CORRESP 4 filename4.htm

 

Christopher E. Howard

One Monument Square
Portland, ME  04101

207-791-1335 voice
207-791-1350 fax
choward@pierceatwood.com

pierceatwood.com

April 6, 2007

VIA EDGAR

Mr. Jeffrey Riedler
Assistant Director
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549

Re:          Advanced Cell Technology, Inc. — SEC File No. 333-140265

Dear Mr. Riedler:

We are counsel to Advanced Cell Technology, Inc., a Delaware corporation (the “Company”).  On behalf of the Company, enclosed for your review are three copies of Amendment No. 1 to the Registration Statement on Form SB-2 (File No. 333-140265) of the Company (the “Registration Statement”), which is being filed with the Securities and Exchange Commission (the “Commission”) on April 6, 2007.  Two of the enclosed copies of Amendment No. 1 have been marked to indicate all changes made to the Registration Statement as filed with the Commission on January 26, 2007.

This Amendment is being filed in response to comments contained in your letter of February 23, 2007 relating to the Registration Statement.  These comments, and the responses on behalf of the Company to these comments, are set forth below.

Comment 1: Dollar value of underlying securities

Please provide the total dollar value of the securities underlying the convertible note that you have registered for resale (using the number of underlying securities that you have registered for resale and the market price per share for those securities on the date of the sale of the convertible note).



 

Dollar Value of Underlying Securities Registered for Resale in this Prospectus

The total dollar value of the securities underlying the 2005 Debentures and the 2006 Debentures that we have registered for resale (using the number of underlying securities that we have registered for resale and the market price per share for those securities on the date of the sale of the 2005 Debentures and 2006 Debentures, respectively) are as follows:

September 2005 Financing

Shares of Common Stock Underlying 2005 Debentures Registered for Resale*:

 

9,685,326

 

Market Price per Share of Common Stock on September 15, 2005:

 

$

2.20

 

Dollar Value of Underlying Securities:

 

$

21,307,717

 

*                    This amount does not include an additional number of shares that were registered for resale in excess of the actual number of shares underlying the 2005 Debentures, in accordance with our contractual obligations.

September 2006 Financing

Shares of Common Stock Underlying 2006 Debentures Registered for Resale*:

 

13,516,367

 

Market Price per Share of Common Stock on September 6, 2006:

 

$

0.81

 

Dollar Value of Underlying Securities:

 

$

10,948,257

 

*                    These registered shares are available for resale upon conversion and/or redemption of the 2006 Debentures, as well as upon (i) conversion and/or redemption of the 2005 Debentures and (ii) exercise of the 2005 Warrants, the 2006 Warrants and the Replacement Warrants.

2



Comment 2: Payments to the investor and affiliates

Please provide tabular disclosure of the dollar amount of each payment (including the value of any payments to be made in common stock) in connection with the transaction, that you have made or may be required to make to any selling shareholder, any affiliate of a selling shareholder, or any person with whom any selling shareholder has a contractual relationship regarding the transaction (including any interest payments, liquidated damages, payments made to “finders” or “placement agents,” and any other payments or potential payments).  Please provide footnote disclosure of the terms of each such payment.  Please do not include any repayment of principal on the convertible notes in this disclosure.

Further, please provide disclosure of the net proceeds to the issuer from the sale of the convertible notes and the total possible payments to all selling shareholders and any of their affiliates in the first year following the sale of convertible notes.

Payments Made in Connection with September 2005 Financing and September 2006 Financing

The following tables disclose the dollar amount of each payment (including the value of any payments to be made in common stock) in connection with the September 2005 financing and the September 2006 financing that we have made or may be required to make to any selling security holder, any affiliate of a selling security holder, or any person with whom any selling security holder has a contractual relationship regarding the transaction (including any interest payments, liquidated damages, payments made to “finders” or “placement agents”, and any other payments or potential payments). The net proceeds to the Company from the sale of the 2005 Debentures and the 2006 Debentures and the total possible payments to all selling security holders and any of their affiliates in the first year following the sale of the 2005 Debentures and the 2006 Debentures, respectively, are also provided.

3



September 2005 Financing

 

 

Type of

 

Amount/Value

 

Payee

 

Payment

 

of Payment

 

T.R Winston & Company, LLC(1)

 

Cash

 

$

1,065,000

 

 

 

Warrant(2)

 

$

1,379,000

 

Feldman & Weinstein(3)

 

Cash

 

$

20,000

 

Total Possible Payments to all Selling Security Holders and Any of Their Affiliates in First Year:

 

 

 

$

2,464,000

 

Net Proceeds from 2005 Debentures:

 

 

 

$

15,286,000

 

(1)             T.R. Winston & Company, LLC served as the placement agent for the securities sold in the September 2005 financing.

(2)             On September 15, 2005, we issued a warrant to purchase 1,162,239 shares of common stock at an exercise price of $2.53 per share to T.R. Winston & Company, LLC in connection with the September 2005 financing. The market price per share on the date of issuance was $2.20. The initial fair value of the warrant was estimated at approximately $1,379,000 using the Black Scholes pricing model. The assumptions used in the Black Scholes model are as follows: (1) dividend yield of 0%; (2) expected volatility of 64%, (3) risk-free interest rate of 3.99%, and (4) expected life of 5 years.

(3)             Feldman & Weinstein served as counsel to the selling security holders in connection with the September 2005 financing.

September 2006 Financing

Payee

 

Type of
Payment

 

Amount/
Value
of Payment

 

T.R Winston & Company, LLC(1)

 

Cash

 

$

783,875

 

 

 

Warrant(2)

 

$

3,600,000

 

Total Possible Payments to all Selling Security Holders and Any of Their Affiliates in First Year:

 

 

 

$

4,383,875

 

Net Proceeds from 2006 Debentures:

 

 

 

$

3,866,125

(3)

(1)             T.R. Winston & Company, LLC served as the placement agent for the securities sold in the September 2006 financing.

(2)             On September 6, 2006, we issued a warrant to purchase 4,575,521 shares of common stock at an exercise price of $0.3168 per share to T.R. Winston & Company, LLC in connection with the September 2006 financing and the warrant repricing. The market price per share on the date of issuance was $0.81. The initial fair value of the warrant was estimated at approximately $3,600,000 using the Black Scholes pricing model. The assumptions used in the Black Scholes model are as follows: (1) dividend yield of 0%, (2) expected volatility of 176%, (3) risk-free interest rate of 4.81%, and (4) expected life of 5 years.

(3)  The value of the warrant issued to T.R. Winston & Company, LLC described in footnote 2 includes the value of the portion of the warrant issued to T.R. Winston & Company, LLC as consideration for services provided to the Company in connection with the warrant repricing.  The “net proceeds” line item does not, however, include $4,314,589 in proceeds received by the Company as a result of the exercise of certain of the 2005 Warrants in connection with the warrant repricing.

4



 

Comment 3: Potential profits on conversion

Please provide tabular disclosure of:

the total possible profit the selling shareholders could realize as a result of the conversion discount for the securities underlying the convertible note, presented in a table with the following information disclosed separately [in this comment, the reference to “securities underlying the convertible note” means the securities underlying the note that may be received by the persons identified as selling shareholders]:

·                  the market price per share of the securities underlying the convertible note on the date of the sale of the convertible note;

·                  the conversion price per share of the underlying securities on the date of the sale of the convertible note, calculated as follows:

·                  if the conversion price per share is set at a fixed price, use the price per share established in the convertible note; and

·                  if the conversion price per share is not set at a fixed price and, instead, is set at a floating rate in relationship to the market price of the underlying security, use the conversion discount rate and the market rate per share on the date of the sale of the convertible note and determine the conversion price per share as of that date;

·                  the total possible shares underlying the convertible note (assuming no interest payments and complete conversion throughout the term of the note);

·                  the combined market price of the total number of shares underlying the convertible note, calculated by using the market price per share on the date of the sale of the convertible note and the total possible shares underlying the convertible note;

·                  the total possible shares the selling shareholders may receive and the combined conversion price of the total number of shares underlying the convertible note calculated by using the conversion price on the date of the sale of the convertible note and the total possible number of shares the selling shareholders may receive; and

·                  the total possible discount to the market price as of the date of the sale of the convertible note, calculated by subtracting the total conversion price on the date of the sale of the convertible note from the combined market price of the total number of shares underlying the convertible note on that date.

If there are provisions in the convertible note that could result in a change in the price per share upon the occurrence of certain events, please provide additional tabular disclosure as appropriate.  For example, if the conversion price per share is fixed unless and until the market price falls below a stated price, at which point the conversion price per share drops to a lower price, please provide additional disclosure.

Potential Profits on Conversion of 2005 Debentures and 2006 Debentures

The following tables show the total possible profit that the selling security holders could realize as a result of the conversion discount for the securities underlying the 2005 Debentures and the 2006 Debentures.

