(To Be Sent in Two Posts)
TO ALL,
Sorry for the delay in responding with the answers to the questions provided by thread members. I have done my best to provide as much accuracy as humanly possible. The answers were provided not only by Rob Gordon, but also by other officers of TSIG, Grady & Hatch, TSIG's SEC attorneys, etc… and all were confirmed by more than one individual.
I do believe a few comments are in order. SEC documents are confusing to say the least. I went over this with my son who is not only an attorney, but has an LL.M in tax law. His comment was that the only thing more confusing to the layperson than IRS documents are SEC documents. The fact that TSIG is a filing company is a major positive to its credit… but understanding what is written in those filings is not for amateurs (such as shareholders) or even a general practice attorney. It was for that very reason that I chose to delay posting this until after I had the opportunity to confirm certain figures with SEC counsel. Things that may appear “negative” in a filing are often not, however, a reading of same by non-professionals can lead to incorrect conclusions. Any “real” company… especially a startup/turnaround such as TSIG… is going to do its best to paint as bad a picture as possible in its filings (I know it sounds ridiculous) to avoid future problems with the SEC. I know that sounds strange, but it is a fact. The SEC, and, IMO, justifiably so, does not take kindly to public companies “hyping” themselves. TSIG has done a superb job in complying as witnessed by the barrage of posts and non-shareholder bashers who appeared on the scene after the release of the 1998 10K. It was for this reason that I decided to make the pilgrimage to, as one poster phrased it, mecca. Interestingly, I have twelve years of university education and have been personally involved with public companies in the past (being Chairman of the Board and principal shareholder of one until I had a major heart attack), yet I did not feel competent or qualified (in contrast to some who post on the thread) to read and interpret an SEC filing without more detailed explanation from the company and SEC attorneys… yes, I spoke to more than one. I was there for two and a half days… eyeball to eyeball with everyone (except the attorneys)… and have spent numerous hours since then confirming certain pertinent items. I can assure you that the only daylight I saw was from the windows and during the five minute drive from my hotel to the company. I was there first thing in the morning and went late into the evening (please note the time of my posts from St. Petersburg) and, quite frankly, my questioning was relentless and unyielding. I must say, however, that there was never any hesitation by anyone in responding to me and if I raised another issue or questioned an answer, Rob Gordon immediately picked-up the phone and got the appropriate party on the line, introduced me, and handed me the phone so I could ask away. Nothing was being hidden.
Below you will find the questions and answers. I can only assure you that having this opportunity (as physically and mentally draining as it was) only more firmly convinced me of the correctness of my decision to have taken a large position in TSIG as a lifetime investment. As most of you are aware, the majority of my investment funds are in “no muss, no fuss” hedge funds. This allows me the opportunity to focus on opportunities in just a few stocks I can do thorough DD on… and thorough DD, IMO, is not just reading an SEC filing… especially when they are not even properly interpretable by most attorneys. Any true scientist will tell you that collecting data is only a small part of research. Just as important is the application… in this case what is the company doing. Those of you who were fortunate enough to have bought Microsoft many years ago and have continued to hold have made many millions of dollars. Do you resent Bill Gates now being the wealthiest man in the world because of all the stock he owns (read gave himself)? The important thing, at least IMO, is the success of the company over the years and not the number of shares this one or that one owns. Any true scientist will tell you that a judgement cannot be determined by only one factor. All parts must be taken into consideration before a decision about the whole can be formulated. One poster on SI has as his motto: "I am too stupid to know it cannot be done." Yes, Dr. Hed, I agree. Hence, evaluation should include more than just one item such as an SEC filing. It should include evaluating the management team, the “gameplan”, the execution of the “gameplan”, the uniqueness of the concept, etc., etc.. Perhaps, Dr. Hed, the two of us share the same stupidity as I not only believe it will be done at TSIG, but it is, in fact, being done.
To: Martin E. Frankel (23202 )
From: phillip longacre Monday, Apr 5 1999 12:42AM ET
Reply # of 25377
TO: Martin E. Frankel: St. Pete Questions (FINAL):
Regards,
phil.com
_______________________________________________________________________
A) Grady & Hatch (specific questions): *These were asked directly to Rob Gordon AND to John Black (the principal of Grady & Hatch) independently.* ============================================================
1. Perhaps not answerable, but certainly askable: Does RG have any clear indication of Grady & Hatch's intent toward TSIG.com, harmful or benevolent, and if benevolent, will G & H reduce their intentions to writing, for the benefit of TSIG.com shareholders?
ANSWER: They are very, very positive on TSIG's prospects and will continue to add funds as requested until cashflow increases. (see 5. below)
2. Which firm or firms does Grady & Hatch use for clearing their trades?
ANSWER: Ed. & F. Mann in Chicago
3. Will Grady & Hatch make their "back office" trading (clearing) records available if requested?
ANSWER: Yes
4. Are any of the principals of Grady & Hatch also principals to the PP?
ANSWER: No
5. Rumor has it that you can call Grady & Hatch and get directly in touch with the principal/s of the PP?
ANSWER: Incorrect… and not unusual as most private parties (in contrast to corporate lenders) doing private placements prefer anonymity as they frankly don't want a constant barrage of phone calls from shareholders. As a point of information, however, the parties who did the TSIG PP are very positive regarding the company as witnessed by the fact that they have made introductions of alliances to TSIG. Secondly, John Black advised me that he had done another PP with this same group when the stock price was 0.60 and they converted at $4.00 and the stock is now at $6.00. He assured me that they were in this for the long haul. What I do find amusing is the absurd thought presented by some posters that the people who have done the PP are shorting the stock so as to obtain conversion at a lower price and hence essentially control the company. What company? Were this ever to happen does anyone really believe John Hwang and the rest of upper management would still be there? I not only do not think so, but I know not… and so do the people who did the PP. They are individuals with significant funds and market “savvy” who have made an investment in a company that they believe in. They certainly are not interested in taking over a lease on TSIG's office space with all of its top caliber management gone.
