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Technology Stocks : RMII -- Ignore unavailable to you. Want to Upgrade?

To: E_K_S who wrote (306)	8/30/1999 7:06:00 PM
From: E_K_S	Read Replies (1) \| Respond to of 345

Some observations.... Here are some specifics regarding RMII's purchase terms for one of their recent acquisitions. You will notice that the seller can sell their RMII stock (up to 40%) according to a formula. This may be one reason why the stock has fallen over the last few weeks. Look for this selling to continue until all the shares have been re-distributed to new share holders. From the SEC report issued 8-26-99 i. In exchange for the Acquired Assets, the Buyer will issue to the Seller that number of the Buyer Shares equal to six million seventy-five thousand and no/100ths dollars ($6,075,000.00) adjusted per subsection (c) below (the "Purchase Price") divided by the average closing price per share of the Buyer Shares for the ten (10) day trading period ending on the day prior to the Closing Date (the "Closing Price"). << This would be about 506,000 shares valued at a price of $12/share>> ii. The number of shares of the Buyer Shares to be issued pursuant to Section 2(b)(i) above shall be allocated among and distributed by the Seller to itself and its Members (the "Distributees") as determined by the Seller in its discretion. iii. At the Closing Date, forty percent (40%) of the Buyer Shares issued pursuant to Section 2(b)(i) above will be registered under the Securities Act (the "Registered Shares"). The Distributees shall be allowed to sell, trade and otherwise transfer the Registered Shares; PROVIDED, HOWEVER, that the Distributees may not sell, trade, or otherwise transfer more than the greater of 4,000 of such Registered Shares in any one trading day, or more than five percent (5%) of the average trading volume of such Registered Shares for the previous ten day (10) trading periods in any one trading day, for a period of thirty (30) days after the Closing Date. <<This should be about 202,000 shares that will overhang the market and could take as long as 10-15 trading days to re-distribute to new shareolders>> Here is how the other 60% of shares can be sold thus putting futher downside bias on the stock. v. The remaining portion of the Purchase Price (approximately fifty percent (50%)) not paid in Buyer Shares at Closing, as the same may be further adjusted by post-closing adjustments made pursuant to that certain Post-Closing Agreement executed by the Parties at the Closing, shall be paid in Buyer Shares issued to the Seller in the following installments subsequent to the Closing: (A) one-half (1/2) thereof (approximately twenty-five (25%) percent of the Purchase Price) six (6) months following the Closing Date; and (B) one-half (1/2) thereof (approximately twenty-five percent (25%) of the Purchase Price) twelve (12) months following the Closing Date (collectively the "Installment Periods" and each an "Installment Period"). The number of Buyer Shares to be issued at the end of each Installment Period shall be determined by dividing the Closing Price (adjusted as provided in Sections 2(b)(vi) and 2(c)(iii)) into the portion of the Purchase Price, adjusted as provided in Sections 2(c)(i) and 2(c)(iii). The Buyer Shares so issued will be registered under the Securities Act on or prior to the date of the expiration of the Installment Periods and will be without restriction against sale, trade and transfer of any kind. ======================================================== Until these shares are re-distributed to new shareholders AND the company can continue to report positive results regarding their merger activities, RMII's share price should continue to move lower to a point where new shares are no longer sold. For this sale alone, share price has fallen 34% from the initial buy out price. The seller may hold their new stock and begin to sell again on prices above the purchase price of $12. Once RMII's management has consolidated the assets of the companies they have acquired, reduced the SG&A by 30%, begin to book a positive cash flow for the combined operation, will the stock move higher. In the industry they measure EBITD (earnings before interest, taxes and depreciation). RMII is currently valued at 2x sales. It is possible once all the consolidation is completed, RMII could receive a value between 5-10x sales. MCI sells for 28x sales, Qwest sells for 5x sales. At current levels RMII could be valued at between $20/share and $40/share. It is the overall sales and sales growth that is key going forward. RMII must keep and grow their customer sales BOTH during and AFTER these acquisitions. Continue to hold!