 

5



September 2005 Financing

 

Selling Security Holder

 

Market
Price per
Share of
Common
Stock on
Closing
Date

 

Conversion
Price
of 2005
Debentures(1)

 

Total
Possible
Shares
Underlying
2005
Debentures

 

Combined
Market
Price of
Shares
Underlying 2005
Debentures

 

Combined
Conversion
Price
of Shares
Underlying
2005
Debentures

 

Total
Possible
Discount
to Market
Price(2)

 

Newberg Family Trust UTD 12/18/90

 

$

2.20

 

$

2.30

 

272,826

 

$

600,217

 

$

627,500

 

$

(27,283

)

JMB Capital Partners, LP

 

$

2.20

 

$

2.30

 

818,478

 

$

1,800,652

 

$

1,882,500

 

$

(81,848

)

Jay Goldman Master Limited Partnership

 

$

2.20

 

$

2.30

 

818,478

 

$

1,800,652

 

$

1,882,500

 

$

(81,848

)

CAMOFI Master LDC

 

$

2.20

 

$

2.30

 

545,652

 

$

1,200,435

 

$

1,255,000

 

$

(54,565

)

Shapiro Family Trust Dated September 25, 1989

 

$

2.20

 

$

2.30

 

109,130

 

$

240,087

 

$

251,000

 

$

(10,913

)

G. Tyler Runnels or Jasmine Niklas Runnels TTEES The Runnels Family Trust dtd 1-11-2000

 

$

2.20

 

$

2.30

 

81,848

 

$

180,065

 

$

188,250

 

$

(8,185

)

High Tide, LLC

 

$

2.20

 

$

2.30

 

81,848

 

$

180,065

 

$

188,250

 

$

(8,185

)

JMG Triton Offshore Fund, Ltd.

 

$

2.20

 

$

2.30

 

545,652

 

$

1,200,435

 

$

1,255,000

 

$

(54,565

)

JMG Capital Partners, LP

 

$

2.20

 

$

2.30

 

545,652

 

$

1,200,435

 

$

1,255,000

 

$

(54,565

)

Cranshire Capital, LP

 

$

2.20

 

$

2.30

 

163,696

 

$

360,130

 

$

376,500

 

$

(16,370

)

MM & B Holdings, a California general partnership

 

$

2.20

 

$

2.30

 

545,652

 

$

1,200,435

 

$

1,255,000

 

$

(54,565

)

JGB Capital, LP

 

$

2.20

 

$

2.30

 

409,239

 

$

900,326

 

$

941,250

 

$

(40,924

)

Bristol Investment Fund, Ltd.

 

$

2.20

 

$

2.30

 

1,091,304

 

$

2,400,870

 

$

2,510,000

 

$

(109,130

)

Overbrook Fund I, LLC

 

$

2.20

 

$

2.30

 

109,130

 

$

240,087

 

$

251,000

 

$

(10,913

)

Portside Growth and Opportunity Fund

 

$

2.20

 

$

2.30

 

272,826

 

$

600,217

 

$

627,500

 

$

(27,283

)

Rockmore Investment Master Fund Ltd.

 

$

2.20

 

$

2.30

 

0

 

$

—

 

$

—

 

$

—

 

Omicron Master Trust

 

$

2.20

 

$

2.30

 

545,652

 

$

1,200,435

 

$

1,255,000

 

$

(54,565

)

Smithfield Fiduciary, LLC

 

$

2.20

 

$

2.30

 

272,826

 

$

600,217

 

$

627,500

 

$

(27,283

)

Alpha Capital

 

$

2.20

 

$

2.30

 

272,826

 

$

600,217

 

$

627,500

 

$

(27,283

)

Midsummer Investment, Ltd.

 

$

2.20

 

$

2.30

 

436,522

 

$

960,348

 

$

1,004,000

 

$

(43,652

)

Bushido Capital Master Fund, LP

 

$

2.20

 

$

2.30

 

136,413

 

$

300,109

 

$

313,750

 

$

(13,641

)

John A. Kryzanowski

 

$

2.20

 

$

2.30

 

218,261

 

$

480,174

 

$

502,000

 

$

(21,826

)

DAFNA LifeScience, Ltd.

 

$

2.20

 

$

2.30

 

136,413

 

$

300,109

 

$

313,750

 

$

(13,641

)

Whalehaven Capital Fund Limited

 

$

2.20

 

$

2.30

 

409,239

 

$

900,326

 

$

941,250

 

$

(40,924

)

Stonestreet, LP

 

$

2.20

 

$

2.30

 

136,413

 

$

300,109

 

$

313,750

 

$

(13,641

)

Anthem Ventures Fund, LP

 

$

2.20

 

$

2.30

 

545,652

 

$

1,200,435

 

$

1,255,000

 

$

(54,565

)

Evan S. Malik

 

$

2.20

 

$

2.30

 

27,283

 

$

60,022

 

$

62,750

 

$

(2,728

)

Gamma Opportunity Fund Capital Partners LP Class A

 

$

2.20

 

$

2.30

 

68,207

 

$

150,054

 

$

156,875

 

$

(6,821

)

Gamma Opportunity Fund Capital Partners LP Class C

 

$

2.20

 

$

2.30

 

68,207

 

$

150,054

 

$

156,875

 

$

(6,821

)

T.R. Winston & Company LLC

 

—

 

—

 

—

 

$

—

 

$

—

 

$

—

 

Total

 

 

 

 

 

9,139,673

 

$

21,307,717

 

$

22,276,250

 

$

(968,533

)

(1)             In connection with an amendment to the 2005 Debenture financing documents executed on January 11, 2007, the conversion price of the 2005 Debentures was reduced from $2.30 to $0.90. On January 11, 2007, the market price per share of our common stock was $0.86.

(2)             This amount does not include Original Issue Discount.

6



 

September 2006 Financing

Selling Security Holder

 

Market
Price per
Share of
Common
Stock on
Closing
Date

 

Conversion
Price
of 2006
Debentures

 

Total
Possible
Shares
Underlying
2006
Debentures

 

Combined
Market
Price of
Shares
Underlying
2006
Debentures

 

Combined
Conversion
Price
of Shares
Underlying
2006
Debentures

 

Total
Possible
Discount
to Market
Price*

 

Newberg Family Trust UTD 12/18/90

 

$

0.81

 

$

0.288

 

1,089,410

 

$

882,422

 

$

313,750

 

$

568,672

 

JMB Capital Partners, LP

 

$

0.81

 

$

0.288

 

3,268,229

 

$

2,647,265

 

$

941,250

 

$

1,706,015

 

Jay Goldman Master Limited Partnership

 

$

0.81

 

$

0.288

 

3,268,229

 

$

2,647,265

 

$

941,250

 

$

1,706,015

 

CAMOFI Master LDC

 

$

0.81

 

$

0.288

 

2,178,819

 

$

1,764,843

 

$

627,500

 

$

1,137,343

 

Shapiro Family Trust Dated September 25, 1989

 

$

0.81

 

$

0.288

 

435,764

 

$

352,969

 

$

125,500

 

$

227,469

 

G. Tyler Runnels or Jasmine Niklas Runnels TTEES The Runnels Family Trust dtd 1-11-2000

 

$

0.81

 

$

0.288

 

326,823

 

$

264,727

 

$

94,125

 

$

170,602

 

High Tide, LLC

 

$

0.81

 

$

0.288

 

326,823

 

$

264,727

 

$

94,125

 

$

170,602

 

JMG Triton Offshore Fund, Ltd.

 

$

0.81

 

$

0.288

 

2,178,819

 

$

1,764,843

 

$

627,500

 

$

1,137,343

 

JMG Capital Partners, LP

 

$

0.81

 

$

0.288

 

2,178,819

 

$

1,764,843

 

$

627,500

 

$

1,137,343

 

Cranshire Capital, LP

 

$

0.81

 

$

0.288

 

653,646

 

$

529,453

 

$

188,250

 

$

341,203

 

MM & B Holdings, a California general partnership

 

$

0.81

 

$

0.288

 

2,178,819

 

$

1,764,843

 

$

627,500

 

$

1,137,343

 

JGB Capital, LP

 

$

0.81

 

$

0.288

 

653,646

 

$

529,453

 

$

188,250

 

$

341,203

 

Bristol Investment Fund, Ltd.

 

$

0.81

 

$

0.288

 

5,338,108

 

$

4,323,867

 

$

1,537,375

 

$

2,786,492

 

Overbrook Fund I, LLC

 

$

0.81

 

$

0.288

 

435,764

 

$

352,969

 

$

125,500

 

$

227,469

 

Portside Growth and Opportunity Fund

 

$

0.81

 

$

0.288

 

2,577,979

 

$

2,088,163

 

$

742,458

 

$

1,345,705

 

Rockmore Investment Master Fund Ltd.

 

$

0.81

 

$

0.288

 

690,250

 

$

559,103

 

$

198,792

 

$

360,311

 

Omicron Master Trust

 

$

0.81

 

$

0.288

 

0

 

$

—

 

$

—

 

$

—

 

Smithfield Fiduciary, LLC

 

$

0.81

 

$

0.288

 

1,089,410

 

$

882,422

 

$

313,750

 

$

568,672

 

Alpha Capital

 

$

0.81

 

$

0.288

 

1,089,410

 

$

882,422

 

$

313,750

 

$

568,672

 

Midsummer Investment, Ltd.

 

$

0.81

 

$

0.288

 

1,743,056

 

$

1,411,875

 

$

502,000

 

$

909,875

 

Bushido Capital Master Fund, LP

 

$

0.81

 

$

0.288

 

544,705

 

$

441,211

 

$

156,875

 

$

284,336

 

John A. Kryzanowski

 

$

0.81

 

$

0.288

 

871,528

 

$

705,938

 

$

251,000

 

$

454,938

 

DAFNA LifeScience, Ltd.

