slaffe here is a passage from one of EXSO's 10Q's..example of a death spiral do to PP's (in this case Reg S)[I should add, I made some nice profits on the bounce,when the deb holders covered their short position] also note stock now trades at .018,down from over 2 dollars.
"Significant Events Affecting Operations
Between December 20, 1996 and January 22, 1997, the Company issued
$5,000,000 in debentures convertible into common stock of the Company at eighty
percent (80%) of the average five day closing bid of the Company's common stock
on the five day period immediately prior to conversion. In May 1997, the Company
entered into modification agreements with the holders of $5 million of 8%
convertible debentures of the Company issued during December 1996 and January
1997. Pursuant to the modification agreements, the Company issued new debentures
to 14 of such holders in the approximate principal amount of $3,339,000 in
exchange for the surrender of $2,637,500 of outstanding debentures and the
waiver by the debenture holders of liquidated damages in the approximate amount
of $225,000 and the release by such debenture holders of certain potential
claims against the Company.
During July, 1997, one of the debenture holders, The Shaar Fund,
attempted to convert separate portions of its convertible debenture into common
stock of the Company. The Company declined to honor the conversions because it
believed that it had valid defenses to honoring such conversions. The Shaar Fund
notified the Company on or about August 1, 1997 that it was entitled to
approximately 5,800,000 shares of common stock of the Company and demanded
delivery of such shares. On August 3, 1997, the Company reached a settlement
agreement with The Shaar Fund whereby the Company delivered 2,200,000 shares of
common stock to The Shaar Fund. The Shaar Fund agreed to a conversion price of
$.45 per share with respect to all of its remaining debenture for which
conversion notices had been previously received by the Company. On or about
August 13, 1997, the Company issued an additional 1,333,333 shares of common
stock to The Shaar Fund in satisfaction of such conversions and in full
satisfaction of all claims of The Shaar Fund. The Shaar Fund also agreed to
provide $100,000 to the Company for reimbursement of expenses incurred by the
Company, to pay up to $50,000 for future legal fees of the Company associated
with claims surrounding the debentures issued in December, 1996 and January,
1997, and to release the Company from any additional claims.
The Company has reached agreements with certain remaining debenture
holders to convert the remaining portions of convertible debentures at a
conversion price of $.45 per share. Each debenture holder converting at such
price provided a complete release of liability to the Company and its officers
and directors. However, the Company is obligated to use its best efforts to
obtain shareholder approval of a plan that would allow for additional stock to
be provided to certain debenture holders who sustained losses by virtue of
making conversions at $.45 per share. As of November 10, 1997, approximately
$1,221,454 of the debentures remain unconverted.
On October 13, 1997, the Company was notified that its listing on
the Nasdaq Stock Market SmallCap Market had been terminated. The decision to
de-list the stock has been appealed to a review committee of the Nasdaq Stock
Market, Inc. The Company has been notified that it may submit additional
documentation for review on or before December 10, 1997. The Company's stock is
currently listed on the Over-the-Counter Bulletin Board operated by the National
Association of Securities Dealers.
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