Thanks Robert. If you want me to I will promise not to ask you anymore questions after these three:
I was trying to understand this Reg S securities stuff when I found this:
"The Series A Shares are convertible at a rate of 100 shares plus accrued dividends per week at 80% of the 15 day average closing bid price. These shares are subject to a 24 month mandatory conversion feature. For the quarter ended August 29, 1998, 700 shares and accrued dividends were converted into 280,059 shares of the Company's common stock." www4.edgar-online.com
With the 80% and 15 day average requirement it does not seem too bad until you figure out how many new shares are outstanding by the time all 2,175 Reg S (Series A Shares) are converted. My estimate is 800,000 within the next year or two.
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Then I found this (which you may have already read and posted):
"...the Company entered into two 8% convertible debentures totaling $500,000. Both notes are due on March 23, 1999, in either cash or common stock, at a conversion rate of $2.25 per share...
...the Company entered into an 8% convertible debenture totaling $200,000. The note is due on July 1, 1999, in either cash or common stock, at a conversion rate of $2.25 per share...
The $1,000,000 debenture matures on July 31, 2000. Interest is payable on a quarterly basis. The holder of the debenture is entitled to convert after 120 days of the agreement, the principal value into the Company's common stock at a discounted market price as is defined in the agreement...
...the Company issued 400,000 warrants to purchase the Company's common stock at $1.50 per share commencing April 20, 1998 exercisable over 5 years."
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So, now, the total possible additional shares outstanding has gone from 800,000 to about 1.6 million.
If I am reading that correctly, then the stock price will be diluted by as much as 27% by July 1999.
What I want to know is this: When MGMA projected $.40 per share earning in fiscal year 1999 did they take into consideration all of the additional shares outstanding? If no, the earnings per share would be $.29. If yes, then there is no problem.
Am I on the right track here, Robert?
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Is the following good or bad:
"...the Company acquired ... Fanzine... for a preliminary purchase price of $7,500,000... The acquisition price consists of $4,000,000 cash, and 1,000,000 restricted shares of the Company's common stock with put option rights at $8.00 per share to be exercised by the selling shareholder's during the second year on a quarterly basis, if certain minimum earnings, as defined, are met. However, during Fanzines' first year of operations, the Company has the right to call the shares at the greater of $6.00 per share or 75% of the market price. The acquisition agreement, also, provides for a reduction in purchase price if Fanzine's results of operations do not meet certain minimum earnings." |
