SEC Company Response from XWELL, Inc. (XWEL) (CIK 0001410428) (XWEL) — Jun 1, 2012
XWELL, Inc. (XWEL) (CIK 0001410428)
Date: June 1, 2012 · CIK: 0001410428 · Accession: 0001144204-12-032983
AI Filing Summary & Sentiment
Reasoning
File numbers found in text: 333-180609
Referenced dates: May 3, 2012
Letter
Jeffrey P. Schultz | 212 692 6732 | jpschultz@mintz.com
Chrysler Center
666 Third Avenue
New York, NY 10017
212-935-3000
212-983-3115 fax
www.mintz.com
June 1, 2012
Via EDGAR and by Federal Express
Securities and Exchange Commission
Division of Corporation Finance
100 F Street, N.E.
Mail Stop 3561
Washington, D.C. 20549
Attention: Larry Spirgel, Assistant Director
Re: Vringo, Inc.
Amendment No. 1 to Registration Statement on Form S-4
Filed May 17, 2012
File No. 333-180609
Ladies and Gentleman:
On behalf of Vringo, Inc. (the “Company” or “Vringo”), we hereby file with the Securities and Exchange Commission (the “Commission”) Amendment No. 2 (the “Amendment”) to the Company’s Registration Statement on Form S-4 (File No. 333-180609), initially filed with the Commission on April 6, 2012 and as previously amended by Amendment No. 1 to Registration Statement filed with the Commission on May 17, 2012 (the “Registration Statement”). Set forth below are the Company’s responses to the comments of the staff of the Commission’s Division of Corporation Finance (the “Staff”) provided by letter (the “Comment Letter”) dated May 25, 2012 from Larry Spirgel, Assistant Director of the Division of Corporation Finance. The responses are based upon information provided to Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. by the Company and are numbered to correspond to the comments set forth in the Comment Letter, which for convenience, we have incorporated into the response letter. Where appropriate, the Company has responded to the Staff’s comments by making changes to the disclosure in the Registration Statement set forth in the Amendment. Page numbers referred to in the responses below reference the applicable pages of the Amendment.
Unaudited Pro Forma Consolidated Balance Sheets, as of December 31, 2011, page 29
1. Pro forma presentation should be based on the latest balance sheet included in the filing. As such, please remove pro forma balance sheet information as of December 31, 2011 here and throughout your filing.
Response: In response to the Staff’s comment, the Company has removed the pro forma balance sheet information as of December 31, 2011 throughout the filing.
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
BOSTON | WASHINGTON | NEW YORK | STAMFORD | LOS ANGELES | SAN DIEGO | LONDON | SAN FRANCISCO
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
Securities and Exchange Commission June 1, 2012 Page 2
The combined company will require additional capital to support its present business..., page 50
2. We note your response to comment 4 from our letter dated May 3, 2012 and related revised disclosure. We note from the third full paragraph on page 50 you are limited from incurring indebtedness senior to Vringo preferred stock in excess of $6 million including the then outstanding principal amount of existing Innovate/Protect indebtedness. Please revise to disclose the amount of indebtedness you may now incur.
Response: In accordance with the terms and conditions of the Merger Agreement, the Company may not currently incur any indebtedness without the consent of Innovate/Protect until the consummation of the Merger. Following the consummation of the Merger and in accordance with the Certificate of Designations, Preferences and Rights of Series A Convertible Preferred Stock to be filed by the Company prior to the closing of the Merger, the Company may not incur indebtedness senior to Vringo preferred stock in excess of $6 million including the then outstanding principal amount of existing Innovate/Protect indebtedness. In response to the Staff’s comment, the Company has revised the disclosure on pages 48, 91, 141 and 186 of the Amendment to clarify that Vringo cannot currently incur any indebtedness without the consent of Innovate/Protect until the consummation of the Merger.
History of Events, page 68
3. We note your disclosure at the bottom of page 69 and top of page 70. On January 9, 2012 Vringo appears to offer consideration worth about $19.2 million. On January 13, 2012 Mr. Perlman appears to be agreeable to consideration worth at least $42 million. Please revise to explain the reason for the substantial increase.
Response: The range was part of the typical, low/high negotiation. Following Vringo’s opening offer, Innovate/Protect counter proposed during negotiations that Vringo would issue 60 million shares, but ultimately, as previously disclosed, Innovate/Protect indicated that it would not be able to engage in any offer that was not at a premium to Innovate/Protect’s most recent valuation of $42 million. The Company has added disclosure on page 67 with respect to the foregoing.
