Auric - As usual, you really miss the point.
Although there are complexities to the conversion provisions dependent on any number of possible events, the bottom line as I see it is this: The basic fixed conversion price of $10.79 contemplates that 1,853,568 shares of common stock will be issued to Rose Glen assuming the average stock price stays above 10.79 a share over the one month period (22 trading days) before the date Rose Glen converts (with an 6% annual increase in the stated value of the preferred, and thus the stock issuable in conversion, for the period prior to their conversion). If the stock diminishes in price, the conversion may be at a more favorable rate to Rose Glen depending on when and how much they convert at a time, but there is a FLOOR -- IT IS NOT FLOORLESS!!!!
Prior to February 17, 2000, if the stock trades for $7.85 per share or less on days when Rose Glen converts, the conversion has a floor of $7.85 per share (which means that if all $20,000,000 is converted on that day, the conversion equates to 2.547 million shares). After February 17, 2000, if the stock trades for $7.35 per share or less, the company can force Rose Glen to convert for the closing sale price on that date. If that price is, say, $7.25, then the conversion equates to 2.75 Million shares that day. That is effectively the worst case scenario, unless Ashton tanks completely or takes other actions which are completely within its control to the detriment of Rose Glen (such as calling the warrants at an inopportune time, failing to register the conversion stock, etc.).
If Ashton tanks completely, floorless equity conversions are rather besides the point -- which is to say that any extra dilution would not be material under circumstances where the stock is "going to zero" as you like to put it. After all, 1% of -0- and 10% of -0- are the same -- ZERO. So as I interpret it, ATG effectively raised $20 MM in cash (legal tender) in exchange for approximately 6% of the Company's common stock, with that 6% possibly rising to just under 10% under very adverse circumstances which, because of the extra cash, are less likely to occur now than they were before.
The $20 Million in cash will be used to accelerate the roll-out of UTS (eAS, eOX, NextExchange) and the development and rollout of eMC. It will accelerate the generation of revenue and profits - which will avoid the very cirumstance which might cause more dilution - but the bottom line is that the conversions are NOT floorless and the circumstances where they are convertible at less than current market prices are limited and less likely to occur now than before the PP. And, by the way, Rose Glen cannot convert immediately, for all intents and purposes, they must wait until the common stock they would be converting into is registered, which ATG has until February, 2000 to accomplish.
In a doomsday or intentional breach scenario, the 8K reflects that certain additional protections have been added for Rose Glen's benefit -- but in a doomsday or intentional breach scenario, who cares? Unless ATG willfully screws Rose Glen, or the company tanks, this is not even close to floorless. And, at the end of the day, it is equity, not debt -- it is unsecured, superior only to the company's common stock (as all preferred stock is) until converted, and accruing return at a meager 6% per annum until converted. Which means that when you look at Rose Glen's investment, you must accept that, having performed massive due diligence (as you would expect any institution to perform prior to a $20 MM investment) they believe that Ashton is a good company, and that the price of ATG stock is heading north.
So, I return to my original point - it is not "floorless" convertible equity and does not cause "massive" dilution - these adjustment provisions are typical of any private placement of this magnitude, and the fact that Rose Glen (which has previously made successful investments in CMGI and CyberCash, to name a few) is willing to invest this amount of money in equity reflects a high level of confidence by Rose Glen and ATG management regarding where the company (and its stock price) is heading. And in a highly regulated market where there is enormous competition and change underway, it beats the heck out of debt, which is something that CAN cause development stage companies to tank.
In 1998, the company issued approximately 10 million shares to convert about $15 million in equity contributed at a time of great need. They had to pay the parties who brought that financing to them, and accept dilutive conversion provisions, because that was the predicament they faced. It was very dilutive - you called it floorless, and predicted doom, but in the end the extra stock was absorbed, the company survived, and its stock price is now up over 800% as it awaits the phase in of its premiere trading system later this week. At the time, I was very happy, because I viewed the commitment of up to $18 MM in equity as the product of a lot of due diligence and a sign of confidence by those investors that ATG would survive the SEC delays. And that is exactly what happened. The Rose Glen PP is at market prices, did not involve payments to the parties who brought the financing to the company, is far less dilutive (best case, 1.8 million shares at 10.79, worst case, 2.7 million shares in the low 7's), but most importantly (and the point you continually miss on this), it reflects the very same confidence by yet another investor (with a pretty good track record) who has performed far more diligence than you and I (or any individual stockholder) could ever perform
It's good news, Auric (though anybody who posts 144's filed by restricted stockholders with no other connection to the the company to make the point that insiders are selling should not be expected to present a fair perspective on its merits -- and to be sure, you did not disappoint in that regard). The ATG stockholders don't lose - if they wait 2 years for VTS profits to fund the rollout of eMC and the rest of UTS, then they will have lost, because by then the markets will have changed and the competition will have had that much more time to catch up. That you fail to see this, IMHO, reflects your bias against ATG, which you are still trying to fit into your "pump and dump, insider's selling" even as $20 Million in fresh capital is provided, SEC scrutiny and review has been completed, tech testing has been completed, and roll out is commencing. I think it is you who is in denial. But that goes without saying.
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