Here I go again, talking to myself....
INCE submitted a S-1 form to the SEC today, in order to register the common shares needed for the conversion of the remaining Series B and Series C Preferred shares yet to be converted to common shares. Get ready, as over 14 million shares are being registered for sale..... Once the preferred shares and associated warrants are converted to common shares INCE will have over 37 million shares in the float. Of course not all of those shares will be on the street in the near future as the warrants won't be in the money until the share price is well above $3, which I don't think is an issue for awhile....(notice I'm not even guessing when that might be). If we're lucky, INCE might find a way to redeem some of the preferred shares so they never get converted, sold, and added to the public float. (see next paragraph)
According to the S-1 filing: After Dec. 16th, INCE can redeem Series C shares as long as they redeem a minimum of $1.5 million in shares, and pay the shareholders 130% of their original purchase price (I suspect there are a few Series C shareholders that would rather have a 30% gain, vs. a 15% gain, which is what they get when they convert to common shares at 85% of market price)....we'll have to see if Paul can find the money.
We know that ITCO owes INCE $300,000+ in December on a note payable. Maybe they can find another $1.2 million to buy back the bulk of the remaining 167 Series C shares ($10,000/share). Perhaps the sale of the Arizcan Property in Arizona could fill the gap (see below, #9). That property was originally valued at $1.4 million.
The S-1 repeats much of the company background information already presented in recent 10-Qs, the last 10-K, and the most recent 8-K. But, it also gives new information about some important issues:
1) Management compensation: Salaries, and Stock Options
1a) Metzinger and Smith are receiving $210,000 and $200,000/yr in salary respectively, and they each were issued over 2 million (shares) stock options since Sept. 30th, 1997. (prices range between $0.375 and $0.50/share)
Paul is clearly a better manager than his predecessor, but the company is still very much in the RED, and it doesn't sit well with me as a shareholder to see anyone, regardless of their position, capability, or perceived value, receive this kind of compensation package when the company's revenues are not where they should be, and money is being lost far faster than it is being made. I have no problem in seeing Sr. Mgt. literally become millionaires "after" they come through for the shareholders, but they needn't draw so much cash out of the company when it needs it so badly simply to stay alive. (It's as much about principle, as it is a legitimate financial concern; at least in my opinion)
2) New Management Additions/Deletion: Neuhaus @ PIC, and Olachea @ Sigma. Dr. Bauer resigned as of Oct. 1st. I wonder what is to come of the Technology Advisory Panel INCE intended to put together with Bauer's leadership? I wonder why Dr. Bauer left? His credentials were impeccable, and his involvement was a feather in INCE's cap.
3) PIC's old/new facilities, and the associated liability for breaking their lease ($275,000), and their new facility, and.... new name (see #4).
The S-1 makes it clear for anyone who doubted that it is PIC's strategy NOT to manufacturer anything themselves (a strategy I happen to agree with). Their new facility is only 4000 sq/ft. The have a 3 yr. lease, and they have sold $420,000 worth of company assets for $50,000 (yielding a $370,000 loss) on those assets.
4) Yes, PIC has gone through a change of names apparently, and INCE no longer owns 100%. The new company is Microlink Technologies and INCE owns 72.5%, leaving 27.5% to motivate Sr. Mgt. (such as Herb Neuhaus, and Ron Morley) to make something of Microlink. That's a nice incentive, given the potential that Microlink appears to possess. I dodn't notice any mention of what INCE rec'd in exchange of the 27.5% they gave up in future revenue/profit flow.
5) It appears INCE is no longer fighting Mr. Bahl re: his supposed 1/2 interest in Louis DiFrancesco's patent underlying the PIC technology. The company now appears to be negotitating with Mr. Bahl to buy his interest in the technology.
6) The company seems to be hot and heavy in negotiating one or more alliances for PIC/Microlink. I hope the negotiations with Mr. Bahl don't effect the outcome of INCE's negotiations with key world class interconnect manufacturers.
7) INCE and its subsidiaries employ 81 people as of Sept 30, '97.
8) INCE has gone on record in the S-1 that they are in the process of raising funds for Sigma via a private placement. (interesting comment about "institutional and other financing")??
<<<The Company believes that current and known future capital resources will be adequate to fund its operations over the next 12 months. The Company believes the sale of electron tube products of CTL and memory modules of Sigma 7 will, in addition, to funds derived from a private placement by Sigma 7 and anticipated further institutional and other financing of Sigma 7, provide sufficient funds to satisfy the Company's capital requirements for the next two years.>>>
It's obvious Sigma needs cash in order to implement their plan to grow their product offering beyond SIMM cards, and into DIMM and COB products.
9) INCE is actively trying to sell their Arizona (Arizcon) property, for which they paid $1.4 million.
The only aspect of the company that has not changed radically in the last 6 months is CA Tube, although they appear to have finally moved into the new Watsonville facility (or are to move in Nov. '97) according to severel statements made in the S-1. However, I wonder how long CA Tube will remain uneffected by INCE's hunger to constantly remake itself?
It's not a bad idea for each shareholder with a vested interest in this company to visit the Edgar-Online.com and study the entire S-1 (700K) filing for themselves. I read and re-read over 50 pages of text this evening, and reaquainted myself with nearly that many familiar pages of financial information from the last 8-K. Each time I read a page something new popped out.... You definitely have to read carefully to get past all the "Boilerplate CYA legal stuff" in order to get at the more valuable insights.
I hope Paul is able to raise the private placement money Gil Olachea needs to implement his high growth plans. Once achieved I pray they'll put the positive cash flow, and profits, to good use. Equally, I hope PIC/Microlink succeeds in negotiating closure with Mr. Bahl, and that they convince interconnect company #1 and #2 that PIC's technology is a worthwhile star to hook their wagons to......These are critical issues, and we could all use some good news right about now.
edgar-online.com
The above link may or may not work for gaining access to the S-1 filing, however you should be able to get it by visiting Edgar-online.com and searching under INCE's symbol.
Bill |
