Excerpts...
The Company has also entered into a development agreement with Intel Corporation
("Intel") and is designing and developing a digital voice recorder
referencedesign and prototypes. Under the agreement, Intel is paying
non-recurringengineering fees for design and development of prototypes.The
Company is also supplying digital music player prototypes to Lucent and
performing other work to port Lucent's EPAC compression technology to a newTexas
Instrument DSP. The Company is actively developing licensing, privatelabel, and
OEM opportunities seeking to penetrate the digital recording andplayback market.
Management is currently in discussions with OEM's interested in using the
Company's Internet music player reference designs. The Company intends to
support various emerging Digital Rights Management Systems ("DRMS")
that supportthe Secure Digital Music Initiative ("SDMI"). The Company
has signed a non-exclusive license agreement to support Liquid Audio's SP3 DRMS
and intends to support other emerging DRMS developers. Management is currently
in discussions with several popular DRMS providers. There can be no assurance
thatthe Company will support additional DRMS or that OEM's will use the
Company's Internet music player reference designs.
=============================================
At June 30, 1999 the Company had cash on hand of approximately $3.5 million.
Other than cash on hand and accounts receivable, the Company has no material
unused sources of liquidity at this time. Based on the Company's cash position
assuming (i) continuation of existing OEM development arrangements, (ii)
currently planned expenditures and level of operation, (iii) product sales
against existing orders; the Company believes it has sufficient capitalresources
for the next twelve months..
====================
The following is a description of equity securities sold by the Company
during the first fiscal quarter ended June 30, 1999 that were not
registered under the Securities Act:
On June 25, 1999, the Company issued 300 shares of Series B stock for
cash at $10,000 per share to one institutional investor for gross
proceeds of $3,000,000. Dividends of 7% per annum are payable, with
certain exceptions, either in cash or in shares of Common Stock, at
the election of the Company. The stated dollar amount of Series B
stock is convertible into fully paid and nonassessable shares of
Common Stock of the Company at a conversion price which is the lower
of (i) $2.00 per share or (ii) a per share amount computed on each of
two adjustment dates (30 and 60 days after registration of the
underlying shares), but not less than $1.50 per share except as may be
subsequently modified as a consequence of certain possible penalties
and other adjustments related to the Company's failure to file a
registration statement on a timely basis or have the registration
statement declared effective within 180 days. The conversion price on
the two adjustment dates is computed at a premium to the average of
the three lowest of the ten day closing bid market prices prior to and
including each adjustment date. The Series B stock shall be subject to
automatic conversion on June 24, 2002, subject to certain conditions.
The Series B stock is redeemable in certain instances at the Company's
option and at the holder's election upon the occurrence of certain
triggering events including, without limitations, a lapse of a
registration statement for ten non-consecutive trading days and
certain other events. The redemption price upon such election
following a triggering event shall be the greater of (a) 110% of the
stated value or (b) the product of the number of preferred shares
multiplied by the closing market price, multiplied by the stated value
per share, divided by the then conversion price per share. In
addition, certain shares of Common Stock, which are converted within
30 trading days of an event triggering a redemption are subject to
repurchase.
The Company also issued to the purchaser of Series B stock warrants to
purchase 195,000 shares of Common Stock at $2.40 per share until June
24, 2004. In connection with the financing, the Company incurred
placement agent fees and legal and related costs of approximately
$250,000 and issued a warrant to purchase 137,615 shares of Common
Stock at $3.27 per share until June 24, 2004 as a placement agent fee
to Jesup & Lamont Securities Corporation in connection with the
offering. The Company intends to use the net proceeds of approximately
$2,750,000 for general corporate purposes.
The securities were offered and sold without registration under the
Act in reliance upon the exemption provided by Regulation D thereunder
and an appropriate legend was placed on the Series B stock and the
warrants and will be placed on the shares issuable upon conversion or
exercise unless registered under the Act prior to issuance. The
Company has filed a registration statement on the stock obtained upon
conversion of the Series B stock or exercise of the warrants and also
granted other registration rights to the holder. |