4. We note your disclosure on page 69 regarding the January 4, 2012 board meeting regarding two alternative potential merger proposals. We note on January 19, 2012 Vringo’s board concluded to proceed with the Innovate/Protect transaction and leave open other potential transactions. Please explain the status of the two alternative proposals in more detail.
Response: In response to the Staff’s comment, the Company has further explained the status of the two alternative proposals on pages 68, 69 and 71 of the Amendment.
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
Securities and Exchange Commission June 1, 2012 Page 3
5. We note your disclosure on page 70 regarding a January 29, 2012 board meeting. Please disclose the additional capital raise that would have been required. Further, we note Vringo’s board rejected the alternative proposal because it would not command the same valuation as the transaction with Innovate/Protect. Please explain in more detail what you mean by “same valuation.” Disclose whether you were paying a greater amount than the Innovate/Protect transaction for a smaller part of the combined company.
Response: An additional capital raise of at least $6 million would have been required prior to closing of the alternative proposal. Although the relative percentage of Vringo ownership of the combined entity post-deal on a fully diluted basis was materially similar to the Innovate/Protect merger, based on a number of comparable public companies, the Vringo board of directors concluded that the alternative proposal would not be in the best interests of stockholders as the combined entity would not command the same valuation, i.e. number of shares outstanding post-merger multiplied by share price, in the public markets as the transaction with Innovate/Protect. The Company has added disclosure on page 69 with respect to the foregoing.
6. We note your disclosure on page 73 regarding a February 23, 2012 board meeting. After the warrant holders exercised their warrants, you were approached by a number of third parties regarding potential transactions. Please explain the status of these transactions as of February 23, 2012 and why the board rejected these transactions and considered the merger with Innovate/Protect the best possible outcome.
Response: In response to the Staff’s comment, the Company has added disclosure on page 71 of the Amendment to explain that Vringo’s management believed that the alternative offers seemed less likely to close because one of the target companies required a significant amount of time to prepare its financial statements in accordance with U.S. GAAP and the other target company would require too much additional outside capital to give the transaction a reasonable change of closing. In addition, based on management’s preliminary analysis, none of such alternatives provided more value to Vringo’s stockholders than the current offer from Innovate/Protect.
Opinion of Etico Capital to Vringo Board of Directors, page
7. We note your response to comment 20 from our letter dated May 3, 2012. Please disclose the capital budget.
Response: In response to the Staff’s comment, the Company has disclosed on page 76 of the Amendment that the Company’s operating expenditure budget for 2012 was approximately $4.22 million (consisted of $0.14 million for cost of revenue, $1.51 million for research and development, $0.93 million for marketing, and $1.64 million for general and administrative expenses).
Comparable Companies Analysis, page 79
8. We note your response to comment 24 from our letter dated May 3, 2012. However, because Vringo did not have positive EBITDA, earnings or book value, Etico Capital had to rely solely on EV/Rev to determine an implied valuation range, so it is not clear how this method was not given more weight than the others. We reissue our comment for an explanation of how Etico Capital considered the implied valuation provided by the Comparable Companies Analysis in light of the wide valuation range. Further, disclose why 0.31x to 27.94x is a narrow range of multiples for EV/REV.
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
Securities and Exchange Commission June 1, 2012 Page 4
Response: In response to the Staff’s comment, the Company has revised the second full paragraph on page 78 of the Amendment to read as follows by adding the following sentence: “Despite the wide range of EV/Rev multiples used, the high end of the implied valuation range nevertheless supported the fairness of the Merger consideration, from a financial point of view, to the holders of Vringo common stock.”
In addition, in stating “No individual method was given more weight,” Etico Capital was referring to the Vringo comparable company analysis, rather than the EV/Rev analysis. To avoid any confusion, the last two sentences in the second full paragraph on page 80 of the previous amendment have been deleted.
9. We note your response to comment 25 from our letter dated May 3, 2012. However, because Innovate/Protect did not have positive EBITDA, earnings or revenue, Etico Capital had to rely solely on P/Book to determine an implied valuation range, so it is not clear how this method was not given more weight than the others. We reissue our comment for an explanation of how Etico Capital considered the implied valuation provided by the Comparable Companies Analysis in light of the wide valuation range. We note the revised disclosure states the valuation of Innovate/Protect was within the middle of the range of $2.0 million and $287.0 million which is about $144.5 million. Please explain how this accords with the consideration being paid to Innovate/Protect’s shareholders.
