SEC Company Response from ALPHA INNOTECH CORP (CIK 0000830736) — Jul 28, 2005
ALPHA INNOTECH CORP (CIK 0000830736)
Date: July 28, 2005 · CIK: 0000830736 · Accession: 0001170918-05-000475
AI Filing Summary & Sentiment
File numbers found in text: 001-14257
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[STUBBS ALDERTON & MARKILES, LLP LETTERHEAD]
July 28, 2005
VIA EDGAR AND OVERNIGHT DELIVERY
Securities and Exchange Commission
Division of Corporation Finance
Mail Stop 6010
Washington, D.C. 20549
RE: XTRANA, INC.
RESPONSES TO STAFF COMMENTS OF JULY 21, 2005 WITH RESPECT TO:
PRELIMINARY PROXY STATEMENT ON SCHEDULE 14A
AMENDMENT NO. 1
FILED ON JULY 7, 2005
FILE NO. 001-14257
FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2004
FILE NO. 001-14257
Ladies and Gentlemen:
On behalf of Xtrana, Inc. (the "COMPANY"), we have enclosed for filing
one copy of Amendment No. 2 to Preliminary Proxy Statement on Schedule 14A (the
"AMENDMENT NO. 2"). In addition to filing Amendment No. 2, we hereby provide
supplementally the following responses in reply to the Staff's comment letter,
dated July 7, 2005 (the "COMMENT LETTER"). The factual information provided
herein relating to the Company has been made available to us by the Company and
by Alpha Innotech Corporation ("ALPHA INNOTECH"). Paragraph numbering used for
each supplemental response set forth below corresponds to the numbering used in
the Comment Letter.
GENERAL
1. WE NOTE YOUR RESPONSE TO COMMENT 4. WE ALSO NOTE THAT ON DECEMBER 2,
2005 THE BOARD APPROVED THE TRANSACTION AND DETERMINED THAT THE MERGER
WAS FAIR TO AND IN THE BEST INTERESTS OF XTRANA AND ITS STOCKHOLDERS.
HOWEVER, THE FAIRNESS OPINION IS DATED APRIL 21, 2005. PLEASE DISCLOSE
WHAT MATERIALS THE XTRANA DIRECTORS RELIED ON IN DETERMINING THAT THE
MERGER WAS FAIR TO AND IN THE BEST INTERESTS ON THE XTRANA
SHAREHOLDERS.
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15821 Ventura Boulevard, Suite 525, Encino, California 91436
office > 818.444.4500 fax > 818.444.4520 www.biztechlaw.com
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Securities and Exchange Commission
July 28, 2005
Page 2
The Company has included additional disclosure in the Background of the
Merger section of Amendment No. 2 to the proxy statement.
The Company notes supplementally that in determining to approve the
transaction, the Company's board of directors primarily relied upon its due
diligence review of Alpha Innotech, its consideration of the terms of the
transaction with respect to the Company and its stockholders and discussions
with its financial advisors (as described in more detail in Amendment No. 2).
There were no written materials or presentations relied upon by the board of
directors for this purposes.
2. WE NOTE YOUR RESPONSE TO COMMENT 6. PLEASE PROVIDE US WITH A
SUPPLEMENTAL ANALYSIS, INCLUDING THE UNDERLYING FACTS, SUPPORTING YOUR
DETERMINATION THAT RULE 506 OF REGULATION D IS AVAILABLE TO YOU.
The Company and Alpha Innotech have determined that the issuance of the
Company's shares to the Alpha Innotech shareholders pursuant to the Agreement
and Plan of Merger meets the following requirements for a valid exemption from
registration under the Securities Act pursuant to Rule 506 of Regulation D:
a. NUMBER OF PURCHASERS: Rule 506 requires that there are no more
than 35 purchasers of the securities from the issuer, with
accredited investors being excluded from this number pursuant
to Rule 501(e). Alpha Innotech has 34 shareholders of record
and informed us that most of these are "accredited investors"
as defined in Regulation D. As result, the number of
purchasers requirement will be met.
b. NATURE OF PURCHASERS: Rule 506 requires that each purchaser
that is not an accredited investor must, either alone or with
his purchaser representative, have such knowledge and
experience in financial and business matters that he is
capable of evaluating the merits and risks of the prospective
investment. It is a condition to closing of the proposed
merger that each Alpha Innotech shareholder that is not an
accredited investor will represent to the Company that he, she
or it, either alone or with his purchaser representative, has
such knowledge and experience in financial and business
matters that he, she or it is capable of evaluating the merits
and risks of the prospective investment.
