Wayne, Some of the debenture info can be found at:
sec.gov
There is some reference to the debentures throughout the filing, but the main part is found on pages 7 & 8.
As for how the debentures are converted, I am not certain on this, but I believe it is done like this:
I understand that a debenture essentially allows a "sophisticated investor" to buy stock at a discount to whatever the "Bid Price" is at some future time.
The old management wanted to raise about $1.5 million, but I think they were only able to eventually get about $1 million. So they had Select Capital find "investors," which in this case were apparently foreign investors, that were willing to buy debentures at the discounted price.
The foreign investors were restricted from selling those shares until at least 45 days after CVIA got the funds.
Since the 10-Q filed on 5-20-97 only covered the time period up through 3-31-97, CVIA had only received about 50% of the $1 million ($540K) and CVIA had issued $729,000 worth of debentures ("future common shares") to the foreign investors. The foreign investors paid about $620,000 (15% discount off of $729,000) to Select Capital. Select Capital then paid CVIA about $545,000 (12% discount off of $620,000). CVIA actually only got about $540,000 because they had agreed to give Select Capital $5,000 originally as a "due diligence" fee.
Apparently, this whole process was done again in probably similar amounts until CVIA had received the total $1 million. So the TOTAL amount the foreign investors were entitled to exchange the debentures for amounted to probably around $1,458,000.
To redeem the debentures, I think the foreign investors simply waited the necessary 45 days and then began selling the shares to marketmakers at 20% less than whatever the going "bid price" was at the time. In the 10-Q, this is referred to as an "80% of the average closing bid price." (See Page 8 of the 10-Q)
Obviously, under this situation, marketmakers can see almost any level of buying in the stock, and they might raise the ask price, but they are not compelled to raise the bid price because they can buy plenty of shares from the foreign investors at 20% less than the bid price.
The foreign investor doesn't really care what the bid price is because he is entitled to convert ANY amount of shares until he reaches (in this example) $1,458,000 dollars. He has practically NO risk.
Marketmakers, being responsible to the SEC to "maintain an orderly market," still buy some shares from regular shareholders, but they keep lowering the bid price to a point where regular shareholders don't want to sell. That way they can get the shares for the cheapest price from the foreign investors.
Obviously, once the debentures are out of the way, it is a HIGHLY SIGNIFICANT EVENT because it removes the excessive downward pressure on stock price. As a "normal" market begins to return, the price should usually rise.
That's how I see it. Please keep in mind that I DON'T KNOW EVERYTHING about how these things work for sure, but this is how I understand it.
I DO KNOW that CVIA got about $1 Million in Net Proceeds because Gifford Mabie, Sheryl Mabie, and Rhonda Vincent verified that when I spoke with them in their office in July. They claimed that they were out of money.
But since this post is so long already, I'll save that for another time.
For various reasons, many of which I have already alluded to, I expect the CVIA price to begin moving up nicely very soon. Time will tell.
Best wishes,
Brad |
