July 23, 2019
Dean Petkanas
Chief Executive Officer
Kannalife, Inc.
3805 Old Easton Road
Doylestown, PA 18902
Re: Kannalife, Inc.
Amendment No. 6 to Registration Statement on Form S-1
Filed July 5, 2019
File No. 333-227736
Dear Mr. Petkanas:
We have reviewed your amended registration statement and have the
following
comments. In some of our comments, we may ask you to provide us with
information so we
may better understand your disclosure.
Please respond to this letter by amending your registration statement
and providing the
requested information. If you do not believe our comments apply to your facts
and
circumstances or do not believe an amendment is appropriate, please tell us why
in your
response.
After reviewing any amendment to your registration statement and the
information you
provide in response to these comments, we may have additional comments. Unless
we note
otherwise, our references to prior comments are to comments in our July 1, 2019
letter.
Amendment No. 6 to Registration Statement on Form S-1 Filed July 5, 2019
Notes to the Consolidated Financial Statements March 31, 2019 (Unaudited)
Note 12. Marketable Securities, page F-36
1. Please refer to your response to prior comment 1. We are unable to find
support in ASC
321 for what you refer to as "realized" gains or losses on equity
securities. Please revise:
To combine the line items, on your condensed consolidated statement of
operations
and cash flows on F-24 and F-25, "realized loss on marketable
security" and
"unrealized loss on marketable security" into one line "net gains and
losses recognized
during the period on equity securities."
Dean Petkanas
FirstName Inc.
Kannalife, LastNameDean Petkanas
Comapany NameKannalife, Inc.
July 23, 2019
July 23, 2019 Page 2
Page 2
FirstName LastName
To delete following references:
o In Note 12 to "...an unrealized loss of $101,307 related to the
investment in MJNA.
The realized losses on equity securities sold during the three
months ended March
31, 2019, which are the difference between the proceeds from
sales and the
original cost, was $228,039."
o In Note 14 to "The Company recognized a realized loss of
$330,331 and an
unrealized gain of $143,040..."
Please also make conforming changes consistent with the above to your
consolidated
statements of operations and cash flows on F-4 and F-6, respectively,
and Note 2 Equity
Investments on F-10 and Note 12 Marketable Security on F-18 within
your 2018 audited
financial statements.
General
2. We do not necessarily agree with the Company's legal analysis on why
the Company may
rely on rule 3a-8 for its excepted investment company status. Of
particular concern is the
Company's legal analysis of the definition of "capital preservation
investment" in rule 3a-
8(b)(4) and the Company's assertion that MJNA stock meets that
definition.
Rule 3a-8(b)(4) defines "capital preservation investment" as an
investment that is made to
conserve capital and liquidity until the funds are used in the
issuer's primary business or
businesses. In the release adopting rule 3a-8, the Commission
indicated that it was
adopting the definition of "capital preservation investment" as
proposed, which indicated
that capital preservation investments are liquid so that they can be
readily sold to support
the research and development company's activities as necessary and
present limited credit
risk. See Certain Research and Development Companies, Investment
Company Act
Release No. 26077 (June 16, 2003) at 37048 [68 FR 370456 [June 20,
2003] ("Adopting
Release"). The Adopting Release further states that: "...investments
in equity or
speculative debt would not meet the definition of capital preservation
investments, but
would be considered `other investments' subject to the limits stated
in the rule." Id.
Please supplementally explain the basis for the Company's position
that the MJNA stock
is a capital preservation security, given that it is an equity
security. Please cite to any
existing authority indicating that equity securities can be considered
capital preservation
investments for purposes of rule 3a-8. Please also explain the basis
for the Company's
statements that the MJNA stock is liquid for purposes of rule 3a-8 and
for purposes of the
Company's investment guidelines. Notably, the Company has stated that
the board-
adopted investment policy details a liquidation plan over the course
of 12 months to
provide "for an orderly liquidation in a manner not to depress the
stock price." Please
explain how characterizing a security as liquid is consistent with a
concern that the stock
price will be depressed if sold all at once (or within a shorter
period of time than 12
months). Please cite to relevant Commission or staff guidance in your
response.
Dean Petkanas
Kannalife, Inc.
July 23, 2019
Page 3
Furthermore, while the Company states that it is the Company's and Board
of Directors'
intent that the Company liquidate its holdings in MJNA within the next
12 months to
coincide with the Company's proposed development timeline, are there
factors that could
cause the Company to hold the MJNA stock for longer than 12 months? If
so, what are
they and how are they consistent with complying with rule 3a-8?
You may contact Paul Cline at 202-551-3851 or Jim Rosenberg at
202-551-3679 if you
have questions regarding comments on the financial statements and related
matters. Please
contact Jeffrey Gabor at 202-551-2544 or Joe McCann at 202-551-6262 with any
other
questions.
Sincerely,
FirstName LastNameDean Petkanas
Division of
Corporation Finance
Comapany NameKannalife, Inc.
Office of Healthcare
& Insurance
July 23, 2019 Page 3
cc: Christopher L. Tinen, Esq.
FirstName LastName