note 2. Summary of Significant Accounting Policies
Revenue Recognition
4. We note that your disclosure that you enter into collaborative
arrangements. Your accounting for these arrangements is unclear.
Tell us and revise this filing to address the following:
* Describe how you account for the associated costs under these
arrangements since you recognize revenue when milestones have been
achieved.
* Clarify when you recognize revenue related to your license fees
under these arrangements. We note that you defer these licenses
fees
and recognize them when earned. Describe to us how you determine
and
measure when these fees are earned.
* Cite the accounting literature relied upon.
Note 6. Stockholders` Equity
5. We note that you have classified $4.8 million related to your
redeemable convertible preferred stock as a liability within your
consolidated balance sheet. We also note your settlement
agreement
with Abbott for the redemption of these securities. Tell us and
revise this filing to explain if you measure these instruments at
fair value with changes in fair value recognized in earnings at
each
reporting date. Refer to paragraph 24 of SFAS 150.
6. We note that you granted and canceled a significant number of
stock options in each period. Please revise the filing to explain
the circumstances surrounding the number of grants in 2003 and
2004,
and explain how they related to the number of cancellations in
those
periods. Explain to how you considered Question 11(b) of FIN 44 in
your accounting for these cancellations and grants.
* * * *
As appropriate, please amend your filing and respond to
these
comments within 10 business days or tell us when you will provide
us
with a response. You may wish to provide us with marked copies of
the amendment to expedite your review. 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 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 filing to be certain that the
filing includes all information required under the Exchange Act of
1934 and that they have provided all information investors require
for an informed decision. 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 filing;
* staff comments or changes to disclosure in response to staff
comments 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 Tara Harkins, Staff Accountant, at (202)
551-
3639, Kevin Vaughn, Staff Accountant at (202) 551-3643 or me at
(202)
551-3327 if you have questions regarding these comments.
Sincerely,
Michele Gohlke
Branch Chief
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Mr. Mark A. Samuels
Spectrx, Inc.
May 24, 2005
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