BDE up big on TWX connection but this looks like a discount convertible in a December S-3 filing.
sec.gov
OUR SALE OF SHARES TO ST. ANNES AT A PRICE BELOW THE MARKET PRICE OF OUR COMMON
STOCK WILL HAVE A DILUTIVE IMPACT ON OUR STOCKHOLDERS.
We have entered into a securities purchase agreement with St. Annes
Investments, Ltd. that allows us to sell to St. Annes up to $6,000,000 worth of
shares of our common stock at a discount to the then-prevailing market price of
our common stock. If the market price is $4.00 or less, St. Annes will receive a
discount equal to 14% of the market price, and if the market price is greater
than $4.00, St. Annes will receive a discount equal to 12% of the market price.
Additionally, we have agreed to issue to St. Annes as a fee shares of common
stock having an aggregate market price equal to 2% of the purchase price of the
shares of common stock that are issued and sold to St. Annes under the
securities purchase agreement. Accordingly, the issuance of shares under the
securities purchase agreement will have a dilutive impact on our stockholders.
As a result, our net income or loss per share could be materially decreased in
future periods, and the market price of our common stock could be materially and
adversely affected.
The table below sets forth the number of shares and the percentages of our
common stock that St. Annes would own if we elected to sell the entire
$6,000,000 worth of stock under the purchase agreement. The share amounts and
the percentages include the shares St. Annes will receive as a fee under the
securities purchase agreement. The share amounts and the percentages are based
on our closing share price of $3.00 on December 9, 1999, and on assumed closing
share prices of $2.25, $1.50 and $0.75, which prices represent a 25%, 50% and
75% decline, respectively, in our December 9, 1999 closing share price. The
percentages are also based on 12,450,926 shares of our common stock outstanding
on December 9, 1999.
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
DECLINE IN ASSUMED OF
DECEMBER 9, 1999 CLOSING SHARES OF OUTSTANDING
CLOSING PRICE PRICE COMMON STOCK COMMON STOCK
------------------- ------------ ------------- --------------
<S> <C> <C> <C>
-- $ 3.00 2,365,581 16.0%
25% $ 2.25 3,154,108 20.2%
50% $ 1.50 4,731,163 27.5%
75% $ 0.75 9,462,326 43.2%
</TABLE>
WE MAY NOT BE ABLE TO SELL THE ENTIRE $6,000,000 WORTH OF SHARES OF OUR COMMON
STOCK TO ST. ANNES WITHOUT OBTAINING STOCKHOLDER APPROVAL, WHICH MAY REQUIRE
THAT WE SEEK ALTERNATIVE SOURCES OF FINANCING THAT MAY NOT BE AVAILABLE ON
TERMS FAVORABLE TO US.
Under the rules of the American Stock Exchange, we cannot sell to St.
Annes under our securities purchase agreement more than 1,881,800 shares of
common stock unless we obtain stockholder approval of the issuance of shares in
excess of this amount. Accordingly, if the average price at which we sell our
stock to St. Annes under the securities purchase agreement is less than $3.19
per share, we will not be able to sell the entire $6,000,000 worth of shares of
our common stock to St. Annes without first obtaining stockholder approval. If
we are unable to obtain stockholder approval, or if we choose not to pursue
stockholder approval, we may be required to seek alternative sources of
financing to fund our working capital requirements. We cannot guarantee that
additional financing will be available or that, if available, it can be obtained
on terms favorable to our stockholders and us.
OUR SALE OF SHARES TO ROSEWORTH UPON CONVERSION OF DEBENTURES AT A PRICE BELOW
THE MARKET PRICE OF OUR COMMON STOCK WILL HAVE A DILUTIVE IMPACT ON OUR
STOCKHOLDERS.
We have issued to Roseworth a $1,000,000 debenture, and we will issue to
Roseworth an additional $500,000 debenture, that Roseworth may convert into
common stock at a discount to the then-prevailing market price of our common
stock. Accordingly, the issuance of shares upon conversion of the principal and
interest under the debentures will have a dilutive impact on our stockholders.
Discounted sales resulting from the conversion of the debentures could have an
immediate adverse effect on the market price of the common stock.
Page 10
<PAGE>
DECREASES IN THE PRICE OF OUR COMMON STOCK COULD INCREASE SHORT SALES OF OUR
COMMON STOCK BY THIRD PARTIES, WHICH COULD RESULT IN FURTHER REDUCTIONS IN THE
PRICE OF OUR COMMON STOCK.
Our sales of common stock to St. Annes and Roseworth at a discount to the
market price of our common stock could result in reductions in the market price
of our common stock. Downward pressure on the price of our common stock could
encourage short sales of the stock by third parties. Material amounts of short
selling could place further downward pressure on the market price of the common
stock. A short sale is a sale of stock that is not owned by the seller. The
seller borrows the stock for delivery at the time of the short sale, and buys
back the stock when it is necessary to return the borrowed shares. If the price
of the common stock declines between the time the seller sells the stock and the
time the seller subsequently repurchases the common stock, then the seller sold
the shares for a higher price then he purchased the shares and may realize a
profit. |
