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  Staff Interpretation Letter 2014-1
Identification Number 1113

This is in response to your correspondence asking whether, for purposes of the shareholder approval requirements in Listing Rule 5635(d) (the “Rule”), shares issued in a proposed transaction (the “Proposed Transaction”) would be aggregated with shares issued in connection with a pending acquisition (the “Acquisition”).

In the Acquisition the Company will purchase certain assets for cash. The Company will obtain the cash needed for the Acquisition and satisfy certain related closing conditions by selling in two private placements shares of its common stock representing in aggregate approximately 12% of the total number of shares currently outstanding (not including any shares that by then may have been issued in the Proposed Transaction) (the “Private Placements”). The terms of the Private Placements were agreed by the Company and participating investors in two security purchase agreements, which were executed on the same date as the purchase agreement with respect to the Acquisition. Due to the various required closing conditions, including regulatory approval, the Company does not expect the Acquisition and Private Placements to close in the near term.

After announcing the Acquisition and Private Placements, the Company received unsolicited inquiries from institutional investors expressing interest in acquiring directly from the Company shares of its common stock. To take advantage of this interest and favorable market conditions, you stated that the Company is now considering the Proposed Transaction, in which the Company may issue shares representing up to 19.9% of the number of shares of common stock currently outstanding. The proceeds from the Proposed Transaction would be used for general working capital purposes, including future potential acquisitions. The investors in the Proposed Transaction are different than the investors in the Private Placements, and there are no contingencies between the Private Placements and the Proposed Transaction. The Proposed Transaction was not contemplated at the time the Company’s Board considered and approved the Acquisition and Private Placements. If the Company proceeds with the Proposed Transaction, it expects it to close in the near term.

Following our review of the information you provided, we have determined that the shares issued in the Proposed Transaction would not be aggregated with the shares to be issued in the Private Placements, and thus the Proposed Transaction would not require shareholder approval under the Rule. Our conclusion is based on all of your representations to us, including, but not limited to, the following: (i) there is no commonality of investors in the two transactions; (ii) the transactions are not contingent on each other; (iii) the proceeds from the transactions would be used for different purposes; (iv) the Proposed Transaction was not contemplated at the time the Private Placements agreements were entered into; and (v) the transactions are not part of the same financing plan.

Publication Date*: 8/4/2014 Mailto Link Identification Number: 1113
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