SYTE had $985,000 of convertible debentures on its books as of September 30, 2000. They appear to be floorless convertibles. SYTE filed a registration statement for 3,857,274 common shares applicable to these convertibles on September 1, 2000. From that statement:
sec.gov
DESCRIPTION OF CONVERTIBLE DEBENTURES
The securities being offered by the selling security holders consist of shares of common stock that are issuable upon the conversion of convertible debentures and upon the exercise of warrants that we issued in a private offering in May 2000. The debentures are in the original principal amount of $500,000 and bear interest at a rate of 12% per annum. The warrants to purchase an aggregate of 250,000 shares of our common stock at an initial exercise price of $0.77 per share.
The debentures are convertible into common stock at a rate equal to the lowest of $.70 or 60% of the average of the three lowest closing bid price for the common stock during the 20 trading days immediately preceding the conversion date.
The Company and the Purchasers have also agreed that, upon the declaration of effectiveness of the Registration Statement to be filed pursuant to the Registration Rights Agreement, provided that the trading price of the Common Stock is at least $1.00 for the ten (10) consecutive trading days immediately preceding the Effective Date, the Purchasers will be obligated to purchase, and the Company shall be obligated to sell and issue to the Purchasers, additional debentures in the aggregate principal amount of Five Hundred Thousand ($500,000) and additional warrants to purchase an aggregate of 250,000 shares of Common Stock for an aggregate purchase price of Five Hundred Thousand Dollars ($500,000), with the closing of such purchase to occur within thirty (30) days of the Effective Date. The terms of the Additional Debentures and the Additional Warrants shall be identical to the terms of the Debentures and the Warrants as described in this prospectus, provided that the Initial Conversion Price (as defined in the Debentures) for the Additional Debentures shall be seventy-seven hundredths of one dollar ($.77). The Common Stock underlying the Additional Debentures and the Additional Warrants shall be Registrable Securities as defined in the Registration Rights Agreement and shall be included in the Registration Statement to be filed pursuant to the Registration Rights Agreement.
However, the debentures may not be converted into common stock, nor may the holder receive shares in payment of interest, if the debenture holder and any affiliate would, as a result, beneficially own more than 4.999% of our company's issued and outstanding shares of common stock. This limitation could be waived by the holder as to itself by giving 5 days' prior notice to us. Further, as a separate restriction, a holder may not convert the debentures into common stock, nor may the holder receive shares in payment of interest, if as a result, he together with his affiliates would beneficially own in excess of 9.999% of our company's issued and outstanding common stock. This provision can also be waived by the holder as to itself by giving 15 days' prior notice to us. However, the conversion limitations do not preclude a holder from converting and selling all or a portion of the outstanding principal amount of the debentures that would result in the beneficial ownership by such holder of less than 4.999% of 9.999% (as applicable) of the shares of common stock then outstanding, and thereafter converting and selling an additional similar portion of its holdings. In this manner such holder could over time receive and sell a number of shares of common stock in excess of 4.999% or 9.999% (as applicable) of the shares of common stock outstanding while never beneficially owning more than 4.999% or 9.999% (as applicable) at any one time.
The number of shares being offered by the selling security holders represents (i) 200% of the shares of common stock issuable to the selling security holders upon conversion of the debentures and as payment of interest thereunder and (ii) the shares of common stock issuable to selling security holders upon exercise of the warrants issued to the selling security holders. Because the number of shares of common stock issuable upon conversion of the debentures and as payment of interest thereon is dependent in part upon the market price of the common stock prior to a conversion, the actual number of shares of common stock that will then be issued in respect of such conversions or interest payments and, consequently, offered for sale under this registration statement, cannot be determined at this time. We have contractually agreed to include herein 3,727,273 shares of common stock issuable upon conversion of the debentures, payment of interest thereunder and exercise of the warrants issued to the selling security holders.
This prospectus does not cover the sale or other transfer of the debentures or warrants. If a selling security holder transfers its debentures or warrants prior to conversion or exercise, the transferee of the debentures or warrants may not sell the shares of common stock issuable upon conversion or exercise of the debentures or warrants under the terms of this prospectus unless this prospectus is appropriately amended or supplemented by us.
For the period a holder holds our debentures or warrants, the holder has the opportunity to profit from a rise in the market price of our common stock without assuming the risk of ownership of the shares of common stock issuable upon conversion of the debentures or exercise of the warrants. The holders of the debentures and warrants may be expected to voluntarily convert their debentures or exercise their warrants when the conversion or exercise price is less than the market price for our common stock. Further, the terms on which we could obtain additional capital during the period in which the debentures or warrants remain outstanding may be adversely affected. |
