Mail Stop 6010
June 15, 2005
J. Richard George
Chief Executive Officer
Calypte Biomedical Corporation
5000 Hopyard Road, Suite 480
Pleasanton, California 94588
Re: Calypte Biomedical Corporation
Registration Statement on Form S-3
Filed May 19, 2005
File No. 333-125051
Dear Mr. George:
We have limited our review of your filing to those issues we
have addressed in our 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 information so we may better understand
your
disclosure. After reviewing this information, we may 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 any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
Incorporation by Reference, page 24
Form 10-KSB for the year ended December 31, 2004
Note 2. Significant Accounting Policies, page F-10
Principles of Consolidation, page F-10
1. We note that you have a 51% ownership interest in the joint
venture Beijing Calypte Biomedical Technology Ltd. Please tell us
more about the nature of the
arrangement and provide us with your analysis of why the joint
venture is not a variable interest entity under FIN 46(R) and why
you
are not consolidating your interest.
Segment and Geographic Information, page F-13
2. We note in your MD&A on page 36 that you discuss the different
types of products that you have and how these products affect your
operations. Please revise future filings to provide all
disclosures
as required by paragraph 37 of SFAS 131, as those disclosures
apply
to all companies even those that have a single reportable segment
or
tell us why these disclosures are not applicable.
Note 6. Accounts Payable, Accrued Expenses and Deferred Revenue,
page F-15
3. We note on page F-14 in Note 4 that you have closed a plant in
Alameda, California, and on page 38 you accrued $300,000 of
severance-related costs attributable to the shut-down. We also
note
that you disclose additional liabilities related to employee
severance and accrued restructuring expense in Note 6.
Additionally,
we note on page 38 that you have eliminated your direct sales and
marketing force. To the extent these costs were incurred as part
of
a formal restructuring plan accounted for pursuant to SFAS 146,
please revise future filings, if significant, to provide the MD&A
disclosures required by SAB Topic 5-P as well as the financial
statement disclosures required by paragraph 20 of the Statement.
Note 7. Notes and Debentures Payable, page F-16
4. Disclose the effective interest rate for each borrowing. Refer
to
APB 21.
5. We note that you determined that each of the 10% convertible
debentures and the 12% convertible debentures were issued with a
beneficial conversion feature and that the intrinsic value was
calculated based on the date of issue. Please clarify how you
accounted for an adjustment of the beneficial conversion feature
with
each extension of the maturity of the debentures, if you did not
make
an adjustment please tell us why. In your response please refer
to
EITF 98-5 and EITF 00-27.
8% Convertible Notes, page F-16
6. We note that you recognized approximately $768,000 as
liquidated
damages attributable to your two 8% convertible notes totaling
$3,232,000. We also note that you overestimated the liquidated
damages by approximately $205,000; however you did not reverse the
accrual until fiscal year 2004. Please tell us why you did not
reverse the over accrual related to the liquidated damages in 2003
rather than in 2004, as we note that the conversion of the note
and
the calculation of the liquidated damages was completed in 2003.
10% Convertible Note, page F-17
7. We note that you disclose that no accounting adjustments were
required as a result of the extension of the note`s maturity or
the
amendment of the conversion price. We also note that with each
extension of the note`s maturity and amendment of the conversion
there was a difference in the intrinsic value, which would cause
an
accounting adjustment relating to the recognition of the
beneficial
conversion feature. Please tell us why you did not account for
the
adjustment of the beneficial conversion feature and additionally
tell
us how you considered EITF 98-5 and EITF 00-27.
12% Convertible Debenture - Mercator Momentum Fund (MMF), page F-
21
8. Please tell us why you classified the non-cash gain of $128,000
from the repurchase of the beneficial conversion feature upon the
repayment of the debenture, as other income rather than
classifying
the amount as interest expense.
5% Note Purchase Agreement, page F-22
9. We note that as consideration for the Marr Credit Facility you
issued Marr several warrants to purchase common stock. Please
tell
us and disclose in future filings how you classified the warrants
as
of December 31, 2004 considering that they have been issued but
not
exercised.
Note 8. Lease Commitments, page F-23
10. We note that your new operating lease provides for tenant
improvements. Please tell us whether this is a lease incentive
provided by the landlord and how you accounted for the
improvements
in your financial statements. Please refer to paragraph 15 of
SFAS
13, the response to Question 2 of FASB Technical Bulletin 88-1
("FTB
88-1"), and the letter issued by the SEC outlining the current
GAAP
literature that should be looked to in determining the appropriate
accounting available on our website at
http://www.sec.gov/info/accountants/staffletters/cpcaf020705.htm.
