PRIVATE PLACEMENT ANNOUNCEMENT (12/2) and MORE DISCUSSION
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From: Tim J. Flick Dec 2 1997 Reply 6748
PRIVATE PLACEMENT NOW PUBLIC
PRIVATE PLACEMENT. On November 21, 1997, Topro, Inc. (the "Company")
completed a private sale pursuant to Section 4(2) of the Securities Act of 1933 (the
"Act") of 955,000 shares of Common Stock for gross proceeds of $5,252,000. The
securities were sold to four "Qualified Institutional Investors" as defined in
Rule 144A under the Act and two institutional "accredited investors" as defined
in Regulation D of the Act. The shares are "restricted securities" which may
not be offered or sold absent registration or an exemption from the registration
requirements of the Act. The purchasers were granted certain registration
rights with respect to the shares of Common Stock. To the extent the shares are
not timely registered as required, an aggregate of 95,500 Common Stock Purchase
Warrants, exercisable at a price of $5.50 per share, will be issued to the
purchasers. The Company's placement agent was paid a cash commission equal to
8% of the gross proceeds of the offering. The Company plans to apply the net
proceeds of the offering to working capital.
From: insider Dec 2 1997 Reply 6749
Looks like the 4 institutions got in for $5.50 about a $1 under the market price. I
thought the "word" was they were being sold at the market price. Any idea on the
conflicting story.
From: TokyoMex Dec 2 1997 Reply 6753
I was told at no discount then 10% from the market price (Have you heard of
negotiation ?) and that day TPRO was trading at 6 1/4, the same very Monday, so it is
10%.
I heard this and reported here that PP is a done deal.
I posted this some where in the club house mentioning 10%.
Now when you move a volume like a 1 million shares and is being bought by
institutions with outstanding reputations and are restricted, I bet your bottom they want
discount. Also the names of those institutions will generate more than 10% in my book.
And we should be glad that its done by people like Zweig and TPRO in spite of that 1
million dillution we went up consecutively for last two days, contrary to shorts cry here.
No one screwed you here nor lied to you , thats the reality of the market.
From: Jack Zahran Dec 2 1997 Reply 6756
Tim: What is your opinion on the effect of the PP now that it is public? If the
companies who bought in are prestigious, will this actually boost the stock? For
example, when Microsoft backed APPLE in this way, Apple went through the roof. Is
there reason for enthusiasm?
From: Tim J. Flick Dec 2 1997 Reply 6759
Jack... My best guess is more of the same. At least we don't have to worry about lack
of capital now. I see no super heat until we get some coverage, become marginable,
get the warrants out of the way. The thing to remember here is DO NOT LOOSE
YOUR POSITION. One might get tempted to sell some in hopes of buying it back
lower, but heed my message. No one knows when the fireworks will go off, so do not
try to guess.
From: John Rakoci Dec 2 1997 Reply 6761
If TPRO still cannot qualify for a $5 mil loan things are not as pretty as most
want to believe. Price should take a nice rise on next qtr earnings,, less hype, less BS,,
more patience!
Now if I was offered 1 mil shares at 5 1/2--- how long would it be kept? Sell 80% at
currant price and all held is nearly free. Of course when the additional mil goes it will
have to be slow and will still drop the price.... I do not think mgmt needs praise for this
action!
From: TokyoMex Dec 2 1997 Reply 6762
Huh ?
Explain again ?
Shares are restricted, for a year I believe....
From: Tim J. Flick Dec 2 1997 Reply 6763
John... Why do you want DEBT on the balance sheet? The buyers of this equity
placement must feel good about their purchase, they gave the ultimate nod to TPRO by
saying that they want to speculate on the price of the stock instead of earn 10%
interest. THIS IS MONEY THAT DOES NOT HAVE TO BE PAID BACK. There
is no interest expense, no liability, it's the purest form of capitalism, enjoy it.
