Via Facsimile and U.S. Mail
Mail Stop 6010
November 23, 2005
Mr. George G. Usher
President and Chief Executive Officer
Polydex Pharmaceuticals Limited
421 Comstock Road
Toronto, Ontario M1L 2H5
Canada
Re: Polydex Pharmaceuticals Limited
Form 10-K for Fiscal Year Ended January 31, 2005
Forms 10-Q for Fiscal Quarters Ended
April 30, 2005 and July 31, 2005
File No. 1-08366
Dear Mr. Usher:
We have reviewed your filings and have the following
comments.
We have limited our review of your filings to only your financial
statements and related disclosures and do not intend to expand our
review to other portions of your documents. Where indicated, we
think you should revise your documents 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 ask you to provide us with more information so we may better
understand your disclosure.
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 any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
Form 10-K for the year ended January 31, 2005
Financial Statements
Consolidated Statements of Operations
1. It appears from your disclosure that depreciation and
amortization
related to products sold is not classified in cost of goods sold.
If
true, please revise your disclosure to reclassify the appropriate
amounts to cost of goods sold. Alternatively, expand the cost of
goods sold caption to include parenthetical disclosure indicating
that depreciation and amortization related to products sold is
excluded and disclose such excluded amounts. Please refer to SAB
Topic 11:B. In addition, please revise your gross profit analysis
in
MD&A to disclose the gross profit amounts including depreciation
and
amortization. Please revise your fiscal 2006 Forms 10-Q,
accordingly.
2. Please refer to your disclosures in Note 12a. Please explain
to
us why the sale of the finished product veterinary pharmaceutical
business, including your interest in the joint venture is
classified
as continuing operations. Please address paragraphs 41 and 42 of
SFAS
144.
3. Please tell us what is netted against your interest expense on
your statements of operations as interest expense should be
presented
on a gross basis. Please see Rule 5-03(b)(8) of Regulation S-X.
4. Please revise your statements of operations to remove the line
item "Income (loss) before the following" as this sub-total is a
non-
GAAP measure. In addition, please reclassify the legal fees,
litigation, and other costs associated with the interest you sold
in
the joint venture and the allowance on the amount due from
Sparhawk,
included in other income (expense), to the appropriate categories
within expenses.
Consolidated Statements of Cash Flows
5. Please revise your statements to ensure that the ending cash
and
cash equivalents balances agree to the reported amounts of cash
and
cash equivalents on your balance sheets as required by paragraph 7
of
SFAS 95.
Notes to Consolidated Financial Statements
Note 12a. Sparhawk Laboratories, Inc., page 15
6. Please clarify for us why you disclose a deferral of $350,000
of
gain on the sale of your joint venture interest rather than a full
valuation allowance against your $350,000 promissory note from
Sparhawk. Please tell us where the deferred gain and promissory
note
are presented on your consolidated balance sheet and how you
account
for the interest on this note. If the deferral of the gain is a
valuation allowance, please revise your fiscal 2005 Form 10-K to
provide Schedule II - Valuation and Qualifying Accounts as
required
Rule 5-04 of Regulation S-X.
As appropriate, please amend your Form 10-K for the year
ended
January 31, 2005 and Forms 10-Q for the quarters ended April 30,
2005
and July 31, 2005 and respond to these comments within 10 business
days or tell us when you will respond. You may wish to provide us
with marked copies of the amendments to expedite our review.
Please
furnish a cover letter with your amendments that keys your
responses
to our comments and provides any requested information. Detailed
cover letters greatly facilitate our review. Please file the
letter
on EDGAR under the form type label CORRESP. Please understand
that
we may have additional comments after reviewing your amendments
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
Exchange Act of 1934 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.
In connection with responding to our comments, please
provide,
in your letter, 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.
If you have any questions, please contact Mark Brunhofer,
Staff
Accountant, at (202) 551-3638 or Donald Abbott, Senior Staff
Accountant, at (202) 551-3608. In this regard, do not hesitate to
contact me, at (202) 551-3679.
Sincerely,
Jim B. Rosenberg
Senior Assistant Chief Accountant
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Mr. George G. Usher
Polydex Pharmaceuticals Limited
November 23, 2005
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