 

$

0.81

 

$

0.288

 

544,705

 

$

441,211

 

$

156,875

 

$

284,336

 

Whalehaven Capital Fund Limited

 

$

0.81

 

$

0.288

 

1,634,115

 

$

1,323,633

 

$

470,625

 

$

853,008

 

Stonestreet, LP

 

$

0.81

 

$

0.288

 

0

 

$

—

 

$

—

 

$

—

 

Anthem Ventures Fund, LP

 

$

0.81

 

$

0.288

 

2,178,819

 

$

1,764,843

 

$

627,500

 

$

1,137,343

 

Evan S. Malik

 

$

0.81

 

$

0.288

 

108,941

 

$

88,242

 

$

31,375

 

$

56,867

 

Gamma Opportunity Fund Capital Partners LP Class A

 

$

0.81

 

$

0.288

 

272,352

 

$

220,605

 

$

78,437

 

$

142,168

 

Gamma Opportunity Fund Capital Partners LP Class C

 

$

0.81

 

$

0.288

 

272,352

 

$

220,605

 

$

78,437

 

$

142,168

 

T.R. Winston & Company, LLC

 

—

 

—

 

—

 

$

—

 

$

—

 

$

—

 

Total

 

 

 

 

 

38,129,340

 

$

30,884,765

 

$

10,981,250

 

$

19,903,515

 

*                    This amount does not include Original Issue Discount.

 

7



 

 

Comment 4: Total potential profit from other securities

Please provide tabular disclosure of:

the total possible profit to be realized as a result of any conversion discounts for securities underlying any other warrants, options, notes, or other securities of the issuer that are held by the selling shareholders or any affiliates of the selling shareholders, presented in a table with the following information disclosed separately:

·                  market price per share of the underlying securities on the date of the sale of that other security;

·                  the conversion/exercise price per share as of the date of the sale of that other security, calculated as follows:

·                  if the conversion/exercise price per share is set at a fixed price, use the price per share on the date of the sale of that other security; and

·                  if the conversion/exercise price per share is not set at a fixed price and, instead, is set at a floating rate in relationship to the market price of the underlying security, use the conversion/exercise discount rate and the market rate per share on the date of the sale of that other security and determine the conversion price per share as of that date;

·                  the total possible shares to be received under the particular securities (assuming complete conversion/exercise);

·                  the combined market price of the total number of underlying shares, calculated by using the market price per share on the date of the sale of that other security and the total possible shares to be received;

8



 

·                  the total possible shares to be received and the combined conversion price of the total number of shares underlying that other security calculated by using the conversion price on the date of the sale of that other security and the total possible number of underlying shares; and

·                  the total possible discount to the market price as of the date of the sale of that other security, calculated by subtracting the total conversion/exercise price on the date of the sale of that other security from the combined market price of the total number of underlying shares on that date.

Total Potential Profit from Other Securities

The following tables show the total possible profit to be realized as a result of any conversion discounts for securities underlying any other warrants, options, notes or other securities of the Company in connection with the September 2005 financing and the September 2006 financing that are held by the selling security holders or any affiliates of the selling security holders.

September 2005 Financing

Selling Security Holder

 

Market Price
per Share of
Common Stock
on Closing Date

 

Exercise Price
of 2005
Warrants(1)

 

Total Possible
Shares Underlying
2005 Warrants

 

Combined Market
Price of Shares
Underlying
2005 Warrants

 

Combined
Conversion Price
of Shares
Underlying
2005 Warrants

 

Total Possible
Discount to
Market Price(2)

 

Newberg Family Trust UTD 12/18/90

 

$

2.20

 

$

2.53

 

136,413

 

$

300,109

 

$

345,125

 

$

(45,016

)

JMB Capital Partners, LP

 

$

2.20

 

$

2.53

 

409,239

 

$

900,326

 

$

1,035,375

 

$

(135,049

)

Jay Goldman Master Limited Partnership

 

$

2.20

 

$

2.53

 

409,239

 

$

900,326

 

$

1,035,375

 

$

(135,049

)

CAMOFI Master LDC

 

$

2.20

 

$

2.53

 

272,826

 

$

600,217

 

$

690,250

 

$

(90,033

)

Shapiro Family Trust Dated September 25, 1989

 

$

2.20

 

$

2.53

 

54,565

 

$

120,043

 

$

138,050

 

$

(18,007

)

G. Tyler Runnels or Jasmine Niklas Runnels TTEES The Runnels Family Trust dtd 1-11-2000

 

$

2.20

 

$

2.53

 

40,924

 

$

90,033

 

$

103,538

 

$

(13,505

)

High Tide, LLC

 

$

2.20

 

$

2.53

 

40,924

 

$

90,033

 

$

103,538

 

$

(13,505

)

JMG Triton Offshore Fund, Ltd.

 

$

2.20

 

$

2.53

 

272,826

 

$

600,217

 

$

690,250

 

$

(90,033

)

JMG Capital Partners, LP

 

$

2.20

 

$

2.53

 

272,826

 

$

600,217

 

$

690,250

 

$

(90,033

)

Cranshire Capital, LP

 

$

2.20

 

$

2.53

 

81,848

 

$

180,065

 

$

207,075

 

$

(27,010

)

MM & B Holdings, a California general partnership

 

$

2.20

 

$

2.53

 

272,826

 

$

600,217

 

$

690,250

 

$

(90,033

)

JGB Capital, LP

 

$

2.20

 

$

2.53

 

204,620

 

$

450,163

 

$

517,688

 

$

(67,524

)

Bristol Investment Fund, Ltd.

 

$

2.20

 

$

2.53

 

545,652

 

$

1,200,435

 

$

1,380,500

 

$

(180,065

)

Overbrook Fund I, LLC

 

$

2.20

 

$

2.53

 

54,565

 

$

120,043

 

$

138,050

 

$

(18,007

)

Portside Growth and Opportunity Fund

 

$

2.20

 

$

2.53

 

136,413

 

$

300,109

 

$

345,125

 

$

(45,016

)

Rockmore Investment Master Fund Ltd.

 

$

2.20

 

$

2.53

 

—

 

—

 

—

 

—

 

Omicron Master Trust

 

$

2.20

 

$

2.53

 

272,826

 

$

600,217

 

$

690,250

 

$

(90,033

)

Smithfield Fiduciary, LLC

 

$

2.20

 

$

2.53

 

136,413

 

$

300,109

 

$

345,125

 

$

(45,016

)

Alpha Capital

 

$

2.20

 

$

2.53

 

136,413

 

$

300,109

 

$

345,125

 

$

(45,016

)

Midsummer Investment, Ltd.

 

$

2.20

 

$

2.53

 

218,261

 

$

480,174

 

$

552,200

 

$

(72,026

)

Bushido Capital Master Fund, LP

 

$

2.20

 

$

2.53

 

68,207

 

$

150,054

 

$

172,563

 

$

(22,508

)

John A. Kryzanowski

 

$

2.20

 

$

2.53

 

109,130

 

$

240,087

 

$

276,100

 

$

(36,013

)

DAFNA LifeScience, Ltd.

 

$

2.20

 

$

2.53

 

165,132

 

$

363,289

 

$

417,783

 

$

(54,493

)

Whalehaven Capital Fund Limited

 

$

2.20

 

$

2.53

 

495,395

 

$

1,089,868

 

$

1,253,349

 

$

(163,480

)

Stonestreet, LP

 

$

2.20

 

$

2.53

 

165,132

 

$

363,289

 

$

417,783

 

$

(54,493

)

Anthem Ventures Fund, LP

 

$

2.20

 

$

2.53

 

660,526

 

$

1,453,158

 

$

1,671,132

 

$

(217,974

)

Evan S. Malik

 

$

2.20

 

$

2.53

 

33,026

 

$

72,658

 

$

83,557

 

$

(10,899

)

Gamma Opportunity Fund Capital Partners LP Class A

 

$

2.20

 

$

2.53

 

82,566

 

$

181,645

 

$

208,891

 

$

(27,247

)

Gamma Opportunity Fund Capital Partners LP Class C

 

$

2.20

 

$

2.53

 

82,567

 

$

181,647

 

$

208,894

 

$

(27,247

)

T.R. Winston & Company, LLC

 

$

2.20

 

$

2.53

 

1,162,239

 

$

2,556,926

 

$

2,940,465

 

$

(383,539

)

Total

 

 

 

 

 

6,993,539

 

$

15,385,785

 

$

17,693,653

 

$

(2,307,868

)

(1)             In connection with an amendment to the 2005 Debenture financing documents executed on January 11, 2007, the exercise price of the 2005 Warrants was reduced from $2.53 to $0.95. On January 11, 2007 the market price per share of our common stock was $0.86.

(2)             Given that the exercise price for each of the warrants identified in this table is in excess of the market price on the date of issuance, all of the warrants identified herein are "out-of-the-money" and therefore have a negative value ascribed to them.