From: Jack Zahran Dec 2 1997 Reply 6764
Tim, many of us feel that this PP is really big positive news. The company is striking
while things are hot. They've got some big contracts coming down the pike. The recent
e-mail from the company says they are looking to hire 30 more people by December
31. They would only hire if they have contracts for those people to work in. I would be
interested in knowing their current backlog, supposed to be a big indicator of their
long-term health.
From: Skipard Dec 3 1997
I believe that I am correct in stating that company didn't say anything as to the PP one
way or other. I for one, knew the price was at a discount, as is standard in all PP's.
Their credibility is 100%, and if statements were made as to the price, I am to assume
that people were guessing, because the company didn't say anything.
More importantly, now lets get to work. this is last round of PP's, and now "Show Me
The Money"
From: Zebra 365 Dec 3 1997
Why Equity, not Debt?
JDN wrote: <<<(Wednesday, Dec 3 1997 5:23AM EST) To begin with I still find it
hard to believe they couldn't have borrowed necessary funds, now I see they, in my
opinion, got ripped off on the costs of the offering.>>>
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From the October 17, S-3:
Subsequent to June 30, 1997, $2,685,048 of 9% Convertible Debentures was
converted to Common Stock, leaving a principal balance of $2,015,000 for that debt.
Repayment of the principal balance of 9% Convertible Debentures remaining
unconverted will commence on March 1, 1999. With regard to the other debt
obligations, $2,151,000 is scheduled to mature prior to June 30, 1998. This
significant indebtedness could have important consequences to the holders of
Common Stock by restricting the Company's ability to obtain additional
financing for working capital, acquisitions or other purposes in the future and
by creating the risk that violation of a covenant or other term of the loan
agreement could cause the outstanding balance of the loan to become due,
putting all of its assets at risk. The Company's ability to make scheduled payments
of principal or interest on, or to refinance, the Debentures and bank debt will depend
on future operating performance and cash flow, which are subject to prevailing
economic conditions and financial, competitive and other factors beyond its control.
The terms of the Debentures impose substantial conditions on the Company's ability to
redeem or prepay the Debentures. The loan agreements pursuant to which these
Debentures were issued contain numerous financial, operating and general covenants
and require the Company and its subsidiaries to meet certain financial ratios and tests.
Until January 1, 1998, the minimum financial standards under the Debentures
are as follows: debt to equity ratio, as defined in the Debenture Loan
Agreement, no greater than three to one; current ratio no less than one to one;
tangible net worth not less than negative $1,500,000. EBITDA to interest
expense shall be no less than .25 to one through September 30, 1997 and .75 to
one thereafter until January 1, 1998. Thereafter, the minimum financial
standards revert to the following: debt to equity ratio not greater than 3.6 to
one; minimum tangible net worth of $1,000,000; and EBITDA times interest
expense of not less than 1.5 to one. A failure to comply with the loan
agreement covenants could result in an event of default which could permit
acceleration of the debt. The obligations of the Company under the loan
agreements are secured by a pledge of all of the capital stock of ACT, VHC
and ACS and by a first priority security interest in substantially all of the
assets of Topro and its subsidiaries. If the Company becomes insolvent or is
liquidated, or if payment under the loan agreement is accelerated, the investor would
be entitled to exercise remedies available to secured creditors under applicable law
and pursuant to the loan agreement. Accordingly, the Debenture holders will have a
prior claim on the assets of the Company and its subsidiaries. In addition to the
Debentures, the Company and its subsidiaries have other outstanding credit facilities
for which assets of the subsidiaries are pledged as collateral. If the Company is not
successful in refinancing these credit facilities, its overall liquidity would be negatively
impacted and default could result in acceleration of other obligations, including the
Debentures.
