Jon,
Glad we can be civil now. I do apologize, it's just that I'm tired of people misrepresenting the facts as has been done by several short sellers in the past. I appreciate your willingness to have an open mind.
Here is the information on the warrants you were asking about:
In reading the actual documents for the Ailouros financing, the deal seems to be contained in two warrants issued to Ailouros. The first warrant, a Class A warrant, basically allows REFR to require Ailouros to buy stock from REFR at a pre-determined price. This is subject to an overall floor which can be set and reset by REFR as they see fit. This way they control the minimum price at which any sales occur. The Class A warrant specifically says that Ailouros is "required" to buy the stock during the next three months. The Class A warrant also specifically allows REFR to decide what amount (between $0 and $1.5 million in any quarter), Ailouros must buy. The maximum total amount is $15 million through December 31, 2001. In looking at the Class A warrant, it specifically allows a $0 minimum.
The part of the Registration Statement you referred to is the Class B
warrant which basically is the commitment fee given to Ailouros (presumably because they must reserve their capital and forego other investments in case REFR calls upon them to buy stock under the Class A warrant, and also because REFR was given complete control over the Class A warrant.) The Class B warrant is exercisable by Ailouros at 120% of the market price on the date of the closing of this deal (i.e. $8.25). The Class B warrant initially is for 65,500 shares exercisable at a 120% premium. The Class B warrant can under some circumstances also be exercised into an additional 65,500 shares, but only if Ailouros has waited to exercise the Class B warrant AND REFR has not required them to buy any stock under the Class A warrant. It seems to me that basically the first 65,500 shares at $8.25 are exercisable at Ailouros' discretion, but the remaining 65,500 shares at $8.25 would never be issued because REFR can just give Ailouros 3 very small put notices so that the second half of the Class B warrant never vests. Under a worse case scenario then, Ailouros buys 65,500 shares of REFR common stock at a premium over today's prices, and REFR adds $540,375 to its working capital and issues about 0.006% of its outstanding stock to do it.
I'm still astounded that REFR was able to retain so much control and
still extract a large commitment of capital from the fund.
Hope this clarifies it for you,
ND |