 

9



 

September 2006 Financing

Selling Security Holder

 

Market Price
per Share of
Common Stock
on Closing Date

 

Exercise Price
of 2006
Warrants

 

Total Possible
Shares Underlying
2006 Warrants

 

Combined Market
Price of Shares
Underlying
2006 Warrants

 

Combined
Exercise Price
of Shares
Underlying
2006 Warrants

 

Total Possible
Discount to
Market Price

 

Newberg Family Trust UTD 12/18/90

 

$

0.81

 

$

0.3168

 

544,705

 

$

441,211

 

$

172,672

 

$

268,540

 

JMB Capital Partners, LP

 

$

0.81

 

$

0.3168

 

1,634,114

 

$

1,323,632

 

$

518,014

 

$

805,618

 

Jay Goldman Master Limited Partnership

 

$

0.81

 

$

0.3168

 

1,634,114

 

$

1,323,632

 

$

518,014

 

$

805,618

 

CAMOFI Master LDC

 

$

0.81

 

$

0.3168

 

1,089,409

 

$

882,421

 

$

345,343

 

$

537,079

 

Shapiro Family Trust Dated September 25, 1989

 

$

0.81

 

$

0.3168

 

217,882

 

$

176,484

 

$

69,069

 

$

107,416

 

G. Tyler Runnels or Jasmine Niklas Runnels TTEES The Runnels Family Trust dtd 1-11-2000

 

$

0.81

 

$

0.3168

 

163,411

 

$

132,363

 

$

51,801

 

$

80,562

 

High Tide, LLC

 

$

0.81

 

$

0.3168

 

163,411

 

$

132,363

 

$

51,801

 

$

80,562

 

JMG Triton Offshore Fund, Ltd.

 

$

0.81

 

$

0.3168

 

1,089,410

 

$

882,422

 

$

345,343

 

$

537,079

 

JMG Capital Partners, LP

 

$

0.81

 

$

0.3168

 

1,089,410

 

$

882,422

 

$

345,343

 

$

537,079

 

Cranshire Capital, LP

 

$

0.81

 

$

0.3168

 

326,823

 

$

264,727

 

$

103,603

 

$

161,124

 

MM & B Holdings, a California general partnership

 

$

0.81

 

$

0.3168

 

1,089,410

 

$

882,422

 

$

345,343

 

$

537,079

 

JGB Capital, LP

 

$

0.81

 

$

0.3168

 

326,823

 

$

264,727

 

$

103,603

 

$

161,124

 

Bristol Investment Fund, Ltd.

 

$

0.81

 

$

0.3168

 

2,669,054

 

$

2,161,934

 

$

846,090

 

$

1,315,844

 

Overbrook Fund I, LLC

 

$

0.81

 

$

0.3168

 

217,882

 

$

176,484

 

$

69,069

 

$

107,416

 

Portside Growth and Opportunity Fund

 

$

0.81

 

$

0.3168

 

1,288,990

 

$

1,044,082

 

$

408,610

 

$

635,472

 

Rockmore Investment Master Fund Ltd.

 

$

0.81

 

$

0.3168

 

345,125

 

$

279,551

 

$

109,405

 

$

150,147

 

Omicron Master Trust

 

$

0.81

 

$

0.3168

 

0

 

$

—

 

$

—

 

$

—

 

Smithfield Fiduciary, LLC

 

$

0.81

 

$

0.3168

 

544,705

 

$

441,211

 

$

172,671

 

$

268,540

 

Alpha Capital

 

$

0.81

 

$

0.3168

 

544,705

 

$

441,211

 

$

172,671

 

$

268,540

 

Midsummer Investment, Ltd.

 

$

0.81

 

$

0.3168

 

871,527

 

$

705,937

 

$

276,274

 

$

429,663

 

Bushido Capital Master Fund, LP

 

$

0.81

 

$

0.3168

 

272,353

 

$

220,606

 

$

86,336

 

$

134,270

 

John A. Kryzanowski

 

$

0.81

 

$

0.3168

 

435,764

 

$

352,969

 

$

138,137

 

$

214,832

 

DAFNA LifeScience, Ltd.

 

$

0.81

 

$

0.3168

 

272,353

 

$

220,606

 

$

86,336

 

$

134,270

 

Whalehaven Capital Fund Limited

 

$

0.81

 

$

0.3168

 

817,058

 

$

661,817

 

$

259,007

 

$

402,810

 

Stonestreet, LP

 

$

0.81

 

$

0.3168

 

0

 

$

—

 

$

—

 

$

—

 

Anthem Ventures Fund, LP

 

$

0.81

 

$

0.3168

 

1,089,409

 

$

882,421

 

$

345,343

 

$

537,079

 

Evan S. Malik

 

$

0.81

 

$

0.3168

 

54,471

 

$

44,122

 

$

17,267

 

$

26,854

 

Gamma Opportunity Fund Capital Partners LP Class A

 

$

0.81

 

$

0.3168

 

136,176

 

$

110,303

 

$

43,168

 

67,135

 

Gamma Opportunity Fund Capital Partners LP Class C

 

$

0.81

 

$

0.3168

 

136,176

 

$

110,303

 

$

43,168

 

$

67,135

 

T.R. Winston & Company, LLC

 

$

0.81

 

$

0.3168

 

4,575,521

 

$

3,706,172

 

1,450,440

 

2,255,732

 

Total

 

 

 

 

 

23,640,191

 

$

19,148,555

 

$

7,493,941

 

$

11,654,619

 

 

 

10



 

Replacement Warrants

Selling Security Holder

 

Market Price
per Share of
Common Stock
on Closing Date

 

Exercise Price
of Replacement
Warrants(1)

 

Total Possible
Shares Underlying
Replacement
Warrants

 

Combined Market
Price of Shares
Underlying
Replacement
Warrants

 

Combined
Exercise Price
of Shares
Underlying
Replacement
Warrants

 

Total Possible
Discount to
Market Price(2)

 

Newberg Family Trust UTD 12/18/90

 

$

0.81

 

$

1.60

 

136,413

 

$

110,495

 

$

218,261

 

$

(107,766

)

JMB Capital Partners, LP

 

$

0.81

 

$

1.60

 

409,239

 

$

331,484

 

$

654,782

 

$

(323,299

)

Jay Goldman Master Limited Partnership

 

$

0.81

 

$

1.60

 

409,239

 

$

331,484

 

$

654,782

 

$

(323,299

)

CAMOFI Master LDC

 

$

0.81

 

$

1.60

 

272,826

 

$

220,989

 

$

436,522

 

$

(215,533

)

Shapiro Family Trust Dated September 25, 1989  

 

$

0.81

 

$

1.60

 

54,565

 

$

44,198

 

$

87,304

 

$

(43,106

)

G. Tyler Runnels or Jasmine Niklas Runnels TTEES The Runnels Family Trust dtd 1-11-2000

 

$

0.81

 

$

1.60

 

40,924

 

$

33,148

 

$

65,478

 

$

(32,330

)

High Tide, LLC

 

$

0.81

 

$

1.60

 

40,924

 

$

33,148

 

$

65,478

 

$

(32,330

)

JMG Triton Offshore Fund, Ltd.

 

$

0.81

 

$

1.60

 

272,826

 

$

220,989

 

$

436,522

 

$

(215,533

)

JMG Capital Partners, LP

 

$

0.81

 

$

1.60

 

272,826

 

$

220,989

 

$

436,522

 

$

(215,533

)

Cranshire Capital, LP

 

$

0.81

 

$

1.60

 

81,848

 

$

66,297

 

$

130,957

 

$

(64,660

)

MM & B Holdings, a California general partnership

 

$

0.81

 

$

1.60

 

272,826

 

$

220,989

 

$

436,522

 

$

(215,533

)

JGB Capital, LP

 

$

0.81

 

$

1.60

 

204,620

 

$

165,742

 

$

327,392

 

$

(161,650

)

Bristol Investment Fund, Ltd.

 

$

0.81

 

$

1.60

 

545,652

 

$

441,978

 

$

873,043

 

$

(431,065

)

Overbrook Fund I, LLC

 

$

0.81

 

$

1.60

 

54,565

 

$

44,198

 

$

87,304

 

$

(43,106

)

Portside Growth and Opportunity Fund

 

$

0.81

 

$

1.60

 

136,413

 

$

110,495

 

$

218,261

 

$

(107,766

)

Rockmore Investment Master Fund Ltd.

 

$

0.81

 

$

1.60

 

86,422

 

$

70,002

 

$

138,275

 

$

(68,273

)

Omicron Master Trust

 

$

0.81

 

$

1.60

 

0

 

$

—

 

$

—

 

$

—

 

Smithfield Fiduciary, LLC

 

$

0.81

 

$

1.60

 

136,413

 

$

110,495

 

$

218,261

 

$

(107,766

)

Alpha Capital

 

$

0.81

 

$

1.60

 

136,413

 

$

110,495

 

$

218,261

 

$

(107,766

)

Midsummer Investment, Ltd.

 

$

0.81

 

$

1.60

 

218,261

 

$

176,791

 

$

349,218

 

$

(172,426

)

Bushido Capital Master Fund, LP

 

$

0.81

 

$

1.60

 

68,207

 

$

55,248

 

$

109,131

 

$

(53,884

)

John A. Kryzanowski

 

$

0.81

 

$

1.60

 

109,130

 

$

88,395

 

$

174,608

 

$

(86,213

)

DAFNA LifeScience, Ltd.

