Cornell Capital, eh? This equity put deal is designed so that the shares can be sold immediately, or have already been sold short. There is no 'financial backing' of the company here.
As further explained in Note 11 in the 10-KSB, on August 17,2001, the Company entered into an equity line purchase agreement (the "Equity Line Agreement") with Cornell Capital Partners, L.P. ("Cornell Capital") pursuant to which the Company has, in effect, "put" options whereby, subject to certain conditions, it was initially able to require Cornell Capital to purchase shares of its common stock from time to time at an aggregate purchase price of $10,000,000 from September 27, 2001 through September 27, 2004, unless it is terminated earlier at the discretion of the Company.
The purchase price will be 95% of the lowest closing bid price of the Company's common stock over a specified number of trading days commencing on specified dates. Cornell Capital shall be entitled to a cash fee equal to 5% of the gross proceeds received by the Company in connection with each put.
The timing and amount of the required purchases shall be at the Company's discretion subject to certain conditions. For each put exercised, there shall be two closing dates five trading days apart. The number of shares to be purchased at each closing of a put shall be equal to 150% of the average daily trading volume of the Company's common stock over a specified period. At least 10 trading days must elapse before the Company can deliver a new put notice to Cornell Capital.
However, during the 12-month period ending September 27, 2002, the amount of each advance, net of any cash fees payable to Cornell Capital pursuant to the terms of the Equity Line Agreement, must be at least $50,000 per put and the minimum amount of funding to be provided by Cornell Capital will be $100,000 per month. Cornell Capital received 1,500,000 shares of the Company's common stock as of August 17, 2001 as additional consideration for entering into the Equity Line Agreement.
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