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The issuance of more debt was probably not an option, because, as
the working capital from the debt issue was used, it would put the
company in danger of violating the terms of the previous covenants and
having up to 4.8 million in debenture debt suddely called. While A/R
from PlantY2KOne sales contributes to net worth at this time, the most
conservative posture was to do the PP, which dilutes equity on a per
share basis but increases Tangible Net Worth. Also any further debt
issuance would necessarily be subordinate to the currrent debt and
would come at a high cost if it could be placed.
I agree that 8% is high for a PP, but time is of the essence here, and many profitable
companies have been killed by cash flow crunches just as the business starts to take
off. I often say to my fellow small business owners, "If you think your employees are
loyal, try skipping one payroll and see how long you stay in business."
I was hoping the PlantY2KOne revenue would fill in this low point in cash flow also,
but it didn't. Probably another 60 days out with the CD and this deal would not have
been necessary. I'm NOT losing sleep over this.
From: Tim J. Flick Dec 3 1997
JDN... 8 to 10% juice is an industry standard for speculative equity capital. I expected
10%. If TPRO was receiving a loan than this fig would be breath taking. 8% is
typical... remember, we do not have to pay it back.
From: JDN Dec 3 1997
Dear Tim: This is not an initial capital and I am sorry but I think this is high. As to pay
back. We as shareholders will pay back much more in dilution than a standard bank
loan drawing say Prime +2%. You may be right from the company's point of view, but
from existing shareholder point of view debt financing is always more attractive. I say
always because unless the equity situation is inviting it wont attract interest. Its a done
deal, and I dont want to belabor the point anymore. I made my feelings know clearly
right from the start. At this point I only hope that we got some "partners" that are worth
this cost. I reviewed the 8-k filing with the SEC yesterday and neither the PP is filed
nor the names of the participants. Cant understand why as this seems important to me.
Sooner or later it will come out though. JDN
From: jan mccabe Dec 3 1997
The decision to go with a PP rather than increasing the current debt load could also
have been related to Topro qualifying for margin. Fred Betz told me that he had to go
into great detail about all loans from as far as five years back. The SEC may look more
favorably on the PP, they had to raise cash and I'm much happier with having a mutual
fund behind us than incurring another large loan with interest eating away at profit
margins. I hope that we are done with any further dilution after the warrants are
exercised. Jan
From: Skipard Dec 3 1997
The PP was done in the most part with current owners of the stock, who have a long
term time horizon. these holders are holders. This was not a Reg S, and this stock will
not be seen for a long time, IMO.
As for the names of the buyers. We ain't going to get them so lets change the record
and go onto something meaningful. I have had this discussion with a number of people,
and it is not worth rehashing. these buyers know the story, like the story, the company
needed them, we needed them, back to work.
My guess is that there is an awful lot going on businesswise, and I feel comfortable that
over the near term we will be hearing on that front.
From: edgedirect Dec 3 1997
There are those on this board who have stated they have DONE many PPs
just as the one TPRO just completed. My question to them is "What
normally happens to the price of a stock after such a PP is completed
and announced to the public?"
In the Reg-S scenario the stock almost always goes down. If there is
no "normal" reaction to a PP such as this, that's fine. I'm just
curious at this point.
From: JDN Dec 4 1997
Dear Edge: I have done many PP's. I dont think there is a "Norm" in general but in the
case of the Y2K stocks it has gone down. However, TPRO hasnt acted like the Y2K
stocks at all so who knows what this means. In my opinion any negative effects can be
offsett the tremendous increase in business (if that is true) and potentially by the
investors (however they have chosen not to be named). Incidentally a PP does NOT
MEAN names are withheld. Any shareholder is entitled to examine the official stock
records of a Company. However it is possible the PP is in some kind of "straw" name.
"Secrecy" always makes me nervous. As to the Public knowledge that Tom asked
about, I too was puzzled that no Press release is evident. I picked it up off this site and
then from the SEC. I dont know why they wouldnt have made a Press Release other
than the fact they probably agree that it isnt the greatest move one can make for stock
value. |
