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Strategies & Market Trends : SPATIALIZER AUDIO LABS INC (SPAZ) -- Ignore unavailable to you. Want to Upgrade?

To: Jim B who wrote (1003)	7/22/1999 11:37:00 AM
From: Savant	Read Replies (1) \| Respond to of 1113

Preferred stock..how many shares will it turn into? You didn't include them in your calculation, or did I miss it? There are 49,830 preferred as of 3/31/99 and since 10,170 turned into 5,971,801 shares of common, I was wondering how many shares the remainder will turn into and the resultant calculation of the earnings potential?...Thanks, Savant =============================================== ) SALE OF PREFERRED STOCK On April 14, 1998, the Company entered into a private placement for up to $5 million of which $3 million was funded at June 30, 1998. In connection with the private placement, the Company authorized 100,000 shares of a new Series A, 7% Convertible Preferred Stock at a stated price of $50 per share and issued 60,000 shares for $3 million. In connection with the April funding, the Company issued purchase warrants, exercisable for three years and entitling the holders to acquire one share of the Company's common stock for each warrant. Of the warrants, 450,000 were issued and 150,000 warrants were issued to placement agents. The investor warrants are exercisable at 140% and the placement warrants are exercisable at 120%, respectively, of the average closing bid price of the Company's common stock for the 10 days preceding the closing. In addition, cash placement fees of 10% were paid. A related party of the Company received 50,000 of the placement agent warrants and $100,000 of the placement agent cash fee for arranging $1 million of the $3 million investment. As of March 31, 1999, $1 million of the remaining $2 million of the funding was due but had not yet been received. Holders of the Series A Preferred Stock have a right to convert their shares, at their option on the earlier of (x) ninety (90) days after issuance or (y) on the effective date of a Form S-3 Registration Statement (the "Conversion Date") with such conversion to be based on a per share conversion price ("Conversion Price") equal to the lesser of a price that reflects a discount (the "Conversion Discount") to the average of any three (3) consecutive closing bid prices for the Company's Common Stock within twenty (20) trading days immediately prior to the conversion date (the "Floating Conversion Price") or a price which is equal to one hundred thirty percent (130%) of the closing bid prices of the Company's Common Stock for the ten (10) trading days immediately preceding the date of issuance (the "Fixed Conversion Price") provided that in determining the Conversion Price, the holder shall not count any day on which its sales account for greater than twenty percent (20%) of the volume of the Company's Common Stock and on which 8<PAGE> 9 the holder has sales in the last hour of trading. The Conversion Discount shall be equal to fifteen percent (15%) if the Conversion Rights are exercised within one hundred twenty (120) days of first issuance of the Series A Preferred Stock and shall be equal to seventeen and one-half percent (17.5%) if the Conversion Rights are exercised after one hundred (120) days and prior to one hundred forty-nine (149) days of first issuance of the Series A Preferred Stock. Pursuant to the agreement, the applicable Conversion Discount increased by five percent (5%) when the Company was de-listed on NASDAQ. In addition, the percentage of shares that can be converted at any one time is limited during such time periods and the holders cannot own more than 4.99% of the equity of the Company after the Conversion. At March 31, 1999, 10,170 shares of Series A Convertible Preferred Stock had been converted into a total of 5,971,801 shares of the Company's Common Stock. ================== The beneficial conversion feature of the Series A Preferred Stock has been recorded as a dividend using the most favorable conversion terms available to the shareholder to calculate the dividend in accordance with FASB (Emerging Issues Task Force) Topic D-60. Since the Company has an accumulated deficit and, under Delaware Law, must charge dividends against additional paid in capital, the net impact of recording the beneficial conversion feature is zero since both sides of the entry are recorded in additional paid in capital. At March 31, 1999, dividends in arrears were approximately $178,000.