This is my take on the news announcement
1. The acquisition is a major acquisition of 60% of the issued and outstanding shares of MCDI for a total of 1,500,000 voting escrowed common shares of the Company. MCDI principals will retain a 4% gross royalty on sales.
- I'm not sure this was understood before. This means no dilution to take 60% ownership. The financing though, is a different story.
2. The escrowed shares shall be released on the basis of ten shares released for every Cdn.$1.00 in cumulative aggregate net cash flow from operations.
- At least it provides some measure of pay for performance, at .10 per share.
3. MCDI will complete a private offering of non-voting preference shares to raise in aggregate $500,000. The preferred shares will carry a fixed dividend entitlement of 12% and a bonus dividend payable as an aggregate 5% royalty on gross sales of MCDI. The bonus dividend shall be paid pro rata to all preferred equity holders.
Additionally, the preferred shares shall be convertible, at the option of the shareholder, into common voting shares of the Company over a five year period. A total of 2,000,000 shares shall be issued on completion of conversion at a deemed price of $0.25 per share.
Conversion may not occur prior to the expiration of one year from the date of the subscription.
- Half a mil is still a lot of money in today's Vancouver market. I believe this is what is stalling the deal right now. The money is needed to pay for shipping the machine, facilitizing the building, working capital etc. I'm not sure they need to raise all of the money, but they'll take it if they get it. The terms don't sound half bad for someone who needs that income guarantee.
MCDI has reported receipt of the Compact Disc Equipment Lease Agreement, direct from the USA manufacturer, providing favourable pay-as-you-sell CDs payment terms. MCDI further confirms that it is in the final stages of completing the agreement which will bring about delivery of the CD equipment approximately 30 days later.
- Here is the big enchilada, the high-speed machine. Once they get everything in place, they will announce the delivery date. I still have egg on my face from previous optimistic guesses, so I won't make another guess as to when that will be, but I now do not believe the equipment will be installed before Sept 15.. This announcement could come at any time and I think will be the key to start things rolling.
The Company is pleased to announce that in accordance with an amendment (dated July 28, 1998) to the original MCDI acquisition agreement, the Company will not consolidate its share capital as
previously announced in the April 6, 1998 News Release.
- How about that, Robert you got your wish, (or one of them). I am sure this excellent news was possible by the reduced financing requirements of the "pay as you sell" lease. That means the weakness we went through as people anticipated the consolidation has resulted in an oversold position. Maybe it will pick up to .20 as a result.
The Company also re-announces a Private Placement in the aggregate sum of Cdn.$300,000, which will be used to provide for the initial down payment on the equipment lease as to Cdn.$75,000, to provide for additional Autonet product development, and to provide for ongoing working capital. The Private Placement is priced $0.15 per share and provides a warrant exercisable at $0.15 and $0.18 respectively, in years one and two.
Autonet is not dead. They just need some money to get it going. I hope this CD deal gets put away soon so we can get to why I bought this stock in the first place.
The Company also re-announces the setting of employee and director share purchase options, in aggregate of 950,000 shares at the price of $0.15 per share.
At the trough, but if they get this deal put away they probably deserve it. Don't forget, this is the only way they get paid and they get nothing if the stock doesn't go up. All told there is 8.6M existing shares, plus 2M for the convertible preferred, plus 2M for the private placement, and 2M for the warrants that go with it, plus .95M for the directors. That is 15.5M shares fully diluted. Wow, that is a lot more than I like, but that is why they thought about the consolidation. It should provide for liquidity and a lively market once this gets going though.
Now I guess I'll have to redo my forecast.
These are all my opinions only. Anybody care to add something?
Ted
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