All,
Received the 1998 Annual Report last week, and I noticed a few interesting things in the Information Circular. Some of these will be voted on at the AGM.
1. Three of the five Directors up for re-election are Chairmen/Presidents/CEOs/Directors/Chief Financial Officers of gold and gas companies. I am not arguing that they are not good business people, but wouldn't it be in our best interest to have the majority of Directors in our company having some familiarity with the field of business - chemicals, paint-stripping, manufacturing?
2. Incentive Stock Option Plan. The company wants shareholder approval to increase the number of options issuable from 2,314,000 to 4,980,000. That would increas the number of options to about 20% of outstanding shares. That's a fair amount of dilution. Are there any regulations concerning this percentage?
Additionally, the circular states that there are currently options for "1,335,000 common shares exercisable at $2.56 per share until May 3, 2003." However, elsewhere in the circular at table shows 1,435,000 exercisable at $2.56 plus another 135,000 exercisable at $1.50 or below. There's something fishy about those numbers.
3. Approval to Issue a Number of Shares by Private Placement that Exceeds 25% of the Company's Issued Share Capital. According to the circular, TSE regulations state that "one or more private placement transactions during any six-month period must not exceed 25% of the number of shares outstanding (on a non-diluted basis)". Why is Napier looking to raise more than $9M (25% of 27M shares x $1.30) in capital now, when the sales are increasing by 20% per month? Why are they looking at only private placements (with parties at arm's length of course)?
4. Reduction of Paid-Up Capital. The Balance Sheet shows equity (capital stock, special warrants and contributed surplus) of $8,340,184 and a Deficit of ($6,652,083). They are proposing to cancel the Deficit, which would have built up over all previous years (including during the anti-stain period) and during the development of SV-35. To make the Balance Sheet balance, the equity would be reduced to $1,688,101. There is nothing wrong with this, except that you could argue that the company is still in the same general business (i.e. hasn't changed from used car sales to strippers!), and this change will eliminate some of the development costs associated with SV-35. I believe that this accounting matter would mean that they can start paying cash dividends earlier. Wouldn't the status quo mean they would need to earn $6.6M before they could start to think about dividends?
Any comments?
Neil. |
