K&L
Gates LLP
Wachovia
Financial Center
200
South Biscayne Boulevard, Suite 3900
Miami, FL
33131-2399
John D. Owens,
III
john.owens@klgates.com
February
24, 2010
VIA EDGAR, FACSIMILE AND
FEDERAL EXPRESS
Attn:
Michael F. Johnson
United
States Securities and Exchange Commission
Mail Stop
4561
Washington,
D.C. 20549
Fax:
703.813.6981
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Re:
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NeoMedia
Technologies, Inc.
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Preliminary
Proxy Statement on Schedule 14A
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Filed
February 3, 2010
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File
No. 000-21743
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Dear Mr.
Johnson:
On behalf of NeoMedia Technologies,
Inc., a Delaware corporation (the “Company”), we are
providing this letter in response to comments and requests for information made
in that certain comment letter, dated February 17, 2010, from the United States
Securities and Exchange Commission (the “Commission”) to the
Company. The Company’s responses below are in identical sequence with
the Commission’s comment letter. For the convenience of the
Commission, each comment is repeated verbatim with the Company’s response
immediately following.
Special Cautionary Note
Regarding Forward-Looking Statements, page 4.
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COMMENT
1:
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We
note your statement that “the Company and its senior managers will make
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995.” Section 21E(b)(1)(C) of the
Securities Exchange Act of 1934 expressly states that the safe harbor for
forward-looking statements does not apply to statements made by issuers of
penny stock. Please either delete any references to the safe
harbors provided by the Litigation Reform Act or make clear, each time you
refer to the safe harbors provided by Litigation Reform Act, that the safe
harbor does not apply you.
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RESPONSE:
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In
response to the Commission’s comment above, the Company has amended its
Preliminary Proxy Statement on Schedule 14A (the “Amendment”), by
deleting all references to safe harbor provisions provided by the
Litigation Reform Act of 1995, particularly by deleting the section titled
“Special Cautionary Note Regarding Forward-Looking
Statements”. Please also find provided herewith a marked copy
of the Amendment for further reference which shows such changes for your
convenience.
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United
States Securities and Exchange Commission
February
24, 2010
Page
2
Proposal No. 1:
Authorization of an Amendment to the Company’s Certificate of Incorporation to
Authorize a 1 Share for 100 Shares Reverse Split of the Company’s
Outstanding Common Stock, page 5.
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COMMENT
2:
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Please
disclose, in tabular format, the number of shares of common stock
currently authorized, issued and outstanding, reserved for issuance and
authorized but unissued and the number of shares in those same categories
after completion of the reverse stock
split.
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RESPONSE:
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In
response to the Commission’s comment above, the Company has inserted the
following table into the Amendment in the section titled “Reverse Stock
Split in General” of Proposal No.
1:
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The
following table presents the impact of Proposal 1, as well as the cumulative
effect of Proposals 1 and 2 and the cumulative effect of Proposals
1, 2 and 3 on our Common Stock authorized, issued and outstanding,
reserved for issuance and authorized but unissued, if such proposals are
approved by our shareholders*:
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As of
February 1,
2010 (1)
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Effect of
Proposal
1 (2)
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Cumulative
Effect of
Proposals
1and 2 (3)
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Cumulative
Effect of
Proposals
1, 2 and 3 (4)
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Authorized
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5,000,000,000 | 50,000,000 | 5,000,000,000 | 5,000,000,000 | ||||||||||||
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Issued
and outstanding
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2,267,567,835 | 22,675,678 | 22,675,678 | 22,675,678 | ||||||||||||
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Reserved
for issuance
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2,732,432,165 | 27,324,322 | 91,951,478 | 132,831,808 | ||||||||||||
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Authorized
but unissued
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- | - | 4,885,372,844 | 4,844,492,513 | ||||||||||||
*All
of the data presented above is based upon our Common Stock as of the Record
Date, February 1, 2010. As of the Record Date we had 5,000,000,000 authorized
shares of Common Stock; 2,267,567,835 issued and outstanding shares
of Common Stock; outstanding options to acquire 172,561,241 shares of Common
Stock and shares available to issue under our stock option plans; 850,610 shares
of Common Stock issuable upon conversion related to our acquisition of BSD
Software, Inc. in 2006; 9,021,735,956 shares of Common Stock issuable upon the
conversion of all our outstanding convertible subordinated debentures based upon
the terms of each debenture and the market factors related to such conversions;
1,231,195,834 shares of Common Stock issuable upon the exercise of all our
outstanding warrants based upon the terms of each warrant and the market factors
related to each exercise; 2,215,811,538 shares of Common Stock issuable upon the
conversion of all our outstanding Series C Preferred Stock based upon the terms
of conversion and the market factors related to such conversion; and 641,025,641
shares of Common Stock issuable upon the conversion of all our outstanding
Series D Preferred Stock based upon the terms of conversion and the market
factors related to such conversion.
