<<Looks like a good short but I want to understand it better first.>>
I found the following at quicken.excite.com under News. Look for the S-3 (dated 6/98). Also check financials for the quarter ending 9/30- quicken.excite.com.
from the S-3 regarding a stock sale that may net $29 million but not for the company:
" These shares of common stock are being sold by the security holders listed under the heading "Selling Shareholders." The selling shareholders previously received the shares from us or will receive the shares from us by converting previously issued preferred stock or exercising previously issued common stock purchase warrants. We will not receive any of the proceeds from the sales of the shares by the selling shareholders."
<<One of those shareholders is Liviakis Financial Communications. Holdings appear to amount to 15% or more of the total shares.>>
ABOUT DATA RACE, INC.
We design, manufacture and market a line of communications products for remote access to the corporate environment. Our unique client/server product, the Be There!(TM) Remote Access System, gives teleworkers access to all elements of corporate communications networks, including the PBX, Intranet and Internet. Through Be There!, remote workers send and receive e-mail, faxes and phone calls simultaneously over a single phone line. We also design and manufacture advanced network multiplexers which carry data, network, voice and fax traffic between a company's multiple offices. We sell our products nationally through Inacom Communications and Data General Corp., and through many regional resellers.
<<Their competitors: 3-COM, Cisco, ZOOM Telephonics>>
RISK FACTORS
Our goal of returning to profitability and developing a more reliable revenue base will depend on the success of our Be There! Remote Access System. Since its release in early 1997, the Be There! product line has had very limited success and revenue to date from the products has not been significant. The Be There! system represents a new type of product for us which is significantly different from the our network multiplexer products and custom modem products.......
Recent Operating Losses and Expected Continued Losses
We have suffered substantial recurring losses, and we have not had significant revenue to date from our Be There! products. It is possible that we will never return to profitability or generate future revenue levels sufficient to support operations. Our independent auditors have included an explanatory paragraph in their report covering the June 30, 1998 financial statements which expresses substantial doubt about our ability to continue as a going concern. The explanatory paragraph notes that we have suffered recurring losses and incurred negative cash flow from operations during fiscal 1998 and fiscal 1997......
<<Their gross revenues are down 75% from '97 to '98. A mutual insurance company bought $200,000 worth of Be There! last fall and might buy more. Moody's announced a purchase, not sure of the dollar amount. Also the company got a cash infusion of $2.2 million (http://quicken.excite.com/investments/news/story/?story=/news/stories/pr/19981116/hsm048.htm&symbol=RACE), about enough to cover one quarter's operating losses.>>
and then there is what appears to be a "toxic convertible" among the shares that may be sold:
The Series D Convertible Preferred Stock is convertible into common stock at the option of the holder beginning March 17, 1999, subject to acceleration in certain events, at a conversion price equal to 80% of the trailing five-day average closing bid price of the common stock on the conversion date. The conversion price is subject to a minimum conversion price equal to the trailing 15-day average closing bid price of the common stock on March 17, 1999 and is subject to the maximum conversion price equal to the lesser of $3.00 or the trailing five-day average closing bid price of the common stock on March 17, 1999. The number of shares of common stock issuable upon conversion of one share of Series D Convertible Preferred Stock is computed by dividing the share's stated value of $1,000 by the applicable conversion price, plus, in the event we elect to pay in common stock the 8% accrued premium on such preferred stock, that number of shares of common stock having a value equal to such accrued premium. For a complete description of the rights, preferences and restrictions of the Series D Convertible Preferred Stock, see the Statement of Designation, Preferences and Rights of Series D Convertible Preferred Stock filed as an exhibit to our Current Report on Form 8-K filed on August 4, 1998.
<<At the present price of $7 the convertible holders are guaranteed a price of $3/share and a $4/share profit.>>
Last quarter's financials due out soon. It will be interesting to see if there is any significant revenue to report.
I am short RACE but have only a very small position as of now. |
