All:
In response to several recent inquiries, please consider the following:
1) MTEN has 700 million common shares authorized. Of course, there were only 12.7 million shares outstanding on September 30, 1996. Float = est. 3.5 million.
2) Note that Reg-S and Rule 144 are entirely different matters: a) Reg-S is an SEC-authorized mechanism for a company to sell shares to bona fide offshore investors; b) Rule 144 relates to a minimum holding period, normally 2 years, for restricted securities. The Southstar case, in which then-privately held MTEN reverse-merged into a public company, resulted in Rule 144 shares being issued to Southstar shareholders on a 1 for 100 basis. Reg-S had nothing to do with this.
As we all know, MTEN raised approximately $6 million in a private placement this past July to finance the purchase of Steridyne. This was a real Reg-S of 8% Series A convertible preferred. The terms of this deal are being renegotiated at this time. Therefore, it would not make sense to describe the original conversion structure. MTEN management tells us that some 85% of the current Series A holders have orally agreed to delay their conversion and to fix a floor for the conversion price. When the deal goes down, we will disclose it in detail if legally permissible.
The foregoing notwithstanding, it is our belief that the maximum dilution under a restructured deal would be about 2.5 million shares. Set beside the presently outstanding 12.7 million shares, this could not be considered excessive dilution. Furthermore, the company is negotiating an orderly conversion procedure so that only 20% of the shares come back every quarter. Remember that this kind of volume -- say, 500,000 shares -- has been done in the past 2 DAYS. So there is no question that the market can absorb such an offering without unduly depressing share price.
Lastly, management tells us that very few preferred shares have been issued since conversion became possible in September -- they have to know, because the preferred certificates come into them for conversion. Conclusion: the tremendous supply of shares has come from short selling -- and those chickens must come home to roost as MTEN begins to show its stuff sales-wise.
Cavior Organization (IR counsel to MTEN)
tel: 212-687-6070 |