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(1)
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As
of the Record Date, we do not have sufficient authorized and unissued
shares of Common Stock to provide for the exercise and conversion of all
of our potentially convertible and exercisable instruments. Therefore the
number of shares of Common Stock reserved for issuance is limited to the
remaining balance of our authorized shares, less our issued and
outstanding shares.
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United
States Securities and Exchange Commission
February
24, 2010
Page
3
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(2)
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Upon
the approval by our shareholders of Proposal 1, the Reverse Split, all of
our Common Stock authorized, issued and outstanding, and reserved for
issuance shall be reduced by a factor of 1 share for 100 shares. As of the
Record Date, we would not have sufficient authorized and unissued shares
of Common Stock to provide for the exercise and conversion of all of our
potentially convertible and exercisable instruments. Therefore the number
of shares of Common Stock reserved for issuance is limited to the
remaining balance of our authorized shares, less our issued and
outstanding shares.
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(3)
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Upon
the approval by our shareholders of Proposal 1, the Reverse Split, all of
our Common Stock authorized, issued and outstanding, and reserved for
issuance shall be reduced by a factor of 1 share for 100 shares. Upon the
approval by our shareholders of Proposal 2, the fixing of our authorized
shares of Common Stock at 5,000,000,000, our reserves for issuance would
then include potential exercise of our stock options, the potential
conversion of our conversion shares related to our acquisition, and the
potential conversion of our convertible subordinated
debentures.
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(4)
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Upon
the approval by our shareholders of Proposal 1, the Reverse Split, all of
our Common Stock authorized, issued and outstanding, and reserved for
issuance shall be reduced by a factor of 1 share for 100 shares. Upon the
approval by our shareholders of Proposal 2, the fixing of our authorized
shares of Common Stock at 5,000,000,000, our reserves for issuance would
then include potential exercise of our stock options, the potential
conversion of our conversion shares related to our acquisition, and the
potential conversion of our convertible subordinated debentures. Upon the
approval by our shareholders of Proposal 3, the reduction in par value of
our Common Stock from $0.01 to $0.001, our reserves for issuance would
then include potential conversion of the Company’s Warrants, Series C
Preferred Stock and Series D Preferred
Stock.
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Please
see the attached marked copy of the Amendment for further
reference.
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COMMENT
3:
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We
note your statement on page 9 that your amendment will enable the company
to issue more shares of Common Stock in connection with financing projects
and attracting potential investors. Given that you do not
intend to decrease your authorized shares in connection with your
reverse-split, which will have the effect of creating newly available
authorized shares of common stock, please disclose whether you presently
have any plans, proposals or arrangements to issue any of the newly
available authorized shares of common stock for any purpose, including
future acquisitions and/or financings. If so, please disclose
by including materially complete descriptions of the future acquisitions
and financing transactions. If not, please state that you have
no such plans, proposals, or arrangements, written or otherwise, at this
time to issue any of the newly available authorized shares of common
stock.
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United
States Securities and Exchange Commission
February
24, 2010
Page
4
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RESPONSE:
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In
response to the comment above, the Company has disclosed in the Amendment
that, at this time, the Company does not have any plans, proposals or
arrangements, written or otherwise, to issue any of the newly available
authorized shares of common stock for any purpose, including future
acquisitions and/or financings in the “Certain Disadvantages
Associated with the Reverse Split” subsection of Proposal No. 1, as
well as the “Fixing of
Authorized Shares in General” subsection of Proposal No.
2.
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COMMENT
4:
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Please
refer to Release No. 34-15230 and discuss the possible anti-takeover
effects of the effective increase in your authorized
shares. Please also discuss other anti-takeover mechanisms that
may be present in your governing documents or otherwise and whether there
are any plans or proposals to adopt other provisions or enter into other
arrangements that may have material anti-takeover
consequences. Inform holders that management might use the
additional shares to resist or frustrate a third-party transaction,
favored by a majority of the independent stockholders, which would provide
an above-market premium.
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RESPONSE:
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In
response to the Commission’s comment above, the Company has disclosed in
the Amendment the following text in subsections titled “Anti-Takeover
Effects” in Proposal No. 1 and Proposal No.
2:
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Release No. 34-15230 of the staff
of the SEC requires disclosure and discussion of the effects of any proposal
that may be used as an anti-takeover device. Although not a factor in the
decision by our Board to effect the effective increase of our authorized shares
of common stock, one of the effects of having increased additional shares of our
authorized common stock available for issuance may be to enable the Board to
render more difficult or to discourage an attempt to obtain control of the
Company by means of a merger, tender offer, proxy contest, or otherwise, and
thereby protect the continuity of then present management. Unless prohibited by
the regulations of applicable law or other agreements or restrictions, a sale of
shares of Common Stock by us or other transactions in which the number of our
outstanding shares of Common Stock would be increased could dilute the interest
of a party attempting to obtain control of us. The effective increase in
available authorized Common Stock may make it more difficult for, prevent or
deter a third-party from acquiring control of the Company or changing our Board
and management, as well as inhibit fluctuations in the market price of our
shares that could result from actual or rumored takeover
attempts.