 

$

0.81

 

$

1.60

 

0

 

$

—

 

$

—

 

$

—

 

Whalehaven Capital Fund Limited

 

$

0.81

 

$

1.60

 

0

 

$

—

 

$

—

 

$

—

 

Stonestreet, LP

 

$

0.81

 

$

1.60

 

0

 

$

—

 

$

—

 

$

—

 

Anthem Ventures Fund, LP

 

$

0.81

 

$

1.60

 

0

 

$

—

 

$

—

 

$

—

 

Evan S. Malik

 

$

0.81

 

$

1.60

 

0

 

$

—

 

$

—

 

$

—

 

Gamma Opportunity Fund Capital Partners LP Class A

 

$

0.81

 

$

1.60

 

0

 

$

—

 

$

—

 

$

—

 

Gamma Opportunity Fund Capital Partners LP Class C

 

$

0.81

 

$

1.60

 

0

 

$

—

 

$

—

 

$

—

 

T.R. Winston & Company, LLC

 

$

0.81

 

$

1.60

 

581,120

 

$

470,706

 

$

929,790

 

$

(459,084

)

Total

 

 

 

 

 

4,541,672

 

$

3,678,753

 

$

7,266,673

 

$

(3,587,920

)

(1)             The exercise price of these replacement warrants was subsequently adjusted from $1.60 to $0.95 pursuant to the anti-dilution provisions thereof.

(2)             Given that the exercise price for each of the warrants identified in this table is in excess of the market price on the date of issuance, all of the warrants identified herein are "out-of-the-money" and therefore have a negative value ascribed to them.

 

11



 

Comment 5: Comparison of issuer proceeds to potential investor profit

Please provide tabular disclosure of:

·                  the gross proceeds paid or payable to the issuer in the convertible note transaction;

·                  all payments that have been made or that may be required to be made by the issuer that are disclosed in response to Comment 2;

·                  the resulting net proceeds to the issuer; and

·                  the combined total possible profit to be realized as a result of any conversion discounts regarding the securities underlying the convertible notes and any other warrants, options, notes, or other securities of the issuer that are held by the selling shareholders or any affiliates of the selling shareholders that is disclosed in response to Comments 3 and 4.

Further, please provide - as a percentage - of the total amount of all possible payments as disclosed in response to Comment 2 and the total possible discount to the market price of the shares underlying the convertible note as disclosed in response to Comment 3 divided by the net proceeds to the issuer from the sale of the convertible notes, as well as the amount of that resulting percentage averaged over the term of the convertible notes.

12



Comparison of Company Proceeds from September 2005 Financing and September 2006 Financing to Potential Investor Profit

September 2005 Financing

Gross Proceeds from September 2005 Financing:

 

$

17,750,000

 

Less Payments Made or Required to be Made to Selling Security Holders and Any of Their Affiliates:     

 

$

2,464,000

 

Resulting Net Proceeds from September 2005 Financing:

 

$

15,286,000

 

Combined Total Possible Discount to Market Price:

 

 

 

Debentures

 

$

—

 

Warrants*

 

$

—

 

Total

 

$

—

 

(Payments Made or Required to be Made to Selling Security Holders + Combined Total Possible Discount to Market Price)/ Net Proceeds from September 2005 Financing:

 

16.1

%

Percentage Averaged over Term of 2005 Debentures (3 years):

 

5.4

%

*                    Given that the exercise price for each of the warrants identified in this table is in excess of the market price on the date of issuance, all of the warrants identified herein are "out-of-the-money" and therefore have no value ascribed to them for purposes of this table.

September 2006 Financing

Gross Proceeds from September 2006 Financing:

 

$

8,250,000

 

Less Payments Made or Required to be Made to Selling Security Holders and Any of Their Affiliates:     

 

$

4,383,875

 

Resulting Net Proceeds from September 2006 Financing:

 

$

3,866,125

 

Combined Total Possible Discount to Market Price:

 

 

 

Debentures

 

$

19,903,515

 

Warrants

 

$

11,654,619

 

Total

 

$

31,558,134

 

(Payments Made or Required to be Made to Selling Security Holders + Combined Total Possible Discount to Market Price)/ Net Proceeds from September 2006 Financing:

 

929.7

%*

Percentage Averaged over Term of 2006 Debentures (3 years):

 

309.9

%*

*                    The “payments made” line item includes the value ascribed to the portion of the warrant issued to T.R. Winston & Company, LLC as consideration for services provided to the Company in connection with the warrant repricing. The “gross proceeds” line item and “resulting net proceeds” line item do not, however, include $4,314,589 in proceeds received by the Company as a result of the exercise of certain of the 2005 Warrants in connection with the warrant repricing.

13



 

Comment 6: Prior transactions between the issuer and the selling shareholders

Please provide tabular disclosure of all prior securities transactions between the issuer (or any of its predecessors) and the selling shareholders, any affiliates of the selling shareholders, or any person with whom any selling shareholder has a contractual relationship regarding the transaction (or any predecessors of those persons), with the table including the following information disclosed separately for each transaction:

·                  the date of the transaction;

·                  the number of shares of the class of securities subject to the transaction that were outstanding prior to the transaction;

·                  the number of shares of the class of securities subject to the transaction that were outstanding prior to the transaction and held by persons other than the selling shareholders, affiliates of the company, or affiliates of the selling shareholders;

·                  the number of shares of the class of securities subject to the transaction that were issued or issuable in connection with the transaction;

·                  the percentage of total issued and outstanding securities that were issued or issuable in the transaction (assuming full issuance), with the percentage calculated by taking the number of shares issued and outstanding prior to the applicable transaction and held by persons other than the selling shareholders, affiliates of the company, or affiliates of the selling shareholders, and dividing that number by the number of shares issued or issuable in connection with the applicable transaction;

·                  the market price per share of the class of securities subject to the transaction immediately prior to the transaction (reverse split adjusted, if necessary); and

·                  the current market price per share of the class of securities subject to the transaction (reverse split adjusted, if necessary).

14



 

Prior Securities Transactions between the Company and Selling Security Holders

On January 31, 2005, the small business issuer entered into a merger pursuant to which it effected a complete change of business. Upon the completion of the merger, the issuer ceased all of its pre-merger operations and adopted the business of the Company as it exists today. Prior to the merger, the issuer had minimal business, operations, revenues and assets, and had been involved in an industry entirely unrelated to the business of the Company as it exists today. As a result, the following table sets forth all prior securities transactions between us and the selling security holders, any affiliates of such selling security holders or any person with whom any selling security holder has a contractual relationship regarding such securities transactions, since January 31, 2005, the date of the merger.

Selling Security Holder or
Affiliate of Selling
Security Holder

 

Date of
Transaction

 

Number of
Shares of
Common Stock
Outstanding
Prior to
Transaction

 

Number of
Shares of
Common Stock
Outstanding
Prior to
Transaction
Held by Persons
Other than
Selling Security
Holders, Affiliates
of the Company,
or Affiliates of
Selling Security
Holders

 

Number of
Shares of
Common Stock
Issued or
Issuable in
Transaction

 

Percentage of
Total Issued and
Outstanding
Securities Held
by Persons Other
than Selling
Security Holders,
Affiliates of the
Company, or
Affiliates of
Selling Security
Holders Issued or
Issuable in
Transaction

 

Market Price
per Share of
Common Stock
Prior to
Transaction

 

Current Market
Price per Share*

 

Alan C. Shapiro

 

8/1/2005(1)

 

23,166,466

 

20,164,574

 

50,000

 

0.25%

 

$

2.48

 

$

0.80

 

 

 

10/5/2005(2)

 

23,099,879

 

17,046,288

 

2,813

 

0.02%

 

$

2.25

 

$

0.80

 

 

 

4/20/2006(1)

 

24,876,655

 

18,607,356

 

50,000

 

0.27%

 

$

1.35

 

$

0.80

 

 

 

7/3/2006(2)

 

25,872,015

 

19,787,124

 

44,216

 

0.22%

 

$

0.65

 

$

0.80

 

 

 

1/5/2007(2)

 

39,759,973

 

36,216,730

 

40,034

 

0.11%

 

$

0.74

 

$

0.80

 

*                     Market price per share of common stock on March 27, 2007.

(1)             We issued these stock options to Dr. Shapiro as compensation for duties performed by him as a member of our Board of Directors.

(2)             We issued these shares of our common stock to Dr. Shapiro as compensation for duties performed by him as a member of our Board of Directors.

 

15



 

Comment 7: Comparison of registered shares to outstanding shares

Please provide tabular disclosure comparing:

·                  the number of shares outstanding prior to the convertible note transaction that are held by persons other than the selling shareholders, affiliates of the company, and affiliates of the selling shareholders;

·                  the number of shares registered for resale by the selling shareholders or affiliates of the selling shareholders in prior registration statements;

·                  the number of shares registered for resale by the selling shareholders or affiliates of the selling shareholders that continue to be held by the selling shareholders or affiliates of the selling shareholders;

·                  the number of shares that have been sold in registered resale transactions by the selling shareholders or affiliates of the selling shareholders; and

·                  the number of shares registered for resale on behalf of the selling shareholders or affiliates of the selling shareholders in the current transaction.

In this analysis, the calculation of the number of outstanding shares should not include any securities underlying any outstanding convertible securities, options, or warrants.

