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Gold/Mining/Energy : PYNG Technologies

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To: Michael Pogor who wrote (4342)	8/16/1999 10:42:00 AM
From: Jack Rayfield	Read Replies (1) of 8117

Michael, I appreciate your Devil's Advocate thinking. It is always best to consider all sides of an issue before acting. Your point is a good one. As far as Pyng's management of the company's cash, I have stated several times on this forum it has been masterful. It is remarkable how they have accomplished what they have while burning less than $3 million dollars. And I am not opposed at all to the use of stock options as reward for future performance. I think if Pyng managment is able to get the product to market they should reap the benefits of that effort and be handsomely rewarded. As we all will be if the stock appreciates based on their efforts which through our funding was made possible. But the purpose of stock option is to reward the accomplishment of stated goals which directly effect the share price that is why a strike price is set at the current market price at the time of issuance. The receiptients of the stock options are receiving a set price for a number of years and they receive the benefit of all the stock appreciation they produce as a group from that point. The impression I have gotten from Mr. Jacobs on this thread is that Pyng is using the stock options as a form of baseline compensation which seems to be in direct violation of the security regulations presented by Ari. Though I am not a lawyer so my interpretation could be flawed. If the stock options are cancelled some staff may leave. Which would be a very ominous sign that them have lost confidence in the future of the company. This would be bad for everyone concerned. Most of the options are controlled by the senior management and Pyng's attorney and I think that there is less of a risk that they will abandon ship at this late stage. But if they do then so be it. The real problem that I have with the repricing of the options is that they were originally priced at $4.97 issued in April 98 to expire in April 00. Obviously management thought at this time the product would be going to market soon and publicly said so in PRs issued and that was the optimal time to issue the stock options. They would not have issued them if they were not confident that the stock price would appreciate considerably from that point. Some outside investors I am sure used their issuance in their decision making process. Obviously they were mistaken in their expectation. Yet they still have not publicly acknowleged what has changed their expectations or what reasonable future expectation would be. These 600k stock options were repriced in Oct 98 down to $2.09 in Oct 98. Again management did not have to pick this date but they must have thought that the product would soon be on the market and that this represented a fair price based on their outlook for the 18 months remaining before expiration. Now obviously they have relooked the future of Pyng and feel that a reprice to $1.30 (73% reduction from the original price) and extension of time until Aug 1 01 (additional 15 months) is necessary to provide the "give away" necessary to adequately make up the difference between what Pyng is paying and the market compensation that these individuals could earn outside in a competative market. All of this downward revision of the future prospects of Pyng has been done internally with virtually no information released to the investing public which would explain this level of pessimism. I think the purpose of the protest letter is to provide a voice for minority shareholders that have been ignored by Jacobs and Pyng management. The only recourse that we have is to appeal to someone that they will have to listen to namely the regulators of their stock. As far as the issue of higher compensation goes, yes I believe that this will result in higher compensation and a much faster burn rate. But I expect to receive a fair wage for my work and I do not begrudge Pyng management a fair level of compensation. I would rather have fair compensation that is a definite amount that can be evaluated as reasonable or unreasonable than have them use the stock options as supplemental compensation and change the price of the options at their whim when things do not go as planned. Bottom line is I want Pyng to use stock options as they were intended as a reward system that is tied to the appreciation of the stock and there by take the same risk that shareholders in the company take. No one employeed by Pyng had a gun held to their head during negotiation of their employment terms so they accepted that risk then and should have the intergrity to stand behind their commitment or move on because the situation has changed so drastically. All of this is mute if the product ever gets to market as I am confident that the stock options as they are now repriced will provide amble reward for a job well done.

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