Response: As the multiples of Price/Book of the comparable companies varied greatly, Etico Capital used the average of the Price/Book multiples of the ten comparable companies. Accordingly, and in response to the Staff’s comment, the Company has amended t
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filename1.htm
Jeffrey P. Schultz | 212
692 6732 | jpschultz@mintz.com
Chrysler Center
666 Third Avenue
New York, NY 10017
212-935-3000
212-983-3115 fax
www.mintz.com
June 1, 2012
Via EDGAR and by Federal Express
Securities and Exchange Commission
Division of Corporation Finance
100 F Street, N.E.
Mail Stop 3561
Washington, D.C. 20549
Attention: Larry Spirgel, Assistant Director
Re: Vringo,
Inc.
Amendment No. 1 to Registration Statement
on Form S-4
Filed May 17, 2012
File No. 333-180609
Ladies and Gentleman:
On behalf of Vringo, Inc. (the “Company”
or “Vringo”), we hereby file with the Securities and Exchange Commission (the “Commission”)
Amendment No. 2 (the “Amendment”) to the Company’s Registration Statement on Form S-4 (File No. 333-180609),
initially filed with the Commission on April 6, 2012 and as previously amended by Amendment No. 1 to Registration Statement filed
with the Commission on May 17, 2012 (the “Registration Statement”). Set forth below are the Company’s
responses to the comments of the staff of the Commission’s Division of Corporation Finance (the “Staff”)
provided by letter (the “Comment Letter”) dated May 25, 2012 from Larry Spirgel, Assistant Director of the Division
of Corporation Finance. The responses are based upon information provided to Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
by the Company and are numbered to correspond to the comments set forth in the Comment Letter, which for convenience, we have incorporated
into the response letter. Where appropriate, the Company has responded to the Staff’s comments by making changes to the disclosure
in the Registration Statement set forth in the Amendment. Page numbers referred to in the responses below reference the applicable
pages of the Amendment.
Unaudited Pro Forma Consolidated Balance
Sheets, as of December 31, 2011, page 29
1. Pro forma presentation should be based on the latest
balance sheet included in the filing. As such, please remove pro forma balance sheet information as of December 31, 2011 here
and throughout your filing.
Response: In response to the Staff’s
comment, the Company has removed the pro forma balance sheet information as of December 31, 2011 throughout the filing.
Mintz,
Levin,
Cohn,
Ferris,
Glovsky
and
Popeo,
P.C.
BOSTON
|
WASHINGTON
|
NEW
YORK
|
STAMFORD
|
LOS
ANGELES
|
SAN
DIEGO
|
LONDON
|
SAN
FRANCISCO
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
Securities and Exchange Commission
June 1, 2012
Page 2
The combined company will require additional
capital to support its present business..., page 50
2. We note your response to comment 4 from our letter
dated May 3, 2012 and related revised disclosure. We note from the third full paragraph on page 50 you are limited from incurring
indebtedness senior to Vringo preferred stock in excess of $6 million including the then outstanding principal amount of existing
Innovate/Protect indebtedness. Please revise to disclose the amount of indebtedness you may now incur.
Response: In accordance with the terms
and conditions of the Merger Agreement, the Company may not currently incur any indebtedness without the consent of Innovate/Protect
until the consummation of the Merger. Following the consummation of the Merger and in accordance with the Certificate of Designations,
Preferences and Rights of Series A Convertible Preferred Stock to be filed by the Company prior to the closing of the Merger, the
Company may not incur indebtedness senior to Vringo preferred stock in excess of $6 million including the then outstanding principal
amount of existing Innovate/Protect indebtedness. In response to the Staff’s comment, the Company has revised the disclosure
on pages 48, 91, 141 and 186 of the Amendment to clarify that Vringo cannot currently incur any indebtedness without the consent
of Innovate/Protect until the consummation of the Merger.
History of Events, page 68
3. We note your disclosure at the bottom of page 69
and top of page 70. On January 9, 2012 Vringo appears to offer consideration worth about $19.2 million. On January 13, 2012 Mr.
Perlman appears to be agreeable to consideration worth at least $42 million. Please revise to explain the reason for the substantial
increase.
Response: The range was part of the
typical, low/high negotiation. Following Vringo’s opening offer, Innovate/Protect counter proposed during negotiations that
Vringo would issue 60 million shares, but ultimately, as previously disclosed, Innovate/Protect indicated that it would not be
able to engage in any offer that was not at a premium to Innovate/Protect’s most recent valuation of $42 million. The Company
has added disclosure on page 67 with respect to the foregoing.
4. We note your disclosure on page 69 regarding the
January 4, 2012 board meeting regarding two alternative potential merger proposals. We note on January 19, 2012 Vringo’s
board concluded to proceed with the Innovate/Protect transaction and leave open other potential transactions. Please explain the
status of the two alternative proposals in more detail.
