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biz.yahoo.com
Wednesday April 21, 3:45 pm Eastern Time
Company Press Release
Hitsgalore.com, Inc. Completes $10 Million Private
Placement
RANCHO CUCAMONGA, Calif.--(BUSINESS WIRE)--April 21, 1999-- Hitsgalore.com, Inc., (OTC
BB:HITT) announced that the Life Foundation Trust has fulfilled its obligations under the terms of the Letter
of Intent announced last week for a $10 million private placement. The trust will be issued 2 million shares of
Hitsgalore.com common stock that the trust will hold under the terms of a lock-up agreement.
Here's what the 1998 10-K says:
NOTE 11 SUBSEQUENT EVENTS
On April 15, 1999, the Company agreed to issue two million shares of its
common stock to The Life Foundation Trust ("LFT") for $10.0 million. LFT has
collateralized its obligation to pay for the shares by assigning a collection
of postage stamps. A third party holds the collection in safekeeping. LFT has
an unconditional and irrevocable obligation to redeem the collateral by
payment of the $10.0 million price for the shares issued, in cash, at the end
of twelve months. The Company issued the shares to LFT in a private
transaction.
By my reading, the company (HITT) received an IOU, due in 12 months, for $10 million. In exchange, they issued 2 million shares. As a good faith deposit, a postage stamp collection was placed under the care of a third party. No claim was made that the postage stamp collection was worth $10 million.
The next paragraph discusses the $100M investment:
On May 15, 1999, the Company entered into a non-binding letter of intent to
issue LFT an additional five million shares of its common stock at a price of
$100.0 million. The issuance of the shares is subject to an increase in the
Company's authorized shares and due diligence to the Company's satisfaction on
a $900.0 million Promissory Oil Production Note to be delivered as collateral
for LFT's obligation to pay the purchase price. The Company's security
interest in the note is to be limited to $100.0 million and is to be an
undivided interest with LFT, who has agreed to permit the Company to receive
the first $100.0 million paid under the note. There is no assurance the
Company can obtain stockholder approval for an increase in authorized shares
or that, if the transaction is completed, any payments will be received on the
note (in which case the Company would seek foreclosure on certain oil and gas
leases securing the note).
Note that this is a similar non-cash transaction. If one did not have 100% faith and confidence in the company's management, one might start to worry about the viability of the assets offered to the company in exchange for 7 million shares.
- Daniel