16



Comparison of Registered Shares to Outstanding Shares

September 2005 Financing

Selling Security Holder

 

Number of Shares of
Common Stock
Outstanding Prior to
September 2005
Financing Held by
Persons Other than
Selling Security
Holders, Affiliates of
the Company, or
Affiliates of Selling
Security Holders*

 

Number of Shares
of Common Stock
Registered for
Resale by Selling
Security Holders
or Affiliates of
Selling Security
Holders in Prior
Registration
Statements

 

Number of Shares
of Common Stock
Registered for
Resale by Selling
Security Holders or
Affiliates of Selling
Security Holders
Still Held by the
Same(1)

 

Number of Shares
of Common Stock
Sold in Registered
Resale Transactions
by Selling Security
Holders or Affiliates
of Selling Security
Holders

 

Number of Shares of
Common Stock
Registered for
Resale on behalf of
Selling Security
Holders or Affiliates
of Selling Security
Holders in
September 2005
Financing

 

Newberg Family Trust UTD 12/18/90

 

20,359,574

 

0

 

29,881

 

493,035

 

532,011

 

JMB Capital Partners, LP

 

20,359,574

 

0

 

0

 

1,596,033

 

1,596,033

 

Jay Goldman Master Limited Partnership

 

20,359,574

 

0

 

89,643

 

854,192

 

1,596,033

 

CAMOFI Master LDC

 

20,359,574

 

0

 

135,425

 

928,777

 

1,064,022

 

Shapiro Family Trust Dated September 25, 1989

 

20,359,574

 

0

 

205,283

 

0

 

212,803

 

G. Tyler Runnels or Jasmine Niklas Runnels TTEES The Runnels Family Trust dtd 1-11-2000

 

20,359,574

 

0

 

0

 

126,059

 

159,603

 

High Tide, LLC

 

20,359,574

 

0

 

0

 

126,059

 

159,603

 

JMG Triton Offshore Fund, Ltd.

 

20,359,574

 

0

 

5,081

 

1,058,941

 

1,064,022

 

JMG Capital Partners, LP

 

20,359,574

 

0

 

62,043

 

1,001,979

 

1,064,022

 

Cranshire Capital, LP

 

20,359,574

 

0

 

0

 

319,207

 

319,207

 

MM & B Holdings, a California general partnership

 

20,359,574

 

0

 

0

 

1,064,022

 

1,064,022

 

JGB Capital, LP

 

20,359,574

 

0

 

0

 

312,363

 

798,016

 

Bristol Investment Fund, Ltd.

 

20,359,574

 

0

 

0

 

2,059,589

 

2,128,043

 

Overbrook Fund I, LLC

 

20,359,574

 

0

 

0

 

78,961

 

212,804

 

Portside Growth and Opportunity Fund

 

20,359,574

 

0

 

0

 

919,188

 

1,052,874

 

Rockmore Investment Master Fund Ltd.

 

20,359,574

 

0

 

0

 

327,904

 

327,904

 

Omicron Master Trust

 

20,359,574

 

0

 

0

 

28,851

 

215,255

 

Smithfield Fiduciary, LLC

 

20,359,574

 

0

 

0

 

395,236

 

532,011

 

Alpha Capital

 

20,359,574

 

0

 

0

 

371,990

 

532,011

 

Midsummer Investment, Ltd.

 

20,359,574

 

0

 

35,035

 

300,129

 

851,217

 

Bushido Capital Master Fund, LP

 

20,359,574

 

0

 

48,440

 

75,420

 

266,005

 

John A. Kryzanowski

 

20,359,574

 

0

 

375,502

 

35,066

 

425,609

 

DAFNA LifeScience, Ltd.

 

20,359,574

 

0

 

0

 

265,976

 

266,005

 

Whalehaven Capital Fund Limited

 

20,359,574

 

0

 

0

 

245,261

 

798,016

 

Stonestreet, LP

 

20,359,574

 

0

 

0

 

22,153

 

266,005

 

Anthem Ventures Fund, LP

 

20,359,574

 

0

 

240,920

 

77,833

 

1,064,022

 

Evan S. Malik

 

20,359,574

 

0

 

34,556

 

0

 

53,201

 

Gamma Opportunity Fund Capital Partners LP Class A

 

20,359,574

 

0

 

0

 

18,881

 

133,003

 

Gamma Opportunity Fund Capital Partners LP Class C

 

20,359,574

 

0

 

0

 

18,881

 

133,003

 

T.R. Winston & Company, LLC

 

20,359,574

 

0

 

0

 

0

 

1,510,911

 

(1)             This amount does not include shares of common stock underlying any outstanding convertible securities, options, or warrants.

17



 

September 2006 Financing

Selling Security Holder

 

Number of Shares of
Common Stock
Outstanding Prior to
September 2006
Financing Held by
Persons Other than
Selling Security
Holders, Affiliates of
the Company, or
Affiliates of Selling
Security Holders*

 

Number of Shares of
Common Stock
Registered for Resale
by Selling Security
Holders or Affiliates
of Selling Security
Holders in Prior
Registration
Statements

 

Number of Shares of
Common Stock
Registered for Resale
by Selling Security
Holders or Affiliates
of Selling Security
Holders Still Held by
the Same(1)

 

Number of Shares of
Common Stock Sold
in Registered Resale
Transactions by
Selling Security
Holders or Affiliates
of Selling Security
Holders

 

Number of Shares of
Common Stock
Registered for Resale
on behalf of Selling
Security Holders or
Affiliates of Selling
Security Holders in
September 2006
Financing

 

Newberg Family Trust UTD 12/18/90

 

24,864,043

 

532,011

 

0

 

0

 

396,115

 

JMB Capital Partners, LP

 

24,864,043

 

1,596,033

 

0

 

0

 

959,086

 

Jay Goldman Master Limited Partnership

 

24,864,043

 

1,596,033

 

0

 

0

 

1,188,345

 

CAMOFI Master LDC

 

24,864,043

 

1,064,022

 

0

 

0

 

772,333

 

Shapiro Family Trust Dated September 25, 1989

 

24,864,043

 

212,804

 

0

 

0

 

158,446

 

G. Tyler Runnels or Jasmine Niklas Runnels TTEES The Runnels Family Trust dtd 1-11-2000

 

24,864,043

 

159,603

 

0

 

0

 

95,113

 

High Tide, LLC

 

24,864,043

 

159,603

 

0

 

0

 

95,113

 

JMG Triton Offshore Fund, Ltd.

 

24,864,043

 

1,064,022

 

0

 

0

 

682,800

 

JMG Capital Partners, LP

 

24,864,043

 

1,064,022

 

0

 

0

 

712,644

 

Cranshire Capital, LP

 

24,864,043

 

319,207

 

0

 

0

 

237,669

 

MM & B Holdings, a California general partnership

 

24,864,043

 

1,064,022

 

0

 

0

 

657,816

 

JGB Capital, LP

 

24,864,043

 

798,016

 

0

 

0

 

310,921

 

Bristol Investment Fund, Ltd.

 

24,864,043

 

2,128,043

 

0

 

0

 

1,588,646

 

Overbrook Fund I, LLC

 

24,864,043

 

212,804

 

0

 

0

 

158,446

 

Portside Growth and Opportunity Fund

 

24,864,043

 

1,052,874

 

0

 

0

 

811,201

 

Rockmore Investment Master Fund Ltd.

 

24,864,043

 

327,904

 

0

 

0

 

253,607

 

Omicron Master Trust

 

24,864,043

 

215,255

 

0

 

0

 

25,054

 

Smithfield Fiduciary, LLC

 

24,864,043

 

532,011

 

0

 

0

 

396,115

 

Alpha Capital

 

24,864,043

 

532,011

 

0

 

0

 

317,044

 

Midsummer Investment, Ltd.

 

24,864,043

 

851,217

 

0

 

0

 

633,784

 

Bushido Capital Master Fund, LP

 

24,864,043

 

266,005

 

0

 

0

 

198,058

 

John A. Kryzanowski

 

24,864,043

 

425,609

 

0

 

0

 

316,892

 

DAFNA LifeScience, Ltd.

 

24,864,043

 

266,005

 

0

 

0

 

100,521

 

Whalehaven Capital Fund Limited

 

24,864,043

 

798,016

 

0

 

0

 

589,159

 

Stonestreet, LP

 

24,864,043

 

266,005

 

0

 

0

 

51,749

 

Anthem Ventures Fund, LP

 

24,864,043

 

1,064,022

 

0

 

0

 

792,230

 

Evan S. Malik

 

24,864,043

 

53,201

 

0

 

0

 

39,612

 

Gamma Opportunity Fund Capital Partners LP Class A

 

24,864,043

 

133,003

 

0

 

0

 

79,261

 

Gamma Opportunity Fund Capital Partners LP Class C

 

24,864,043

 

133,004

 

0

 

0

 

79,261

 

T.R. Winston & Company, LLC

 

24,864,043

 

1,510,911

 

0

 

0

 

819,326

 

(1)             This amount does not include shares of common stock underlying any outstanding convertible securities, options, or warrants.

 

18



 

Comment 8: The issuer’s intention and ability to make all note payments and the presence or absence of short selling by the selling shareholders

Please provide the following information:

·                  whether the issuer has the intention, and a reasonable basis to believe that it will have the financial ability, to make all payments on the overlying securities; and

·                  whether - based on information obtained from the selling shareholders - any of the selling shareholders have an existing short position in the company’s common stock and, if any of the selling shareholders have an existing short position in the company’s stock, the following additional information:

·                  the date on which each such selling shareholder entered into that short position; and

·                  the relationship of the date on which each such selling shareholder entered into that short position to the date of the announcement of the convertible note transaction and the filing of the registration statement (e.g.,. before or after the announcement of the convertible note transaction, before the filing or after the filing of the registration statement, etc.).

