JL,
I agree with you that today's filing, which contains the details the sale of about $1.4 million (225,000 shares x average price of $6.2087) of stock at various dates from 5/2/97 to 5/30/97, increases the likelihood that there will be no KM news in the short term, all the rumors notwithstanding. As you recall, the 10Q was released on 5/1/97 and indicated that as of that date, Ampex had not yet heard from the vertically integrated manufacturers regarding the KM+MR joint
development proposals. It's a cautionary flag that, at this point, I do not wish to exaggerate, though, because there been an unusual mismatch in the amount the Bramson is making from Ampex in terms of salary/bonus of well under $200,000 GROSS versus the annual interest he is obligated to pay on his personal shares. This does not at all strike me as a cushy deal, as cushy deals go. I do think that the point is well taken that he wouldn't leave money on the table if he was this close to a KM deal or if DST sales had really accelerated. Either those or this guy's timing belt needs to be changed.
As for the financing of the Bramson purchases, I refer you to a copy of the memorandum of understanding which contains the details and which was attached to the 1996 10K. Briefly....
1) 400,000 x 6.875/share = $2.75 million total purchase price
2) 20% cash downpayment = $550,000 cash out
3) non-assignable Promissory Note of $2.2 million
4) interest at applicable Federal rate mandated by the IRS
5) interest payable annually every 12/31
6) entire loan due at the end of 5 years
7) portions of 400K shares subject to buyback by AXC upon showing of just cause (just cause defined as a felony conviction or any act injurious to AXC) subject to the following terms:
a) prior to 2nd anniversary, 200,000 shares redeemable at 6.875
b) after 2nd anniv. but prior to 3rd anniv, 100,000 shares at 6.875
The 1995 purchase was structured in a similar fashion and has been reflected as a 'note receivable from stockholder' item in the shareholder's equity portion of the annual balance sheet in 1995 and 1996.
1995 - Note Receivable from Stockholder = $ 2,053,000
1996 - Note Receivable from Stockholder = $ 3,979,000
Note 13 - Related Party Transactions (Notes to CFS, page 27 of annual report)
During 1995 and 1996, the Company received 5-year notes for the purchase of Common Stock by an affiliated company in the prinicpal amounts of $2,052,750 and $2,200,000, respectively. The notes bear annual interest at 7.96% and 6.72%, respectively, and are collaterized by the purchased shares. A voluntary prepayment of $273,000 against the initial note was received in 1996.
From this we can extrapolate the following:
1995 note - $2,052,750 less $273,000 = $1,779,750 balance at 7.96% pa
1996 note - $2,200,000 at 6.72% p.a.
or an annual interest burden of about....
1995 note - $ 141,668 due annually on 12/31 from 1995-2000
1996 note - $ 147,840 due annually on 12/31 from 1996-2001
Total......... $ 289,508 - current as of 12/31/96
Bramson's total average price for his remaining personal (excluding his corporate shells) holdings of 2,359,911 shares is difficult to gauge. I am not sure if the relationship between his annual interest payments and his compensation as Chairman and CEO is all that significant other than to indicate that he and his cronies are not unduly milking Ampex out of much needed cash. I also note that Bramson's 13D group still retains control over 8,207,026 shares, or about 18% of the total outstanding.
My experience is that summer usually has this way of complicating the already difficult task of assessing the near-term risk-reward ratios of most technology stocks, especially one like Ampex. Scenarios are either too rosy or too bleak. Usually no middle ground. I do think that the medium-term and long-term risk-reward ratios of Ampex remain intact and compelling. If anything, this cautionary flag should remind us that like fine wine, Ampex needs time, otherwise, it is going to taste like vinegar and leave a sour taste in one's mouth.
Gus |
