Mail Stop 0309
November 23, 2005
Judy M. Robinett
President and Chief Executive Officer
Medical Discoveries, Inc.
1338 S. Foothill Drive - #266
Salt Lake City, Utah 84108
Re: Medical Discoveries, Inc.
Amendment No. 3 to Form SB-2 Registration Statement
File No. 333-121635
Dear Ms.Robinette:
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.
Prospectus Summary - page 1
1. We note the revisions you made in response to comments 4 and 16
in
our last letter, but the status of your IND application for MDI-P
is
still unclear. Under the law, the FDA has 30 days to review an
IND
application. We note, however, that more than six months have
passed
since you first indicated that the submission had been made.
Please
disclose the date the application was submitted and clearly
disclose
the date and decision reached by the FDA. If the FDA determined
that
the IND, as submitted, was not approvable, clearly say so. It is
inappropriate to suggest that the IND is "awaiting approval" if
the
FDA determined that additional preclinical research is required.
Also, your revised disclosure should be more specific as to what
you
are applying to use MDP-P to treat.
2. We have considered your response to comment 5. However, there
are
no footnotes under "Our Company." There is a footnote 1 under "The
Offering," but it does not contain the "express disclosure that
there
is no minimum conversion price per share for the preferred stock
issued on March 14, 2005." There is another footnote 1 under
"Selling Security Holders" which says that "theoretically" the
preferred stock could be converted into an "infinitely large
number
of shares of common stock." It goes on to suggest that
"practically," the conversion ratio is "limited" by the number of
shares authorized and the limitation in the Series A financing
documents that prohibits the Series A shareholders from
beneficially
owning more than 9.99% of the issued and outstanding common stock
at
any one time. Please revise the information under "The Offering"
as
we previously requested. Also, please delete the footnote under
"Selling Security Holders" as it inappropriately minimizes the
nature
of the legal risk.
Risk Factors - page 2
3. We have considered your response to comment 9. We think you
should include a new risk factor addressing the risk to the market
price of your securities and the risk to your ability to obtain
the
additional funding you need to develop your proposed products,
resulting from the potentially large number of shares that may
continue to be offered for sale by the selling shareholders.
We are a development-stage company that has not yet commercialized
a
product. - page 2
4. Please refer to the second sentence of the risk factor. It
states
that "While we believe MDI-P and SaveCream may have very broad
commercial applications, we do not have any other products under
anecdotal clinical data for development..." Please revise to
clarify
what you mean.
5. We have considered your response to comment 10 in our last
letter.
Please delete the third sentence of the risk factor as we
previously
requested.
We may not be able to raise sufficient capital to meet present and
future obligations. - page 3
6. Please update the disclosure to the most recent practicable
date.
7. Please quantify the amount of additional capital you need in
order
to satisfy current liabilities. Please also clarify how much you
anticipate it will cost you to conduct the additional preclinical
testing requested by the FDA before it will approve your IND.
Please
also clarify whether that testing is being conducted now, or
whether
it will be conducted in the future. It is unclear from your
current
disclosure whether the $2,424,197 in cash referenced in the risk
factor is the amount the additional preclinical testing will cost.
If so, you should clearly indicate that you do not have the funds
to
conduct a Phase I clinical trial. In this regard, the last
sentence
of the first paragraph suggests that this is the amount the
additional preclinical testing will cost, while the first sentence
of
the second paragraph suggests that this sum includes the cost of a
Phase I clinical trial.
Obtaining additional capital through the sale of common stock will
result in dilution of stockholder interests. - page 4
8. Please quantify the disclosure in this risk factor so that
potential investors can evaluate the extent of the dilution you
refer
to.
We face intense competition and competing products. - page 6
9. We have considered the revisions you made in response to
comment
17. It is still unclear what need(s) would be met by your
proposed
products that are not being met by the currently available
products,
and why you believe there is a market for them. It is also still
unclear how you propose to compete with these competitors and
products given your limited resources. Please revise the risk
factor
accordingly.
Description of Business - page 22
10. We have considered your responses to comments 32 and 33 in our
previous letter. Please delete the third paragraph under this
heading on page 22. We note that the same study is discussed
again,
on the next page, with more appropriate caveats about its
significance. In addition, please expand the discussion on page
23
to describe what the term "Stage 4 breast cancer" refers to, and
to
disclose whether any of the women treated with your proposed
product
experienced any lasting effects from the treatment.
11. Under "Potential Benefits of SaveCream in Treating ER-Positive
Breast Cancers" on page 30, you refer to "registration with a
paper
NDA, thereby making the product easier to license." Please
explain,
in reasonable detail, what you are referring to and how this
process
would possibly apply to this product. We may have further comment
after reviewing your response.
Executive Compensation - page 42
12. Please disclose the material terms of your employment
agreement
with Ms. Robinett.
Experts, page 43
13. Please include Tanner + Co.
Financial Statements - December 31, 2004
Notes to Financial Statements, page F-10
Note F - Stockholders` Equity, page F-14
14. As it appears that your warrants and preferred stocks require
a
settlement in the registered shares, these warrants and the
conversion feature of the preferred stocks should be classified as
a
liability and marked to market, until such registration right
lapses.
Refer to EITF 00-19. Accordingly, please reclassify these
warrants
and the conversion feature of the preferred stocks outstanding as
of
December 31, 2004 to liability. The change in the fair value of
the
instruments from the date of the issuance to the period presented
should be reflected in your statements of operations.
Notes to the Unaudited Condensed Consolidated Financial
Statements,
page F-23
Note 3 - Issuance of Common Stock, Preferred Stock, and Warrants,
page F-24
Preferred Stock and Warrants, page F-24
15. Since the preferred stocks issued on March 14, 2005 has no
minimum conversion price, the conversion feature and warrants
related
to this instrument as well as all other instruments such as the
one
in the preceding comment above and other warrants listed in the
table
on page F-17 with features that are exercisable or convertible
into
common stocks should be classified as a liability and marked to
market until there no longer is a conversion feature with an
unlimited ratio (thorough exercise, amendment or retirement).
Refer
to EITF 00-19. Accordingly, please reclassify warrants and the
embedded conversion features of the securities outstanding as of
June
30, 2005. The change in the fair value of the instruments from
the
date of the issuance to the period presented should be reflected
in
your statements of operations.
* * * * *
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 supplemental information.
Detailed cover letters greatly facilitate our review. We may have
additional comments after reviewing your amendment and responses
to
our comments.
You may contact Keira Ino at 202-551-3659 or James Rosenberg
at
202-551-3679 if you have questions regarding comments on the
financial statements and related matters. Please contact Mary K.
Fraser at 202-551-3609 or me at 202-551-3710 with any other
questions.
Regards,
Jeffrey P. Riedler
Assistant Director
Cc: Stephen R. Drake, Esq.
Epstein Becker & Green, P.C.
150 North Michigan Avenue - Suite 420
Chicago, Illinois 60601-7630
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Judy M. Robinett
Medical Discoveries, Inc.
November 23, 2005
Page 5