Note 10. Stockholders` Equity (Deficit), page F-25
Private Placements, page F-25
11. We note that you refer to an independent valuation on pages F-
25
and F-26. While you are not required to make reference to this
independent valuation, when you do so, you must name the expert
and
file their written consents in any registration statements. See
Item
601(b) of Regulation S-K.
Note 15. Employment and Consulting Agreements, page F-34
12. We see that in the fourth quarter of 2002 you canceled all
outstanding options previously granted to certain officers and the
Executive Chairman and granted them fully-vested options on May
29,
2003. Please tell us how you accounted for the cancellations and
subsequent re-issuances of shares in accordance with FIN 44.
Section 302 Certification - Exhibits 31.1 and 31.2
13. We note that the certifications filed as Exhibits 31.1 and
31.2
were not in the proper form. The required certifications must be
in
the exact form prescribed; the wording of the required
certifications
may not be changed in any respect, except for the modifications
temporarily permitted to be made to the fourth paragraph of the
certification required to be filed as Exhibit 31.1 pursuant to
Part
III.E of Release No. 8238. Accordingly, please file an amendment
to
your Form 10-KSB/A that includes the entire filing together with
the
certifications of each of your current CEO and CFO in the form
currently set forth in Item 601(b)(31) of Regulation S-B. Please
revise your Form 10-QSB for the period ended March 31, 2005 as
well.
Form 10-QSB for the period ended March 31, 2005
Note 7. Subsequent Events, page 11
Restructuring of Operations, page 12
14. We note that as of April 11, 2004 that you have signed a
letter
of intent to dispose of your "Legacy Business," and in connection
with the disposal of this portion of your business you have
disclosed
that you expect to incur approximately $1 million in expense from
the
write-down of your inventory. Please tell us why you believe that
this same inventory was not impaired as of the period ended March
31,
2005.
15. As a related matter, we see from the Form 8-K dated April 11,
2005 that you entered into a letter of intent to sell your urine
EIA,
serum Western Blot and urine Western blot diagnostic test
business.
Please tell us whether the "Legacy Business" will be treated as a
discontinued operation under SFAS 144. If so, please explain why
the
"Legacy Business" was not presented as a discontinued operation in
the March 31, 2005 Form 10-QSB.
As appropriate, please amend your registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested information. Detailed cover
letters greatly facilitate our review. Please understand that we
may
have additional comments after reviewing your amendment and
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 Securities Act
of
1933 and that they have provided all information investors require
for an informed investment 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.
Notwithstanding our comments, in the event the company
requests
acceleration of
the effective date of the pending registration statement, it
should
furnish a letter, at the time of such request, acknowledging that:
* should the Commission or the staff, acting pursuant to delegated
authority, declare the filing effective, it does not foreclose the
Commission from taking any action with respect to the filing;
* the action of the Commission or the staff, acting pursuant to
delegated authority, in declaring the filing effective, does not
relieve the company from its full responsibility for the adequacy
and
accuracy of the disclosure in the filing; and
* the company may not assert staff comments and the declaration of
effectiveness 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 connection with our review of
your
filing or in response to our comments on your filing.
We will consider a written request for acceleration of the
effective date of the registration statement as confirmation of
the
fact that those requesting acceleration are aware of their
respective
responsibilities under the Securities Act of 1933 and the
Securities
Exchange Act of 1934 as they relate to the proposed public
offering
of the securities specified in the above registration statement.
We
will act on the request and, pursuant to delegated authority,
grant
acceleration of the effective date.
We direct your attention to Rules 460 and 461 regarding
requesting acceleration of a registration statement. Please allow
adequate time after the filing of any amendment for further review
before submitting a request for acceleration. Please provide this
request at least two business days in advance of the requested
effective date.
You may contact Traci Hornfeck at (202) 551-3642 or Lynn
Dicker
at (202) 551-3616 if you have questions regarding comments on the
financial statements and related matters. Please contact Tom
Jones
at (202) 551-3602 or me at (202) 551-3617 with any other
questions.
Sincerely,
Russell Mancuso
Branch Chief
cc (via fax): Paula Winner Barnett, Esq.
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J. Richard George
Calypte Biomedical Corporation
June 15, 2005
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