Looks like SYQT may have a "death spiral" convertible in Series 3..
In April 1998, the Company raised approximately $11,700,000 in a transaction with Fletcher whereby Fletcher exercised a warrant to acquire 5,000,000 shares of the Company's common stock. As an incentive for exercising that warrant, Fletcher acquired at par value an additional 1,696,429 shares of the Company's common stock. The warrant exercised was acquired in connection with the purchase of the Series 3 Preferred Stock. Fletcher was also granted the right to acquire additional shares of the Company's common stock at par value. The exact number of the additional shares that could be issued is unknown as it will vary depending on the future price of the Company's common stock.
And here it looks like they thought they could dilute all they wanted without shareholder approval. But NASD is making them get approval..
The Company has recently been notified by the NNM that given the structure of Financing Transactions relating to the sale of the Series 3, Series 4, Series 5 and Series 7 Preferred Stock, stockholder approval would be necessary to exceed the 20% Limitation.
Previously, the Company had been notified that transactions so structured would not be deemed to be at less than market value, and therefore would not require stockholder approval to issue shares in excess of the 20% Limitation.
That explains the following kind of shenanigans:
In December 1997, the Company raised approximately $6,000,000 in a transaction with CC Investments, LDC ("CCI"), whereby CCI exercised warrants to acquire 2,000,000 shares of the Company's common stock. As an incentive for exercising those warrants, CCI received a warrant to acquire 1,500,000 shares of the Company's common stock. CCI is one of the investors in the Series 4 Preferred Stock, the Series 5 Preferred Stock and the Series 7 Preferred Stock (defined below). The warrants exercised by CCI were acquired in connection with the purchase of the Series 4 Preferred Stock.
Instead of just issuing more common at 3/shr, they thought they could come in under radar by giving away more warrants as an inducement to get someone to exercise existing warrants at 3. Wonder how long before those were flipped?
Why is this scam allowed to go on? Does the use of the word "turnaround" cause the SEC look the other way? |