c. INTEGRATION: The Company has determined that it has not
conducted any offerings that might be integrated with the
merger transaction that would result in Rule 506 not being
available as a valid exemption.
d. INFORMATION: Rule 502(b) requires that certain financial and
non-financial information regarding the issuer be furnished to
all purchasers that are not accredited investors. The Company
will furnish all Alpha Innotech
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Securities and Exchange Commission
July 28, 2005
Page 3
shareholders, including all such shareholders who are not
accredited investors, with the financial and non-financial
information specified in Rule 502(b).
e. MANNER OF OFFERING: Rule 502(c) prohibits the offer or sale of
securities in a transaction exempt pursuant to Regulation D by
means of any form of general solicitation or advertising. No
such general solicitation or advertising will be conducted in
connection with the solicitation of approval of the merger
transaction by the Alpha Innotech shareholders.
f. LIMITATION ON RESALE: Rule 502(d) provides that securities
issued in a Regulation D transaction will have the status of
restricted securities under the Securities Act. The Company
will take the following steps to assure that the purchasers of
the securities are not underwriters within the meaning of the
Securities Act: (i) obtain representations from each Alpha
Innotech shareholder the shareholder is acquiring the
Company's shares for investment purposes for his, her or its
own account and not with a view of distribution of such
shares; (ii) advise each Alpha Innotech shareholder and obtain
representation from such shareholders that the shares have not
been registered under the Securities Act and may not be sold
unless they are registered under the Securities Act or
pursuant to a valid exemption from registration; and (iii)
placing a legend on the certificates representing the shares
stating that the shares have not been registered under the
Securities Act and referring to the restrictions on transfer
and sale of the shares.
BACKGROUND OF THE MERGER, PAGE 18
3. PLEASE REVISE TO CLARIFY WHEN THE MENTOR GROUP WAS HIRED AND WHEN THEIR
FAIRNESS OPINION WAS DELIVERED TO THE BOARD. THE MEETING AT WHICH THE
FAIRNESS OPINION WAS PRESENTED SHOULD BE DESCRIBED IN THIS SECTION.
ADDITIONALLY, THE PURPOSE OF THE FAIRNESS OPINION IS UNCLEAR GIVEN THAT
IT IS DATED AFTER THE BOARD HAD ALREADY VOTED TO APPROVE THE MERGER.
PLEASE EXPLAIN. SIMILARLY, ON PAGE 28 THE REPORT OF FAIRNESS ADVISOR IS
LISTED AS ONE OF THE DIRECTORS' REASONS FOR THE MERGER. PLEASE ADVISE
OR REVISE.
The Company has included additional disclosure on pages 20 and 21 of
Amendment No. 2 to clarify when The Mentor Group, Inc. was engaged by the
Company to render the fairness opinion and when the fairness opinion was
delivered. We note supplementally that no meeting was held for the presentation
of the fairness opinion, but rather The Mentor Group, Inc. delivered a copy of
its fairness opinion to all members of the Company's Board of Directors.
The Company sought to obtain the fairness opinion to provide additional
information for the stockholders in making their decision on whether to approve
the
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Securities and Exchange Commission
July 28, 2005
Page 4
transaction and to provide independent validation of the Board's determination
that the transaction is in the best interest of the Company's stockholders. In
addition, the Company notes that prior to approving the merger, members of the
Company's board of directors consulted The Mentor Group, Inc. In these
discussions, the Company's directors described to The Mentor Group the terms of
the proposed transaction and Alpha Innotech's business and financial condition,
and asked The Mentor Group for their initial thoughts on the likelihood of the
transaction being determined as fair to our stockholders from a financial point
of view.
The Company has revised the "Board of Directors' Reasons for the
Merger" section of Amendment No. 2 in response to the Staff's comments.
4. PLEASE REVISE TO DESCRIBE THE INITIAL DISCUSSIONS BETWEEN MR.
CHAMBERLAIN AND MR. SNIDER IN AUGUST 2004, INCLUDING ALL DATES, ITEMS
DISCUSSED AND INDIVIDUALS PRESENT.
The Company has revised the Background of the Merger section of
Amendment No. 2 to include additional information in response to the Staff's
comments.
5. PLEASE EXPLAIN HOW IT WAS DECIDED THAT THE XTRANA SHAREHOLDERS WOULD
RETAIN 15% OF THE OUTSTANDING SHARES OF THE COMBINED COMPANY.
