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Frequently Asked Questions
  Staff Interpretation Letter 2010-16  
Identification Number 715
This is in response to your correspondence regarding whether a proposed private placement (the “Proposed Transaction”) would be aggregated with certain prior transactions (the “Prior Transactions”) for purposes of the shareholder approval requirements of Listing Rule 5635(d) (the “Rule”). The Prior Transactions consisted of three private placements that were completed approximately eight months ago (the “First Transaction”), five months ago (the “Second Transaction”), and two months ago (the “Third Transaction”).
You stated that there are no contingencies between the Proposed Transaction and any of the Prior Transactions. Although the investors (the “Investors”) in the Proposed Transaction would be the same as those in each of the Prior Transactions, you stated that there has never been an agreement or understanding between the company and the Investors which would have required the company to issue additional securities to the Investors following any of the Prior Transactions. Moreover, at the time of each of the Prior Transactions, the company had no plan to engage in any of the subsequent Prior Transactions or the Proposed Transaction. In each case, the company was approached by a placement agent indicating that the Investors were interested in making an investment in the company. Each of the Prior Transactions was approved separately by the company’s board of directors at the time of the transaction, and the company expects that the Proposed Transaction will be approved by the board at an upcoming meeting.
You stated that the purpose of both the First Transaction and Second Transaction was to raise capital for general corporate purposes. Following the Second Transaction and prior to the Third Transaction, the Food and Drug Administration granted the company approval to market a medical device, giving rise to the company’s need for additional capital. Accordingly, the purpose of the Third Transaction was, and the purpose of the Proposed Transaction will be, to provide funding for sales and marketing of the device and continuing product development as well as for general corporate purposes.
Each of the Prior Transactions involved the issuance of common stock at a discount to the market value, and the company expects that the Proposed Transaction would likewise result in the issuance of common stock at less than market value. No investor in the Proposed Transaction, either individually or as part of a group, could beneficially own or have the right to acquire more than 19.99% of the company’s outstanding common stock or voting power.
Following our review of the information you provided, we agree with the company’s belief that the Proposed Transaction should not be aggregated with the First Transaction for purposes of the Rule.  We have reached this conclusion in view of the amount of time between the transactions, the absence of contingencies, the different uses of proceeds, and the lack of any agreement between the company and the Investors that would have required the company to issue additional securities to the Investors following any of the Prior Transactions.  We are expressing no opinion as to whether either or both of the Second and Third Transactions would be aggregated with the Proposed Transaction.  Further, we are expressing no opinion as to whether any transaction that may be undertaken subsequent to the Proposed Transaction, particularly transactions involving the Investors, would raise potential aggregation issues.
Publication Date*: 7/31/2012 Mailto Link Identification Number: 715
material_search_footer*The Publication Date reflects the date of first inclusion in the Reference Library, which was launched on July 31, 2012, or a subsequent update to the material. Material may have been previously available on a different Nasdaq web site.
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