New S-2 filing
10M shares x .09 - 10% = 800K big deal
That's less than a month's burn rate. That's assuming the average of the three lowest closing bids for previous 20 day trading period stays at around .09
They can't even get the entire $15M at this rate.
The sales price for the shares we sell to Jameson is not fixed, but will be based on a formula that is tied to the average of the three lowest closing bid prices for the common stock during the 20 trading days prior to the date of the sale. The shares that we sell to Jameson will be at a 10% discount to the market price at the time of the sale. The minimum amount that we can draw at any one time is $100,000. The maximum amount that we can draw at any one time is $1 million. We are committed to drawing a minimum of $2.5 million over the term of the agreement. The maximum amount that we can sell over the 24-month term of the agreement is $15 million.
Generally, we must wait 20 trading days between draws on the equity line. We may not deliver a notice to sell to Jameson if following the purchase of our common stock at any one time, Jameson and its affiliates would beneficially own more than 9.99% of our common stock then outstanding. We obtained our stockholders' approval at our Annual Meeting of Stockholders on September 25, 2001 to issue the maximum number of shares that we may cause Jameson to purchase under the equity line.
To illustrate how the equity line agreement would work, we assume that the market price for our stock is $0.15 and that we currently have issued and outstanding 40,026,146 shares of common stock. The true purchase price would be $0.135, which reflects the 10% discount. If we were to require Jameson to purchase under these assumptions, we could sell and issue as few as 740,741 shares and as many as 4,442,409 shares of common stock with a value of approximately $100,000 and $600,000, respectively, at one time, without exceeding the 9.99% purchase limitation. The 9.99% beneficial ownership restriction affects only the number of shares that we may sell to Jameson at any one point in time. If Jameson sold in the market, it would both decrease its holdings and increase the number of shares outstanding, which would make it possible for us to issue more shares to Jameson in another draw up to the 9.99% limitation. See the "Risk Factors" section relating to possible dilution, short selling and depression of market price.
If we satisfy the conditions that allow us to draw down the entire $15 million available under the equity line, and we choose to do so, then generally, as the market price of our common stock decreases, the number of shares we would have to issue increases. To illustrate, the following table reflects how the ownership dilution increases as the market price of our common stock declines:
Average Market Price Gross Proceeds on Sales Total Number of Shares
of our Common Stock of our Common Stock Issuable
-------------------- ----------------------- ----------------------
$0.50 $15,000,000 33,333,333
$0.25 $15,000,000 66,666,667
$0.10 $15,000,000 166,666,667
We are authorized to issue a total of 100,000,000 shares of our common stock. There are currently 40,026,146 shares issued and outstanding. Given the current market price of our common stock on November 8, 2001 of $0.12, we would be unable to issue a sufficient number of shares of our common stock to fully utilize the entire $15 million available under the equity line without increasing our authorized shares. Such an increase would require the approval of our stockholders. |