Response: In response to the Staff’s
comment, the Company has further explained the status of the two alternative proposals on pages 68, 69 and 71 of the Amendment.
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
Securities and Exchange Commission
June 1, 2012
Page 3
5. We note your disclosure on page 70 regarding a January
29, 2012 board meeting. Please disclose the additional capital raise that would have been required. Further, we note Vringo’s
board rejected the alternative proposal because it would not command the same valuation as the transaction with Innovate/Protect.
Please explain in more detail what you mean by “same valuation.” Disclose whether you were paying a greater amount
than the Innovate/Protect transaction for a smaller part of the combined company.
Response: An additional capital
raise of at least $6 million would have been required prior to closing of the alternative proposal. Although the relative percentage
of Vringo ownership of the combined entity post-deal on a fully diluted basis was materially similar to the Innovate/Protect merger,
based on a number of comparable public companies, the Vringo board of directors concluded that the alternative proposal would
not be in the best interests of stockholders as the combined entity would not command the same valuation, i.e. number of
shares outstanding post-merger multiplied by share price, in the public markets as the transaction with Innovate/Protect. The
Company has added disclosure on page 69 with respect to the foregoing.
6. We note your disclosure on page 73 regarding a February
23, 2012 board meeting. After the warrant holders exercised their warrants, you were approached by a number of third parties regarding
potential transactions. Please explain the status of these transactions as of February 23, 2012 and why the board rejected these
transactions and considered the merger with Innovate/Protect the best possible outcome.
Response: In response to the Staff’s
comment, the Company has added disclosure on page 71 of the Amendment to explain that Vringo’s management believed that the
alternative offers seemed less likely to close because one of the target companies required a significant amount of time to prepare
its financial statements in accordance with U.S. GAAP and the other target company would require too much additional outside capital
to give the transaction a reasonable change of closing. In addition, based on management’s preliminary analysis, none of
such alternatives provided more value to Vringo’s stockholders than the current offer from Innovate/Protect.
Opinion of Etico Capital to Vringo Board of Directors, page
76
7. We note your response to comment 20 from our letter
dated May 3, 2012. Please disclose the capital budget.
Response: In response to the Staff’s
comment, the Company has disclosed on page 76 of the Amendment that the Company’s operating expenditure budget for 2012 was
approximately $4.22 million (consisted of $0.14 million for cost of revenue, $1.51 million for research and development, $0.93
million for marketing, and $1.64 million for general and administrative expenses).
Comparable Companies Analysis, page 79
8. We note your response to comment 24 from our letter
dated May 3, 2012. However, because Vringo did not have positive EBITDA, earnings or book value, Etico Capital had to rely solely
on EV/Rev to determine an implied valuation range, so it is not clear how this method was not given more weight than the others.
We reissue our comment for an explanation of how Etico Capital considered the implied valuation provided by the Comparable Companies
Analysis in light of the wide valuation range. Further, disclose why 0.31x to 27.94x is a narrow range of multiples for EV/REV.
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
Securities and Exchange Commission
June 1, 2012
Page 4
Response: In response to the Staff’s
comment, the Company has revised the second full paragraph on page 78 of the Amendment to read as follows by adding the following
sentence: “Despite the wide range of EV/Rev multiples used, the high end of the implied valuation range nevertheless supported
the fairness of the Merger consideration, from a financial point of view, to the holders of Vringo common stock.”
In addition, in stating “No individual method
was given more weight,” Etico Capital was referring to the Vringo comparable company analysis, rather than the EV/Rev analysis.
To avoid any confusion, the last two sentences in the second full paragraph on page 80 of the previous amendment have been deleted.
9. We note your response to comment 25 from our letter
dated May 3, 2012. However, because Innovate/Protect did not have positive EBITDA, earnings or revenue, Etico Capital had to rely
solely on P/Book to determine an implied valuation range, so it is not clear how this method was not given more weight than the
others. We reissue our comment for an explanation of how Etico Capital considered the implied valuation provided by the Comparable
Companies Analysis in light of the wide valuation range. We note the revised disclosure states the valuation of Innovate/Protect
was within the middle of the range of $2.0 million and $287.0 million which is about $144.5 million. Please explain how this accords
with the consideration being paid to Innovate/Protect’s shareholders.
Response: As the multiples of Price/Book
of the comparable companies varied greatly, Etico Capital used the average of the Price/Book multiples of the ten comparable companies.
Accordingly, and in response to the Staff’s comment, the Company has amended t