This stock is toast!
the equity line is last available cash, 16,000,000 shares were
registered for that, and you can bet they will all be used.
This is an aspect I hadn't noticed before - the Series E floorless.
Series E convertible discussed in prospectus:
Due To the Conversion Of Series E Preferred Stock, Holders of Common Stock May Face Significant Dilution.
In December 1998, we issued 367,269 shares of series E stock, at a price of $22.5313 per share, to certain institutional investors. The series E stock is generally convertible into our common stock at a rate equal to the lesser of (a) $2.25313, and (b) the average closing price of our common stock over the ten d ending on the day immediately preceding the day upon conversion. When our common stock price falls below $2.25313, the conversion of the series E stock may result in the issuance of a significant number of additional shares of common stock, and may cause significant dilution to current holders of our common stock. Even before the shares of series E stock are converted, the holders of the series E stock vote on the basis of the number of shares of common stock that the series E stock can be converted into. Therefore, a large drop in our stock price may result in a large amount of voting control being held by a small number of stockholders. As of August 31, 1999, there were 297,269 shares of series E Stock outstanding that would have been convertible into 3,851,905 shares of our common stock, giving the holders of the series E stock 14% of the vote of the issued and outstanding common stock.
Holders Of Our Series E Preferred Stock Could Engage In Short Selling To Reduce Their Conversion Price.
A decrease in the price of our common stock below the $2.25313 maximum conversion price could result in the series E preferred stock being convertible into more shares of common stock. Increased sales volume of our common stock could put downward pressure on the market price of the shares. This fact could encourage holders of series E preferred stock to sell short our common stock prior to conversion of the series E preferred stock, thereby potentially causing the market price to decline. The selling stockholders could then convert their series E preferred stock and use the share of common stock received upon conversion to cover their short position. The selling stockholders could thereby profit by the decline in the market price of the common stock caused by their short selling.
Qualifications In The Report Of Our Independent Public Accountants May Affect Our Ability To Continue As A Going Concern.
In their audit report on the consolidated financial statements for the year ended December 31, 1998 contained in our Annual Report and elsewhere in this prospectus, our independent public accountants, Ernst & Young, included an explanatory paragraph indicating their view that we would require additional funding to continue operations which raised substantial doubt about our ability to continue as a going concern. We cannot assure you that Ernst & Young's opinion on future financial statements will not include a similar explanatory paragraph if we are unable to raise sufficient funds or generate sufficient cash
flow from operations to cover the cost of our operations. The continued inclusion of this paragraph could raise concerns about our ability to fulfill our contractual obligations, may adversely affect our relationships with third parties, and we may not be able to complete future financings.
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If We Fail To Continue To Meet Nasdaq's Listing Maintenance Requirement, Nasdaq
May Delist Our Common Stock.
There is a possibility that our common stock could be delisted from the
Nasdaq National Market. While our common stock is currently quoted on the Nasdaq
National Market, in order to remain quoted on the Nasdaq National Market, we
must meet certain requirements with respect to:
o market capitalization (the market value of all outstanding shares of
our common stock);
o public float (the number of outstanding shares of common stock held by
those not affiliated with us);
o market value of public float;
o market price of the common stock;
o number of market makers;
o number of shareholders; and
o net tangible assets (total assets minus total liabilities and
intangible assets).
If the price of our common stock were to fall significantly below our current trading range, Nasdaq may approach us regarding our continued listing on the Nasdaq National Market. This situation could result from the rights contained in the series E stock, which is convertible into common stock at a conversion price based on a future price of our common stock. If Nasdaq were to begin delisting proceedings against us, it could reduce the level of liquidity
currently available to our stockholders. With regard to future priced securities such as our series E stock, Nasdaq is concerned with the following, among other things:
o disproportionate voting rights;
o minimum bid price of a company's common stock; and
o public interest concerns.
The holders of our series E stock may vote their series E stock as if they were holders of common stock and are entitled to the number of votes equal to the number of shares of common stock that the series E stock is convertible into at the time of voting. If our common stock price were to fall significantly, this right may be deemed to violate a Nasdaq maintenance requirement due to the disproportionate voting right, when compared to our common stock, that each share of series E stock would have.
Moreover, in order to continue to be listed on Nasdaq, the minimum bid price of our common stock must stay above $1.00. In addition to the fluctuations of the market in general and our common stock in particular, a decrease in our common stock price that causes the number of shares of common stock issuable upon conversion of the series E stock to increase may exert downward pressure on the price of our common stock. This may drive the minimum bid price of our common stock below $1.00, thus violating a Nasdaq maintenance requirement. On August 31, 1999 the minimum bid price on our common stock was $1.625. Nasdaq has also stated that in egregious situations, future priced securities, such as our series E stock, may raise public interest concerns that may result in the delisting of our common stock, if Nasdaq deems the delisting necessary to prevent fraudulent and manipulative acts and practices.
If our common stock is delisted from the Nasdaq National Market, we could apply to have the common stock quoted on the Nasdaq SmallCap Market. The Nasdaq SmallCap Market has a similar set of criteria for initial and continued quotation. We may not, however, meet the requirements for initial or continued quotation on the Nasdaq SmallCap Market. If we were not able to meet the requirements of the Nasdaq SmallCap Market, trading of our common stock could be conducted on an electronic bulletin board established for securities that do not meet the Nasdaq SmallCap Market listing requirements, in what is commonly referred to as the "pink sheets."
In addition, if our common stock were delisted from the Nasdaq National Market, we may not have the right to obtain funds under the equity line agreement and it could be more difficult for us to obtain future financing. In addition, if our common stock is delisted, investors' interest in our common stock would be reduced, which would materially and adversely affect trading in, and the price of, our common stock. |