Company’s Intention and Ability to Satisfy its Obligations to Selling Security Holders

We have the intention, and a reasonable basis to believe that we will have the financial ability, to make payments on the overlying securities in both cash and shares of our common stock. We have duly accounted for such payments as part of our strategic plan.

19



 

Existing Short Positions by Selling Security Holders

Based upon information provided by the selling security holders, the following selling security holders have existing short positions in our common stock:

Selling Security Holder

 

Existing Short Position (Y/N)

 

Newberg Family Trust UTD 12/18/90

 

 

N

 

 

JMB Capital Partners, LP

 

 

N

 

 

Jay Goldman Master Limited Partnership

 

 

N

 

 

CAMOFI Master LDC

 

 

N

 

 

Shapiro Family Trust Dated September 25, 1989

 

 

N

 

 

G. Tyler Runnels or Jasmine Niklas Runnels TTEES The Runnels Family Trust dtd 1-11-2000

 

 

N

 

 

High Tide, LLC

 

 

N

 

 

JMG Triton Offshore Fund, Ltd.

 

 

Y

(1)

 

JMG Capital Partners, LP

 

 

Y

(1)

 

Cranshire Capital, LP

 

 

 

(2)

 

MM & B Holdings, a California general partnership

 

 

N

 

 

JGB Capital, LP

 

 

Y

(3)

 

Bristol Investment Fund, Ltd.

 

 

 

(4)

 

Overbrook Fund I, LLC

 

 

N

 

 

Portside Growth and Opportunity Fund

 

 

 

(5)

 

Rockmore Investment Master Fund Ltd.

 

 

 

(6)

 

Omicron Master Trust

 

 

N

 

 

Smithfield Fiduciary, LLC

 

 

 

(7)

 

Alpha Capital

 

 

Y

(1)

 

Midsummer Investment, Ltd.

 

 

 

(8)

 

Bushido Capital Master Fund, LP

 

 

N

 

 

John A. Kryzanowski

 

 

N

 

 

DAFNA LifeScience, Ltd.

 

 

N

 

 

Whalehaven Capital Fund Limited

 

 

N

 

 

Stonestreet, LP

 

 

N

 

 

Anthem Ventures Fund, LP

 

 

N

 

 

Evan S. Malik

 

 

N

 

 

Gamma Opportunity Fund Capital Partners LP Class A

 

 

N

 

 

Gamma Opportunity Fund Capital Partners LP Class C

 

 

N

 

 

T.R. Winston & Company, LLC

 

 

N

 

 

(1)             Entered into short position on January 10, 2007, after the announcements of both the September 2005 Financing and the September 2006 Financing; after the filing of Registration Statement No. 333-129019 on Form SB-2, which was filed on October 14, 2005, originally declared effective on October 28, 2005, and subsequently amended; after the filing of Registration Statement No. 333-137601 on Form SB-2, which was filed on September 26, 2006 and subsequently withdrawn; and prior to the filing of Registration Statement No. 333-140265 on Form SB-2, which was filed on January 26, 2007.

(2)             In response to our request for information regarding whether this selling security holder has an existing short position in our common stock, we received the following response from Cranshire Capital, LP: We acknowledge the Staff's stated position that short sales of common stock made prior to the effectiveness of the Registration Statement may not be covered with the shares (or underlying shares) acquired in the PIPE transaction.

(3)             Entered into short positions on March 13, 2006, March 14, 2006, April 5, 2006, May 22, 2006, May 23, 2006, August 24, 2006, August 31, 2006, September 5, 2006, September 8, 2006, September 12, 2006, September 13, 2006, September 19, 2006, September 28, 2006, October 12, 2006, October 24, 2006, October 26, 2006, October 27, 2006, November 14, 2006, November 15, 2006, December 1, 2006, January 16, 2007, January 19, 2007. The September 2005 financing was announced on September 16, 2005. The September 2006 financing was announced on August 25, 2006. Registration Statement No. 333-129019 on Form SB-2 was filed on October 14, 2005, originally declared effective on October 28, 2005, and subsequently amended. Registration Statement No. 333-137601 on Form SB-2 was filed on September 26, 2006 and subsequently withdrawn. Registration Statement No. 333-140265 on Form SB-2 was filed on January 26, 2007.

(4)             In response to our request for information regarding whether this selling security holder has an existing short position in our common stock, we received the following response from Bristol Investment Fund, Ltd.: In the ordinary course of its business in trading securities positions, Bristol Investment Fund, Ltd. (“Bristol”) may from time to time enter into short sales. However, no short sales are entered into while in possession of any material, nonpublic information. Bristol is aware of and acknowledges the position of the Staff of the Commission set forth in Item A.65 of the SEC Telephone Interpretations Manual.

(5)             In response to our request for information regarding whether this selling security holder has an existing short position in our common stock, we received the following response from Portside Growth and Opportunity Fund: In the ordinary course of its business in trading securities positions, the Selling Stockholder may enter into short sales. However, no such short sales are entered into prior to the public announcement of any private placement pursuant to which the applicable securities were acquired by the Selling Stockholder and the Selling Stockholder is aware of and adheres to the position of the Staff of the Commission set forth in Item A.65 of the SEC Telephone Interpretations Manual.

(6)             In response to our request for information regarding whether this selling security holder has an existing short position in our common stock, we received the following response from Rockmore Investment Master Trust Ltd.: In the ordinary course of its business in trading securities positions, the undersigned may enter into short sales. However, no such short sales are entered into while in possession of any material, nonpublic information. The undersigned also acknowledges the position of the Staff of the Commission set forth in Item A.65 of the SEC Telephone Interpretations Manual.

(7)             In response to our request for information regarding whether this selling security holder has an existing short position in our common stock, we received the following response from Smithfield Fiduciary, LLC: In the ordinary course of its business in trading securities positions, the undersigned may enter into short sales. However, no such short sales are entered into while in possession of any material, nonpublic information. The undersigned also acknowledges the position of the Staff of the Commission set forth in Item A.65 of the SEC Telephone Interpretations Manual.

(8)             In response to our request for information regarding whether this selling security holder has an existing short position in our common stock, we received the following response from Midsummer Investment, Ltd.: In the ordinary course of its business in trading securities positions, the undersigned may enter into short sales. However, no such short sales are entered into while in possession of any material, nonpublic information. The undersigned also acknowledges the position of the Staff of the Commission set forth in Item A.65 of the SEC Telephone Interpretations Manual.

 

20



 

 

Comment 9: Relationships between the issuer and selling shareholders

Please provide:

·                      a materially complete description of the relationships and arrangements that have existed in the past three years or are to be performed in the future between the issuer (or any of its predecessors) and the selling shareholders, any affiliates of the selling shareholders, or any person with whom any selling shareholder has a contractual relationship regarding the transaction (or any predecessors of those persons) - the information provided should include, in reasonable detail, a complete description of the rights and obligations of the parties in connection with the sale of the convertible notes; and

·                      copies of all agreements between the issuer (or any of its predecessors) and the selling shareholders, any affiliates of the selling shareholders, or any person with whom any selling shareholder has a contractual relationship regarding the transaction (or any predecessors of those persons) in connection with the sale of the convertible notes.

If it is your view that such a description of the relationships and arrangements between and among those parties already is presented in the prospectus and that all agreements between and/or among those parties are included as exhibits to the registration statement, please provide us with confirmation of your view in this regard.

Relationships Between the Company and Selling Security Holders

We hereby confirm that a description of the relationships and arrangements between and among those parties is presented in the prospectus and that all agreements between and/or among those parties are included as exhibits to the registration statement by incorporation by reference.  This disclosure pertains to all such relationships and arrangements occurring on and after January 31, 2005, the date on which the issuer entered into a merger and effected a complete change of business as further described above.

Comment 10: The method by which the number of registered shares was determined

Please provide a description of the method by which the company determined the number of shares it seeks to register in connection with this registration statement.  In this regard, please ensure that the number of shares registered in the fee table is consistent with the shares listed in the “Selling Security Holders” section of the prospectus.

Method of Determining the Number of Shares Registered in this Prospectus

Pursuant to the registration rights agreement between us and the selling security holders, the number of shares of common stock that we are required to register is limited to an amount not in excess of the limits imposed by the Securities and Exchange Commission’s application of Rule 415 to secondary, resale registration statements, provided that we register not less than 30% of our issued and outstanding common stock (less shares held by our affiliates) every six months until the registration requirements of the applicable registration rights agreement are satisfied in their entirety, and provided further that we continue to exercise best efforts to satisfy the registration requirements of the original registration rights agreement as promptly as possible.

21



 

Comment 11: Information regarding institutional selling shareholders

With respect to the shares to be offered for resale by each selling security holder that is a legal entity, please disclose the natural person or persons who exercise the sole or shared voting and/or dispositive powers with respect to the shares to be offered by that shareholder.

Information Regarding Institutional Selling Security Holders

With respect to the shares to be offered for resale by each selling security holder that is a legal entity, the natural person or persons who exercise the sole or shared voting and/or dispositive powers with respect to the shares to be offered by that security holder are as follows:

Selling Security Holder

 

Control Person(1)

Newberg Family Trust UTD 12/18/90

 

Bruce Newberg

JMB Capital Partners, LP

 

Cyrus Hadidi

Jay Goldman Master Limited Partnership

 

Jay G. Goldman

CAMOFI Master LDC

 

Richard Smithline

Shapiro Family Trust Dated September 25, 1989

 

Alan C. Shapiro

G. Tyler Runnels or Jasmine Niklas Runnels TTEES The Runnels Family Trust dtd 1-11-2000

 

G. Tyler Runnels, Trustee of the Runnels Family Trust

High Tide, LLC

 

G. Tyler Runnels, Manager of High Tide, LLC

JMG Triton Offshore Fund, Ltd.