The effective increase of our
authorized shares of common stock is not being proposed in response to any
effort of which we are aware to accumulate shares of Common Stock or obtain
control of the Company. While it is possible that our management
could use the effective increase of authorized shares of Common Stock to resist
or frustrate a third-party transaction providing an above-market premium that is
favored by a majority of stockholders, we do not intend to construct or enable
any anti-takeover defense or mechanism on its behalf. We have no intent or plans
to employ the effective increase of our authorized shares of common stock as an
anti-takeover device and do not have any plans or proposals to adopt any other
provisions or enter into other arrangements that may have material anti-takeover
consequences.
United
States Securities and Exchange Commission
February
24, 2010
Page
5
In
addition to the effective increase of our authorized shares of common stock,
provisions of our governing documents and applicable provisions of Delaware law
may also have anti-takeover effects, making it more difficult for or preventing
a third-party from acquiring control of the Company or changing our Board and
management. These provisions may also have the effect of deterring hostile
takeovers or delaying changes in the Company’s control or in our
management.
Undesignated
Preferred Stock.
Our Certificate of Incorporation currently authorizes the issuance of up
to 25,000,000 shares of preferred stock with such designations, rights and
preferences as may be determined from time to time by our Board. Our Board can
also fix the number of shares constituting a series of preferred stock, without
any further vote or action by the Company’s stockholders. The issuance of
undesignated preferred stock with voting, conversion or other rights or
preferences, while providing flexibility in connection with possible
acquisitions and other corporate purposes, could have the effect of
(i) delaying or preventing a change in control, (ii) causing the
market price of the Common Stock to decline or (iii) impairing the voting
power and other rights of the holders of the Common Stock.
No
Cumulative Voting.
The Company’s Certificate of Incorporation and By-laws do not provide for
cumulative voting in the election of directors. The combination of the present
ownership by a few stockholders of a significant portion of the Company’s voting
capital stock and lack of cumulative voting makes it more difficult for other
stockholders to replace the members of the Board or for another party to obtain
control of the Company by replacing our Board.
Please
see the attached marked copy of the Amendment for further
reference.
Proposal No. 2:
Authorization of an Amendment to the Company’s Certificate of Incorporation to
Fix the Amount of Authorized Shares of Common Stock at 5,000,000,000 Shares,
page 8.
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COMMENT
5:
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We
note that your Board has adopted a resolution seeking authorization to
amend your Certificate “to fix our number of authorized shares of Common
Stock at 5,000,000,000 shares.” Please clarify what changes you
propose to make the Certificate of Incorporation as a result of Proposal
No. 2. In this regard, please include a blacklined version of
the Certificate of Incorporation showing all proposed
amendments.
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RESPONSE:
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With
respect to Proposal No. 2, approval of such proposal will maintain the
amount of the Company’s shares of authorized common stock at 5,000,000,000
shares, notwithstanding the reverse stock split set forth in Proposal No.
1 which, in the absence of the approval of Proposal No. 2, would have the
effect of reducing the amount of authorized shares of common on a 1 share
for 100 shares basis in addition to the intended decrease in the amount of
shares of common stock outstanding. Ultimately, Proposal No. 1 and
Proposal No. 2, together, amend Article IV of the Company’s Articles of
Incorporation to effect a reverse stock split of the Company’s outstanding
Common Stock while maintaining the amount of authorized Common Stock at
5,000,000,000 shares. At the request of the Commission, provided herewith
is a marked version of the Company’s Certificate of Incorporation, showing
all proposed amendments thereto pursuant to Proposal Nos. 1, 2 and 3 (all
occurring within Article IV of
the Certificate of Incorporation). The Amendment also includes a marked
version of all proposed changes to the Company’s Certificate of
Incorporation in its Exhibit
B.
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United
States Securities and Exchange Commission
February
24, 2010
Page
6
The Company acknowledges
that:
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·
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The
Company is responsible for the adequacy and accuracy of the disclosure in
the filing;
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Staff
comments or changes to disclosure in response to staff comments do not
foreclose the Commission from taking any action with respect to the
filing; and
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The
Company may not assert staff comments as a defense in any proceeding
initiated by the Commission or any person under the federal securities
laws of the United States.
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We trust that this response
satisfactorily responds to your request. Should you require further
information, please contact the undersigned at (305) 539-3300.
Thank you very much for your
consideration of this response.
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Sincerely,
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/s/
John D. Owens III
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John
D. Owens III
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cc:
Michael W. Zima
Chief Financial Officer, NeoMedia Technologies, Inc.
