Re: HAPNW - A warrant opportunity
The question has been raised as to why the Board Chairman Sean McDevitt would purchase warrants direct from the Company for $0.70 when they could have been purchased on the open market for $.20-.25. This was answered in HAPN's 10-Q released on May 10, 2007. The company is low on cash and cannot touch the money held in the trust fund.
On page 2 of this 10-Q, it states "The $1,780, 000 of net proceeds of the initial public offering held outside the trust were exhausted at December 31, 2006, however, the sale of warrants on December 28, 2006 for $437,000 replenished the cash held outside of the trust account." This was Mr. McDevitt's first purchase.
On page 3, it states "for the three months ended March 31, 2007, we experienced negative cash flow and financed its operations primarily from existing cash. As of March 31, 2007, we had $61,863 of cash and cash equivalents, a decrease of $365,509 from the $$427,372, at December 31, 2006, which relates primarily to the payment of expenses and deferred acquisition costs."
Mr. McDevitt replenished the coffers a second time on April 12 ,2007 when he purchased an additional 447,143 warrants at $0.70 (cost $313,000).
It is startling to see how deeply Mr. McDevitt is financially invested in the success of this acquisition. Over $700,000 in warrants, one of two people who provided a $3 million letter of credit to I-Flow as a guarantee that the acquisition will go through, and one of two people who have agreed to ensure that shareholders will receive the full amount in the trust fund ($5.86 cash per share) if no acquisition is made by HAPN.
With the warrants still selling in the $0.20-.22 range, it's a high leverage bet that Mr. McDevitt knows what he is doing. If he does and the acquisition goes through, the warrants should be selling in the .60 - .90 range, and higher if the street looks favorably on the acquisition. |
