Univercell Holdings (UVCL)

[MJAM2020]

Decent Read here..

To: Clients and Friends of Feldman Weinstein & Smith LLP

January 26, 2007

I just got back from listening to David Lynn, Chief Counsel of the SEC’s Corporation Finance Department, discuss the Staff’s new interpretation of Rule 415 for non-shelf eligible issuers (below $75 million float).

What you need to know:



The issuer can register up to one-third of its pre-deal public float at one time.


There may be certain situations, however, where companies seeking to register more than 10% of the float on behalf of a particular investor may be restricted from doing so, or other limitations below the 1/3 threshold may be imposed if the staff has other reasons to think an investor is an affiliate (certain covenants in debt deals may create this impression, as will deals where the investor is only registering 1/3 of the float but has purchased substantially more than 1/3).


The SEC will consider, on a case-by-case basis, allowing more than 1/3 of the float to be registered. This goes back to the six Telephone Interpretation D.29 factors. They will be MORE inclined to let a larger number of shares be registered if the deal is common stock or a non-resettable fixed price convertible, and if there are a larger number of smaller investors; and LESS inclined with a toxic or resettable deal or a deal with fewer, larger investors.


Contrary to some press reports from an SEC conference in San Diego, once the first registration statement is effective, the company can file a follow-on for an additional 1/3 of the pre-deal float the LATER OF 6 months after the effective date of the first registration statement, or 60 days after “substantially all” of the registered securities have been sold. This means that investors may be forced to sell out their position sooner than they would wish to in order for the balance of the deal to get registered. Mr. Lynn acknowledged after questioning from the crowd that this was not their intent, and that they may have to “reconsider” this element.


If the company does another deal for another purpose (acquisition rather than working capital) while the first registration is out there and yet not used up, they will not block the second registration. They will be looking for overlapping investors, and the issuer will need to show that the deals are unrelated. Mr. Lynn said that they had nothing against an investor who understands the company re-investing but they are looking for “structured” deals which attempt to hide that the investor is an affiliate. Query how this may impact rights of participation.


Shell mergers: they don’t have a special rule, but acknowledged that there is no float, so they will let issuer make its case for a useful number of registrable shares on a case-by-case basis. [Feldman comment: this is a positive thing for reverse mergers.]


Equity Lines: no new guidance, assume an equity line can be registered for no more than 1/3 of the float.


New disclosure rules, which have been circulated in at least one comment letter, will require that each investor disclose, among other things, how many shares it shorted pre-effectiveness and when.



later
mj