Tjeffries,
There were absolutely no way only 13,500 preferred shares was issued last July. Unless you are telling me insiders were holding 20,250,000 shares from the 27M shares outstanding at that time.
Shares were changing hands on open market through buys and sells, but regardless who bought and sold, someone must owned the 27M shares on July 16th record date. And as long as whoever owned those shares, they qualified for the preferred shares. The only exception was if the shares were owned by the insiders (management), because they were the only party not allowed to participate in the dividend.
Let's do some simple math here. 1 preferred share were issued for every 500 common shares, and you said there were 13,500 preferred shares issued. It means that only 6,750,000 common shares were qualified for the dividend (13,500 ps X 500 = 6,750,000). What happened to the other 20,250,000 shares outstanding at that time?
There were no freaking way the management owned the other 20,250,000 shares (which was 75% of ETCR's total shares issued and outstanding), especially they had issued tons of shares for consultings and services according to the S-8 and 10K reports filed with the SEC.
Remember also that I use the best scenario from my previous example, where only 50% of shareholders will participate in the conversion this coming July. I think for such a deal, the % should be higher IMO. But let's give the benefit of the doubt that only 50% participate, and the average converting price will be 20 cents. The new dilution shares already 75M on top of the currently 35M outstanding and 35M restricted. That is a whooping 145M shares total.
But let's play around with the number a little, and assume that we keep the same 50% participation rate, but change the converting price to a more realistic number. Let's assume the average price from June and July closing price will be somewhere in the current range, which is 8 cents to 18 cents. Now, let's see what we get:
(8+18) /2 = 13 cents
13 cents X 90% = 11.7 cents
13,500,000 / .117 = 115,384,615
115M +35M +35M = 185M Total outstanding diluted shares come July 16th, 2002.
Are you convinced now, or do you want me to continue with a few more examples? |
