The MMs and the overseas investors driving the stock down to covert their notes to cheap stock. Read below.
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Item 9. Sales of Equity Securities Pursuant to Regulation S.
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On December 12, 1997, Newriders, Inc. closed on the sale of $1,000,000
face value of its 8% Convertible Notes (the "Notes"), in minimum denominations
of at least $25,000, due December 12, 2000. Interest on the outstanding
principal amount is payable semi-annually in arrears on the first day of May
and November at the rate of 8% per annum accruing from the date of issuance.
The interest so payable will be paid in shares of common stock of Newriders,
Inc. ("Common Stock") at the then applicable Conversion Price (as defined
below) to the holder of each Note. The offering may continue until a maximum
of $2,000,000 of face value Notes have been sold, or until Newriders, Inc.
decides to terminate the offering.
Holders of the Notes are entitled, at their option, at any time
commencing 45 days after the closing date until maturity to convert one-third
or any lesser portion of the initial principal amount of each Note into shares
of Common Stock of Newriders, Inc. (the "Shares") at a conversion price for
each Share equal to the lesser of $3.3375 per share or eighty percent (80%) of
the average closing bid price of Shares of Common Stock for the five trading
days immediately prior to the Conversion Date with a conversion floor price
(the "Conversion Floor Price") of $2.00 per share (collectively, the
"Conversion Price"); beginning 75 days after the Closing Date, an additional
one-third of the initial principal amount of each Note may be converted into
Shares at the Conversion Price; and beginning 105 days after the Closing Date,
the remaining one-third of the initial principal amount of each Note may be
converted into Shares at the Conversion Price, provided that if the average of
the closing bid price of the Common Stock for the 20 consecutive trading days
immediately prior to a Conversion Date is less than $2.00 per share, the
Conversion Floor Price will be adjusted to equal eighty percent (80%) of such
20 consecutive trading day average of the closing bid price, provided,
however, that in no event shall the holder be entitled to convert any portion
of the Notes in excess of that portion of the Notes upon conversion of which
the sum of (1) the number of shares of Common Stock beneficially owned by the
holder and its affiliates (other than shares of Common Stock which may be
deemed beneficially owned through the ownership of the unconverted portion of
the Notes, as defined in the Subscription Agreement) and (2) the number of
Shares issuable upon the conversion of the portion of the Notes with respect
to which the determination of this proviso is being made, would result in
beneficial ownership by the holder and its affiliates of more than 4.9% of all
outstanding shares of the common stock of Newriders, Inc.
First Bermuda Securities Limited of Hamilton, Bermuda, has acted, and is
acting, as principal underwriter or placement agent in selling the securities.
Commissions equal to ten percent (10%) of the face value of the Notes are paid
to the principal underwriter upon sale of the Notes. The Principal
underwriter also a non-accountable expense allowance of $15,000, and 5-year
broker warrants equal to ten percent (10%) of the aggregate amount raised with
an exercise price equal to one hundred twenty percent (120%) of the closing
bid price of the Shares on the closing date. The broker warrants have
certain piggy-back and demand registration rights.
The Notes sold pursuant to the offering and any Shares issued upon the
exercise of conversion rights have been and will be issued pursuant to
Regulation S promulgated under the Securities Act of 1933, as amended, and
have not been registered under the Securities Act of 1933. Since the offering
is being made pursuant to Regulation S, sales of the securities are limited to
Non-U.S. Persons, as defined under Regulation S, and offers and sales may only
be made outside the United States. The Notes may not be transferred, offered
or sold prior to the end of the 40 day restricted period commencing on the
date of closing, unless such transfer, offer or sale is made in an "offshore
transaction" and not to or for the account of or benefit of a U.S. Person (as
such terms are defined in Regulation S) and is otherwise in accordance with
the requirements of Regulation S. The Notes may not be converted into Shares
by or on behalf of any U.S. person.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NEWRIDERS, INC.
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(Registrant)
Date: January 2, 1998 By:/s/ William R. Nordstrom
-----------------------------
William R. Nordstrom
Executive Vice President
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9. Watch out for Regulation S abuses!
Regulation S is a section of the federal law that permits publicly-traded companies
to sell unregistered securities to overseas investors. These "overseas" investors, in
some cases, are actually U.S. investors operating through offshore shell
companies, often hedging their investments by using options or short sales. That's
particularly true when the issuers are risky small-cap companies, which sometimes
turn to Reg S offerings out to sheer desperation for cash.
In the past, these Reg S securities could be issued to the "overseas" investors and
then sold back into the US market before the existing shareholders even found out
it. But the SEC realized that this was a problem and recently changed the rules. A
company that issues Reg S securities now must file a Form 8-K within 15 days of
its occurrence. Because Reg S securities are currently restricted for 40-days after
they are issued, existing shareholders will be warned about Reg S deals before the
shares can be sold. However, purchasers of Reg S securities can still short the
stock before the 40 days are up, and later use the Reg S shares to cover their short
position. Therefore, existing shareholders can get hurt by Reg S offerings even
under the new rules.
The most dangerous kind of Reg S offerings for existing shareholders are
convertible securities which can be converted into common stock at a fraction of the
stock price at the time of conversion. For example, the securities might convert into
common stock at 75% of the average bid price over the previous five trading days.
No matter how low the stock price falls, the Reg S investors can still convert into
common stock at a price lower than the current stock price. And the lower the stock
price falls, the more shares they get. Therefore, they benefit from the stock price
dropping and will often even short the stock to help it fall further (and lock in higher
sale prices of the stock as well.), and then cover their short position with the shares
they get from conversion. They almost can't lose! It's the existing shareholders who
are the losers. This type of Reg S offering will frequently cause a massive increase
in shares outstanding, which means that existing shareholders now own a smaller
piece of the company and hold shares that are worth much less than they were
before. Watch out for all Reg S offerings, but especially watch out for this type of
Reg S!
stockdetective.com
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WE may see the stock below $2 for the next 20 days. Let's hope the co
Have some good news to release this week. I see not much happening 'll
they open the Fresno restaurant- Myrtle Beach Bike shop or they close the Paisano deal.
Good luck
Pete |