 

(1)

JMG Capital Partners, LP

 

(2)

Cranshire Capital, LP

 

(3)

MM & B Holdings, a California general partnership

 

Bryan Ezralow

JGB Capital, LP

 

Brett Cohen

Bristol Investment Fund, Ltd.

 

(4)

Overbrook Fund I, LLC

 

Arthur G. Altschul, Jr.

Portside Growth and Opportunity Fund

 

(5)

Rockmore Investment Master Fund Ltd.

 

(6)

Omicron Master Trust

 

(7)

Smithfield Fiduciary, LLC

 

(8)

Alpha Capital

 

Konrad Ackerman

Midsummer Investment, Ltd.

 

(9)

Bushido Capital Master Fund, LP

 

Ronald S. Dagar

DAFNA LifeScience, Ltd.

 

Nathan Fischel

Whalehaven Capital Fund Limited

 

Michael Finkelstein, CEO

Stonestreet, LP

 

Michael Finkelstein, Elizabeth Leonard

Anthem Ventures Fund, LP

 

William R. Woodward

Gamma Opportunity Fund Capital Partners LP Class A

 

Jonathan P. Knight

Gamma Opportunity Fund Capital Partners LP Class C

 

Jonathan P. Knight

T.R. Winston & Company, LLC

 

G. Tyler Runnels, Chairman & CEO

(1)             JMG Triton Offshore Fund, Ltd. (the “Fund”) is an international business company organized under the laws of the British Virgin Islands. The Fund’s investment manager is Pacific Assets Management LLC, a Delaware limited liability company (the “Manager”) that has voting and dispositive power over the Fund’s investments, including the Registrable Securities. The equity interests of the Manager are owned by Pacific Capital Management, Inc., a California corporation (“Pacific”) and Asset Alliance Holding Corp., a Delaware corporation. The equity interests of Pacific are owned by Messrs. Roger Richter, Jonathan M. Glaser and Daniel A. David. Messrs. Glaser and Richter have sole investment discretion over the Fund’s portfolio holdings.

(2)             JMG Capital Partners, L.P. (“JMG Partners”) is a California limited partnership. Its general partner is JMG Capital Management, LLC (the “Manager”), a Delaware limited liability company and an investment adviser that has voting and dispositive power over JMG Partners’ investments, including the Registrable Securities. The equity interests of the Manager are owned by JMG Capital Management, Inc. (“JMG Capital”), a California corporation, and Asset Alliance Holding Corp., a Delaware corporation. Jonathan M. Glaser is the Executive Officer and Director of JMG Capital and has sole investment discretion over JMG Partners’ portfolio holdings.

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(3)             Mitchell P. Kofin, President of Downsview Capital, Inc., the General Partner of Cranshire Capital, L.P., has sole voting and investment control over the stock.

(4)             Bristol Capital Advisors, LLC (“BCA”) is the investment advisor to Bristol Investment Fund, Ltd. (“Bristol”). Paul Kessler is manager of BCA and as such has voting and investment control over the securities held by Bristol. Mr. Kessler disclaims beneficial ownership of these securities.

(5)             Ramius Capital Group, LLC (“Ramius Capital”) is the investment adviser of Portside Growth and Opportunity Fund (“Portside”) and consequently has voting control and investment discretion over securities held by Portside. Ramius Capital disclaims beneficial ownership of the shares held by Portside. Peter A. Cohen, Morgan B. Stark, Thomas W. Strauss and Jeffrey M. Solomon are the sole managing members of C4S & Co., L.L.C., the sole managing member of Ramius Capital. As a result, Messrs. Cohen, Stark, Strauss and Solomon may be considered beneficial owners of any shares deemed to be beneficially owned by Ramius Capital. Messrs. Cohen, Stark, Strauss and Solomon disclaim beneficial ownership of these shares.

(6)             Rockmore Capital, LLC (“Rockmore Capital”) and Rockmore Partners, LLC (“Rockmore Partners”), each a limited liability company formed under the laws of the State of Delaware, serve as the investment manager and general partner, respectively, to Rockmore Investments (US) LP, a Delaware limited partnership, which invests all of its assets through Rockmore Investment Master Fund Ltd., an exempted company formed under the laws of Bermuda (“Rockmore Master Fund”). By reason of such relationships, Rockmore Capital and Rockmore Partners may be deemed to share dispositive power over the shares of our common stock owned by Rockmore Master Fund. Rockmore Capital and Rockmore Partners disclaim beneficial ownership of such shares of our common stock. Rockmore Partners has delegated authority to Rockmore Capital regarding the portfolio management decisions with respect to the shares of common stock owned by Rockmore Master Fund and, as of March 1, 2007, Mr. Bruce T. Bernstein and Mr. Brian Daly, as officers of Rockmore Capital, are responsible for the portfolio management decisions of the shares of common stock owned by Rockmore Master Fund. By reason of such authority, Messrs. Bernstein and Daly may be deemed to share dispositive power over the shares of our common stock owned by Rockmore Master Fund. Messrs. Bernstein and Daly disclaim beneficial ownership of such shares of our common stock and neither of such persons has any legal right to maintain such authority. No other person has sole or shared voting or dispositive power with respect to the shares of our common stock as those terms are used for purposes under Regulation 13D-G of the Securities Exchange Act of 1934, as amended. No person or “group” (as that term is used in Section 13(d) of the Securities Exchange Act of 1934, as amended, or the SEC’s Regulation 13D-G) controls Rockmore Master Fund.

(7)             Omicron Capital, L.P., a Delaware limited partnership (“Omicron Capital”), serves as investment manager to Omicron Master Trust, a trust formed under the laws of Bermuda (“Omicron”), Omicron Capital, Inc., a Delaware corporation (“OCI”), serves as general partner of Omicron Capital, and Winchester Global Trust Company Limited (“Winchester”) serves as the trustee of Omicron. By reason of such relationships, Omicron Capital and OCI may be deemed to share dispositive power over the shares of our common stock owned by Omicron, and Winchester may be deemed to share voting and dispositive power over the shares of our common stock owned by Omicron. Omicron Capital, OCI and Winchester disclaim beneficial ownership of such shares of our common stock. As of the date of this prospectus, Mr. Olivier H. Morali, an officer of OCI, and Mr. Bruce T. Bernstein, a consultant to OCI, have delegated authority from the board of directors of OCI regarding the portfolio management decisions with respect to the shares of our common stock owned by Omicron. By reason of such delegated authority, Messrs. Morali and Bernstein may be deemed to share dispositive power over the shares of our common stock owned by Omicron. Messrs. Morali and Bernstein disclaim beneficial ownership of such shares of our common stock and neither of such persons has any legal right to maintain such delegated authority. No other person has sole or shared voting or dispositive power with respect to the shares of our common stock being offered by Omicron, as those terms are used for purposes under Regulation 13D-G of the Securities Exchange Act of 1934, as amended. Omicron and Winchester are not “affiliates” of one another, as that term is used for purposes of the Exchange Act or of any other person named in this prospectus as a selling stockholder. No person or “group” (as that term is used in Section 13(d) of the Exchange Act or the SEC’s Regulation 13D-G) controls Omicron and Winchester.

(8)             Highbridge Capital Management, LLC is the trading manager of Smithfield Fiduciary LLC and has voting control and investment discretion over the securities held by Smithfield Fiduciary LLC. Glenn Dubin and Henry Swieca control Highbridge Capital Management, LLC and have voting control and investment discretion over the securities held by Smithfield Fiduciary LLC. Each of Highbridge Capital Management, LLC, Glenn Dubin and Henry Swieca disclaims beneficial ownership of the securities held by Smithfield Fiduciary LLC.

(9)             Midsummer Capital, LLC is the investment manager to Midsummer Investment Ltd. By virtue of such relationship, Midsummer Capital, LLC may be deemed to have dispositive power over the shares owned by Midsummer Investment Ltd. Midsummer Capital, LLC disclaims beneficial ownership of such shares. Mr. Michel Amsalem and Mr. Scott Kaufman have delegated authority from the members of Midsummer Capital, LLC with respect to the shares of common stock owned by Midsummer Investment Ltd. Messrs. Amsalem and Kaufman may be deemed to share dispositive power over the shares of our common stock owned by Midsummer Investment Ltd. Messrs. Amsalem and Kaufman disclaim beneficial ownership of such shares of our common stock and neither person has any legal right to maintain such delegated authority.

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In connection with the foregoing responses, we have been authorized by the Company to inform you that the Company acknowledges the following:

·              The Company is responsible for the adequacy and accuracy of the disclosure in its filings;

·              Staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking action with respect to a 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.

We hope that the foregoing responses adequately address your comments and are helpful to you in your review of the Registration Statement.

Please do not hesitate to contact us with any questions you may have.

Sincerely,

/s/ Christopher E. Howard

 

Christopher E. Howard

cc:

 

Mr. William M. Caldwell, IV, Advanced Cell Technology, Inc.

 

 

Mr. Jonathan F. Atzen, Esq., Advanced Cell Technology, Inc.

 

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