NTOP<---------ONE OF THE WORST CASES OF SHAREHOLDER DILUTION AND FORWARD LOSSES IVE EVER SEEN!!!!!!!!!!!!!!!!!!!!!!
NTOP<------------WARNS EVERYONE THAT THEY INTEND TO SUBSTANTIALLY DILUTE and DUMP shares in the Market!!!!!!!!!!!!!!!!!!!!
The sale of a substantial number of shares of our common stock after this
offering may affect our stock price.
The market price of our common stock could decline as a result of sales of
substantial amounts of common stock in the public market after the closing of
this offering or the perception that substantial sales could occur. These sales
also might make it difficult for us to sell equity securities in the future at
a time and at a price that we deem appropriate.
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Assumed initial public offering price per share................. $13.00
Net tangible book value per share at April 30, 1999 .......... $0.53
Increase per share attributable to new investors.............. 1.29
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Pro forma net tangible book value per share after this
offering............................ 1.82
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Dilution per share to new investors............................. ( A negative $11.18 )
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We will recognize significant charges relating to non-cash executive
compensation expense in the current fiscal quarter ending July 31, 1999 and on
an ongoing basis. In connection with 5,040,000 options granted with an exercise
price of $3.33 per share on May 17, 1999, including options granted to IDT
employees, we will recognize approximately $41 million of non-cash charges over
the vesting period of these options. We will recognize a charge of $13 million
in the current quarter, $10 million during fiscal 2000, $10 million during
fiscal 2001 and $8 million during fiscal 2002. We also plan to grant options to
purchase approximately 2,503,500 shares of our common stock to our employees,
consultants and others prior to the closing of this offering, which will have
an exercise price equal to the initial offering price, together with additional
options to purchase 168,000 shares of our common stock at an exercise price of
$3.33 per share, and which will result in additional non-cash compensation
charges.
In addition, in connection with the 460,000 options granted to our President
with an exercise price of $3.33 per share, we will recognize approximately $3.6
million of non-cash charges over the vesting period of these options. We will
recognize a charge of $1.2 million during the current quarter, $800,000 during
fiscal 2000, $800,000 during fiscal 2001 and $800,000 during fiscal 2002. In
connection with the remaining 460,000 options granted to our President with an
exercise price equal to the lower of our initial offering price or $11.00 per
share, we will recognize a compensation charge if our initial offering price is
more than $11.00 per share. The non-cash compensation charge will be equal to
the excess of our initial offering price over $11.00 multiplied by the 460,000
shares and will be amortized over the three-year vesting period of the options.
In May 1999 the Company issued 3,140,000 shares of Series A convertible
preferred stock which is convertible into 9,420,000 shares of Class A stock at
$3.33 per share. The Series A convertible preferred stock contains beneficial
conversion features. The total value of the beneficial conversion feature
approximates $75 million. For accounting purposes the value of the beneficial
conversion features was limited to the amount of proceeds allocated to the
Series A convertible preferred stock. The Company will record a reduction in
net income available to common stockholders in the quarter ending July 31, 1999
of approximately $29.3 million. In connection with the issuance of the Series A
convertible preferred stock, we issued warrants to purchase 272,400 shares of
common stock at an exercise price of $3.33 per share. The fair value of
warrants on the date of issuance was $2.1 million. The fair value of the
warrants will be recorded as an increase to additional paid in capital and a
decrease to the carrying value of the Series A convertible preferred stock. The
decrease in the carrying value of the Series A convertible preferred stock will
be accreted, with a corresponding reduction of additional paid-in capital, over
the period to the initial redemption date in May 2006. In connection with this
offering, the Series A convertible preferred stock will be converted in Class A
stock. At that time, the balance of the unamortized discount will be recorded
as a reduction of the amount of income available for common shareholders.
18
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In connection with our distribution and marketing agreement with ICQ, we
issued a warrant to America Online to purchase up to 3% of our outstanding
capital stock on a fully-diluted basis. This warrant will vest in 1% increments
upon the achievement of each of three incremental thresholds of revenue
generated under the agreement during the first four years that the warrant is
outstanding. The per share exercise price under the warrant will be equal to
the lesser of 80% of the price per share in this offering, or $450 million
divided by the number of our fully-diluted shares on the initial exercise date.
If one or more of the revenue thresholds set forth in the warrant are achieved,
we will recognize additional non-cash charges in an amount equal to the value
of the warrant, as determined at the time that these thresholds are met.
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This deal is dead before it even gets going!!
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