B) Private Placement (general): ============================================================
1. How much of the PP money has been used till now?
ANSWER: $2,145,100
2. Does the company anticipate needs for additional PP money?
ANSWER: Yes… until cashflow increases. Considering that the alliances and websites are just starting to become active it should not be very long before this occurs.
3. How much of the PP contracts have been exercised till Now?
ANSWER: $125,000. @ 0.40/share
4. What is the total dilution as a result of exercised PPs?
ANSWER: see 10K, Part II(d)A - $125,000. converted for approximately 531,915 shares
5. from Marty: <<but also the contract with the PP "people" does not permit it to be sold for many, many months from now when, IMO, the stock price will be significantly higher... and that includes the 2 million shares they (the PP "people") have already received. These are
facts!>>
Question: Where is the language in the PP that states this. I have not found it yet. And what does "many, many months" mean? IMO, that would be at least 6 months. At what time can these shares be sold? As far as I can see from the PP, they have only received 525K shares--is that the case? Finally at what time can the shares be registered? From the PP it appears to me that can be done at any time now.
ANSWER: Some of the above has already been answered. Yes, any converted shares can now be registered and become freely trading… however, and this is important, the registration process takes approximately six (6) months to complete and, hence, the stock cannot be freely traded until then.
6. from Marty: <<Be Right!!!... Sit Tight!!! And that is my opinion based on fact! And for those who cannot understand and choose to sell... well, have a nice weekend. And one other thing... this is NOT a floorless convertible! I am here for the duration... actually in perpetuity.>>
Question: If this is not a floorless, where in the PP is there a floor.
ANSWER: I stand corrected, however, I was not lied to. It was my lack of understanding and a miscommunication for which I apologize to the thread. Shares were placed in escrow at the request of the PP party's attorney and a calculation based on $0.10/share was utilized. However, and this is a major plus as it is quite unusual… there is NO ceiling on the conversion price. Those who have been around long enough know that there is almost always a “cap” or ceiling on the conversion price regardless of how high the stock price goes. This is not the case with this PP… there is no ceiling whatsoever.
7. So far 1.5M of the PP has been used. Is it possible the company will not take any more?
ANSWER: unlikely
Can another source of financing be found since profitability is supposedly so near?
ANSWER: highly possible. Three (3) other groups are already in hand, but none have been completed as of this date. The company is also negotiating with other corporate entities who have expressed an interest in acquiring a small percentage (10%) of TSIG at a price far in excess of its current trading price (a necessity as trying to buy that amount of shares on the open market would drive the stock price up to a higher level). Please understand, however, that this is just in the talking stage and it can easily take a minimum of three (3) months for these companies to complete their DD. I have personally been involved in other stocks where this latter scenario has occurred and can only state that, IMO, this is a fantastic boon to the company and its shareholders.
How will TSIG avoid the death spiral to which these sorts of convertibles often lead?
ANSWER: continue to perform as they have recently shown they are capable of doing with new alliances, etc.. With the groundwork and foundation essentially completed and the new upper management team in place in the three divisions, the performance of the company over the past few months has, IMO, been stellar… and, again IMO, the best is yet to come. As stated before, the individuals who did the PP have a track record of investment to make money (just as we all do) and they have no intention of owning a “shell” without the talent which TSIG has already brought on board. Past experience with them has shown that they are long-term investors. There is no ceiling (or cap) on the conversion price, but they will be able to take their position at a discount to market which I believe is quite justifiable considering that they put up the cash when it was needed and before the majority of upper management was even in place. In fact, it was their funds that allowed TSIG to engage these outstanding new members of TSIG's management.
8. Is it a viable option to postpone the conversion by invoking the 2 1/2%/month clause?
ANSWER: No. It will take approximately six (6) months between the actual filing for registration of the converted shares and the time the registration of these shares becomes effective. The SEC does not work quickly. The individuals who did the PP are well aware of this and is further backup to the statement that they are long-term investors and not traders or scalpers interested in hurting their investment. Witness their previous PP done through Grady & Hatch (see Q & A - A5 above)
9. Will the balance of the PP suffice to get to the point of positive cash flow or will there be more cash infusions required.
ANSWER: It is not anticipated that the entire PP will be required. A total need of $5,000,000 (which includes the funds already presented) is estimated before the company reaches the point of positive cashflow.
C) Outstanding Shares & Float - Restricted shares etc.: =====================================================================
1)What is the total outstanding shares as of today?
ANSWER: see cover of 10K (note date). Approximately 76 million shares outstanding.
2)How many shares are restricted and for how long?
ANSWER: see cover of 10K (note date). 62 million shares are held by non-affiliates… the majority of which are unrestricted.
3)What is the current float today?
ANSWER: not available. Perhaps this is of interest to daytraders and momentum players because small or thin floats create the volatility they desire, but to long-term investors it is, IMO, of no consequence. It is also extremely difficult to ascertain with any degree of accuracy as the mindset of investors… whether they be individuals, funds, corporations, etc… varies. As an example, I personally have a relatively large block of TSIG stock which I have placed into a Trust for the duration. Technically this is part of the float… but is it really? If it is not available for sale then, IMO, it has been taken out of the float.
D) Shareholder Meeting: =====================================================================
When will there be a shareholder meeting?
ANSWER: not set... possibly June or July.
(TO BE CONTINUED ON POST) |