The percentage equity ownership of the combined company that would be
retained by the Company's stockholders was determined in arms-length
negotiations based on the parties' agreement of the relative values of Alpha
Innotech and Xtrana, respectively. The Company believes its value in the
combined company is primarily its cash and its status as a public company with
its shares quoted on the OTC Bulletin Board and a "clean" reporting history.
6. PLEASE EXPLAIN HOW DR. GERDES REVISED ALPHA INNOTECH'S TECHNOLOGY AND
INTELLECTUAL PROPERTY RIGHTS.
The statement referred to in the Staff's comment contained a
typographical error. The sentence should have stated that "Dr. Gerdes REVIEWED
Alpha Innotech's technology and intellectual property rights..." The error has
been corrected in Amendment No. 2. The Company further notes that this review
was part of the Company's due diligence process.
7. WE NOTE YOUR DISCLOSURE THAT THE BOARD DETERMINED THAT ALPHA INNOTECH
PROVIDED THE BEST POTENTIAL FOR LONG TERM VALUE TO THE XTRANA
SHAREHOLDERS. WHEN WAS THE MEETING AT WHICH THIS WAS DETERMINED? WHAT
WAS THIS DETERMINATION BASED ON? IF THERE WERE ANY PRESENTATIONS MADE
AT THIS MEETING, PLEASE DESCRIBE THE PRESENTATIONS AND IDENTIFY THE
PERSON MAKING THE PRESENTATIONS.
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Securities and Exchange Commission
July 28, 2005
Page 5
As disclosed in the proxy statement, the Company's board of directors
made a formal determination to approve the transaction with Alpha Innotech was
made at the December 2, 2005 board meeting. The directors' determination was
made based on discussions at this meeting, as well as prior board meetings and
meetings with Alpha Innotech described in the proxy statement.
In determining to approve the transaction, the Company's board of
directors primarily relied upon its due diligence review of Alpha Innotech, its
consideration of the terms of the transaction with respect to the Company and
its stockholders and discussions with its financial advisors. The due diligence
review included, without limitation, Alpha Innotech's audited annual and
unaudited interim financial information, the results of the legal, technical and
business due diligence investigations of Alpha Innotech conducted by the Company
and its advisors, and discussions and meetings with Alpha Innotech management as
described in the proxy statement. There were no written materials or
presentations relied upon by the board of directors for this purposes.
As discussed in the proxy statement, the board of directors also
considered the terms of the transaction as compared to terms proposed by other
potential merger partners and the value that would be realized by stockholders
from other strategic alternatives, including liquidation of the Company. In
addition, members of the Company's board of directors consulted its financial
advisor, The Mentor Group, Inc. prior to approving the Merger Agreement. In
these discussions, the directors described to The Mentor Group the terms of the
proposed transaction and Alpha Innotech's business and financial condition, and
asked The Mentor Group for their initial thoughts on the likelihood of the
transaction being determined as fair to the Company's stockholders from a
financial point of view. The "Board of Directors' Reasons for the Merger"
section of the proxy statement, beginning on page 27 of Amendment No. 2,
describes the factors considered by the Company's board of directors in more
detail.
8. PLEASE CONFIRM THAT THE ONLY MEETINGS THAT TOOK PLACE BETWEEN XTRANA
AND ALPHA INNOTECH WERE THE INITIAL DISCUSSIONS WITH MR. SNIDER AND MR.
CHAMBERLAIN, THE AUGUST 30, 2004 MEETING, THE SEPTEMBER 7 MEETING AND
ANY MEETINGS THAT TOOK PLACE WHILE YOU WERE CONDUCTING DUE DILIGENCE.
The Company confirms that these were the only meetings.
9. PLEASE EXPLAIN WHAT "INVESTMENT REPRESENTATION LETTERS" ARE.
The investment representation letters referred to in the proxy
statement are letters from the Alpha Innotech shareholders to the Company in
which such shareholders will make the representations to the Company necessary
to ensure compliance with Rule 506 of Regulation D under the Securities Act o
1933. The representations from the shareholders in the letters will include:
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Securities and Exchange Commission
July 28, 2005
Page 6
o that the shareholder is acquiring the Company's shares for
investment purposes for his, her or its own account and not
with a view of distribution of such shares;
o that the shareholders understands that the shares will be
"restricted securities" under the Securities Act and cannot be
transferred in the absence of
registration, or pursuant to a valid exemption from
registration, under the Securities Act;
o that the shareholder has received the disclosure regarding the
Company, Alpha Innotech and the merger will be provided to all
Alpha Innotech shareholders;
o that the shareholder has been given an opportunity to ask and
receive answers from the Company and Alpha Innotech regarding
their business, operations, financial co