Ellen, I believe you are right about the "additional shares, apparently, during 1998 34.8 MM shares were added to the count (more than doubling)of which 29 MM were due to options exercise and thus I am assuming that the balance of $5 MM was the Chairman chunk of 5 MM (does it not bother you that insiders got to dilute external holders by more than a factor of 2 in one year?). However, the same source (the last 10 KSB, I believe note #6) also states that during the year (1998) 19,795 MM were granted. Since they started the year with 30 MM in options and only 29.8 were exercised, I presume the whole 19.795 MM are still outstanding, the registration statement the S-8 was talking about grantable options, so I do not know if any of those 17.5 MM were granted and which if these are in the count of outstanding (actually, there is a little confusion there since the same document states that at the end of 98 only 3.64 MM options are outstanding, if anyone can clarify this fine).
So, I am not sure how many shares there will be at the end of the exercise, nor do I know how well the public share holders are going to be taken care of, what is crystal clear however, is that the Chairman is very well taken care of, that is often a warning signal in my book. Insider have also sold a good 2.2 MM shares during the 1998 period, which is another piece of evidence going into the left side of the balance.
As for the burn rate, 1998 "outgoing burn rate" is $3 MM per quarter, in my last post I used this number, but the announcement of all the new divisions and activities must come at an overhead expense, we will not know until the end of the quarter is filed how much it is, but they get paid even half what the Chairman is taking ($360,000 plus 5 million shares), the quarterly overhead could easily grow by between half a million to a million.
ASs for the last question, I am still not clear about the convertible debenture. The 10 KSB talk of only $2 MM (of which by the end of Dec, I believe only $900 K or so was paid out?), while the document you present talk about the $10 MM are these different convertibles or the same.
Is this described in the 8-k listed (I have not read that document).
as for the conversion price here is what the 10 KSB says, The debentures are convertible at the option of the holder into
common stock of the Company at 70% of the market price of the common stock based upon the average bid price for the five
days immediately preceding the date of conversion., so the penalty price and conversion price might be different. It clearly states "bid".
As for the 2.5% per month, this is in my little book "usery" that even Sheilok and the Mafia would be prod of, it comes to 30% per annum. It is definitely something one would want to avoid. There is also a little legal problem seeded here, in that the option to convert lay with the holder at his option, and has no (as far as the documents I have seen) waiting period, the holder could convert, in principle before the shares are registered, causing headache for everyone.
Zeev |
