July 13, 2001
Dow Jones Newswires
Constellation 3D Inc. Dn 34%, Third Straight Day
By Kathy Chu
Of DOW JONES NEWSWIRES
NEW YORK -- Constellation 3D Inc. (CDDD) shares plunged for a third consecutive day and hit a 52-week low - a move the company attributed mainly to investor confusion about a warrant-term change.
It's "no coincidence" that the stock has been dropping since Wednesday - following the company's filing with the Securities and Exchange Commission to amend the exercise price of one-year warrants to 1 cent a share from $10.15 - said Michael Goldberg, Constellation 3D's chief operating officer.
In the filing, the advanced data-storage products maker had also reduced these one-year warrants to 228,585 shares from 750,457.
The move, said Goldberg, came after weeks of negotiations with certain investors - who had provided $15.8 million funding to Constellation 3D in August and September of 2000 - and removed adjustment rights as well as "most favored nation" status awarded under the warrants.
About 14 investors - including Koor's Industries, Halifax Fund L.P. and Winnburn Advisory - had received the special status, requiring Constellation 3D to grant additional shares to these investors if stock in future financings was priced below the warrants' exercise price, after adjustment according to a reset provision.
The reset provision - which took effect in January - repriced the warrants' exercise price based on the stock's average close in the 50 lowest sessions of a 100-day trading period.
"It was an incredible deal for the company because it required the investors to give up long-term rights," said the chief operating officer. "They gave up a right to possibly a few million shares - for 228,585 shares spread between them all."
As of Jan. 2, the company had about 43.2 million shares issued and outstanding.
Margin calls may also be contributing to the stock's drop over the past few days, said Goldberg.
Shares of Constellation 3D - which maintains headquarters in New York but also operates out of Israel and Russia - recently changed hands at $2.50, down $1.30, or 36%, on volume of 1.9 million, compared with average daily volume of 139,300.
The stock fell to $2.46 in earlier trading Thursday. The previous 52-week low of $3.50 was set Dec. 21.
Constellation 3D, in its four years of operation, has been long on promises but short on action in many aspects of its business - posting no revenue and a total net loss of $35.9 million since inception.
This may quickly change, however. Constellation 3D could post revenue from licensing and royalty fees as soon as the first quarter of 2002, said Operating Chief Goldberg.
"It's not a matter of us having to do more R&D on our technology, it's a matter of us selecting and finishing our contracts with content providers and manufacturing partners," he said.
The company also expects to make "major" announcements in upcoming weeks to identify its commercial partners and the timeline for its product manufacturing, Goldberg said.
Constellation 3D hopes to license its patented fluorescent memory technology - to increase electronic data-storage capacity - to entertainment and electronic companies for uses such as high-definition television and digital cinema. The company also plans to incorporate its technology into a media disc and a memory card.
Constellation 3D has racked up 14 patents for its technology, and has applied for in excess of 100 more. The company operates in Israel and Russia, and subcontracts in the Ukraine, said Goldberg, because of the quality of equipment and personnel in these countries.
The operating chief expects Constellation 3D to raise an additional $20 million in the next year to finance operations. Currently, the company has about $4 million of short-term debt and $2 million of cash and equivalents.
No analysts cover the company.
-Kathy Chu, Dow Jones Newswires; 201-938-5388; kathy.chu@dowjones.com
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Briefing Book for: CDDD |
