Text from the yahoo board!!!
From the PRE 14A -- Major
Dilution or Bankruptcy
TraderSoes
May 27 1998
5:41PM EDT
REASONS FOR THE PROPOSAL
The rules of The Nasdaq Stock Market, Inc. ("Nasdaq") require that a
company, whose common stock is listed on Nasdaq obtain shareholder approval prior to the issuance by such company of additional shares of common stock, in a transaction (or series of related transactions), other than a public offering, when (i) the number of shares of common stock being issued equals or exceeds 20% or more of the number of shares of common stock outstanding before such transaction (or series of related transactions), and (ii) the shares of common stock are being sold at a price per share which is less than the greater of the
per share book value or the per share market value of the common stock as of the time of the transaction. As a result of the foregoing, the Company is not permitted to issue in excess of 1,068,513 shares of Common Stock upon conversion of the Series A Preferred Stock. As of May 21, 1998, 2,576 Series A Preferred Shares had been converted into 1,067,217 shares of Common Stock. As a result, the Company is seeking shareholder approval in order that the Company can fulfill its contractual commitment to the holders of the Series A Preferred Shares.
The Company is required, under certain circumstances, to redeem any
outstanding Series A Preferred Shares if it has not either (i) obtained approval of the issuance of the Excess Shares by the requisite vote of shareholders, or (ii) received other permission from Nasdaq, to allow the Company to resume issuances of shares of Common Stock upon conversion of the Series A Preferred Shares (collectively, the "Required Approval"). As of May 21, 1998, 1,924 Series A Preferred Shares were outstanding. If the proposal to approve the issuance of
the Excess Shares is not adopted at the Annual Meeting and, as a result thereof, the holders of the Series A Preferred Shares exercised their redemption rights, the Company would be required to pay approximately $5,039,834 to redeem all the outstanding Series A Preferred Shares (based on a redemption date of May 21,1998). There can be no assurance that the Company will have the financial ability to redeem the Series A Preferred Shares and even if the Company has such ability, such payment would materially adversely effect the Company's financial condition and deplete its cash resources.
The Company entered into, and consummated, the December Placement based on a determination by its Board of Directors that the Company's then level of cash and cash equivalents were inadequate to permit the Company to continue in existence for a sustained period. While the Board of Directors considered the disadvantages of the potential issuance of a significant number of shares of Common Stock upon conversion of the Series A Preferred Shares, including (i) the potential dilution of the voting power per share of Common Stock, (ii) the potential dilution of the Common Stock book value, and (iii) the potential negative impact on earnings per share of Common Stock, after negotiations with investment banking firms and potential investors, and based upon the pressures of the need for additional cash resources, the Board of Directors determined that it was in the best interests of the Company and its shareholders for the Company to proceed with the December Placement based on the Board's belief that
such transactions offered the most favorable terms then available to the Company given the then existing market conditions and the Company's then need for additional cash resources.
REQUIRED VOTE
The approval of the issuance of the Excess Shares will require the
affirmative vote of a majority of the total votes cast on such proposal by the holders of the then outstanding Common Stock (not including any shares of Common Stock held by present or former holders of Series A Preferred Shares that were issued upon conversion of Series A Preferred Shares).
Just when I thought it couldn't get any better, it did. I sure hope this stays at 5.50 or pops a little in the morning so I can short some more. This could be a penny stock soon!! |
