Next time leave a shortcut, please.
Authorized shares have been increased to accomodate
a floorless convertible series E stock that has
particularly nasty features. Pixtech made a deal with the
devil but Micron was holding quite a bit of stock (not
a holder of series E, I believe) so we'll have to check
which of the institutional insiders sold on this last
run-up.
Excerpt from 14A filing of Jan 2000:
- SERIES E PREFERRED STOCK. As of the close of business on December 20, 1999,
297,269 shares of Series E Stock were outstanding. The Company has agreed
with the holders of the Series E Stock to reserve, out of the authorized
but unissued shares, 150% of the number of shares of Common Stock into
which the Series E Stock is convertible. The Series E Stock is generally
convertible into Common Stock at a rate equal to the lesser of (a)
$1.60938, and (b) the average closing price of the Common Stock over the
ten trading day period ending on the day immediately preceding the day upon
conversion. In addition, if the Company issues shares of Common Stock at a
price less than $1.60938 per share, the limit in clause (a) above will be
reduced to the price at which the new shares are issued. The Series E Stock
was sold to certain purchasers on December 22, 1998 at a price per share of
$22.5313. As of December 20, 1999, the Series E Stock would have been
convertible into 4,478,232 shares of Common Stock, thus requiring the
Company to reserve 6,717,348 shares of the remaining authorized but
unissued shares.
In addition, the holders of Series E Preferred Stock are entitled to
receive cumulative dividends. Dividends are calculated on a 6% interest
basis per annum on the purchase price paid for the Series E Preferred
shares for the numbers of days that the stock price is above $2.253, on an
8% interest basis for the numbers of days that the stock price is between
$1.127 and $2.253, and on a 10% interest basis for the numbers of days that
the stock price is below $1.127. There is no ceiling regarding the number
of shares to be issued upon the conversion of Series E Stock; unless the
Company were to issue shares of its Common Stock at less than $1.60938 per
share, the minimum number of shares of Common Stock issuable upon
conversion of the Series E Stock is 4,478,232 shares.
- $5 MILLION CONVERTIBLE NOTE. The Company issued a $5 million convertible
note to Sumitomo Corporation in 1997. This note is convertible into shares
of Common Stock at a conversion price equal to 80% of the market price on
the conversion date. As of December 20, 1999, $0.9 million of the
convertible note had been converted into 650,000 of Common Stock and the
remaining $4.0 million would have been convertible into 2,901,188 shares of
Common Stock of the Company. There is no floor or ceiling to the number of
common shares that could be issued upon the conversion of the Sumitomo
convertible loan
- EQUITY LINE AGREEMENT. The Company has reserved 15,909,091 shares of Common
Stock to be issued to Kingsbridge Capital Limited pursuant to an equity
line agreement. Pursuant to the equity line agreement, the Company may
sell, from time to time, up to $15 million worth of Common Stock to
Kingsbridge. The price at which the Common Stock will be issued to
Kingsbridge will be 88-90% of the consecutive five-day average market price
of Common Stock ending on the date the shares are issued, depending on
certain factors. The Company must sell a minimum of $5 million, and a
maximum of $15 million, worth of Common Stock to Kingsbridge over a
two-year period. The rate at which the Company may sell shares of Common
Stock to Kingsbridge varies depending on the price and trading volume of
the Common Stock. Generally, the greater the volume and market price, the
greater the rate at which the Company may sell shares of Common Stock to
Kingsbridge.
In November 1999, the Company drew $1 million cash in exchange for the
issuance of 624,809 shares of its common stock. As of December 20, 1999,
the remaining $14 million commitment under the Kingsbridge equity line
agreement would correspond to the issuance of 9,427,609 shares based on a
$1.6875 market price. The Company's ability to raise capital through the
Kingsbridge equity line agreement is subject to the satisfaction of certain
conditions at the time of each sale of common stock to Kingsbridge,
including a minimum common stock price of $1. Consequently, there is a
maximum of 15,909,091 additional shares to be issued pursuant to the
Kingsbridge equity line agreement and no minimum number of shares issuable
to Kingsbridge.
Therefore, on December 20, 1999, out of the 60,000,000 authorized shares of
Common Stock, no shares were available for issuance by the Company. Moreover,
8,348,859 additional shares of authorized common stock would be required in
order to satisfy the Company's obligations under the benefits plans and
financing agreements described above.
The Company has received limited waivers from certain investors with
respect to the number of shares that it is required to keep reserved under the
various arrangements described above, so that the Company is not currently in
breach of any of its agreements, by-laws or Restated Certificate of
Incorporation.
The following table set forth certain information regarding the potential
dilutive effect of the Company's existing financing arrangements, stock option
plans and warrants agreements as of December 20, 1999. The number of shares of
Common Stock that the Company would be required to issue pursuant to existing
financing arrangements was computed using the closing market price as of
December 20, 1999, which was $1.6875, and a stock price of $1 and $4.14,
representing a range of conversion prices for the Company's Common Stock based
upon the high and low stock prices during the past twelve months as reported by
the Nasdaq National Market, plus and minus a 25% margin, respectively. As of
December 20, 1999, the Company had 37,237,283 shares of Common Stock
outstanding.
NUMBER OF SHARES OF NUMBER OF SHARES OF
COMMON STOCK COMMON STOCK
ISSUABLE AS OF ISSUABLE AS OF
DECEMBER 20,1999 DECEMBER 20,1999
BASED ON THE PERCENT ASSUMING A PERCENT OF ASSUMING PERCENT
MARKET PRICE AS OF OF MARKET PRICE COMMON A MARKET OF
DECEMBER 20, 1999 COMMON OF $1 STOCK PRICE OF COMMON
STOCK $4.14 STOCK
Series E Preferred Stock 4,478,232 11% 7,167,079 16% 4,478,232 11%
Sumitomo Convertible Loan 2,901,188 7% 5,063,589 12% 1,223,089 3%
Kingsbridge Equity Line 9,427,609 20% 15,909,091 30% 3,842,776 9%
1993 Stock Option Plan 3,892,025 9% 3,892,025 9% 3,892,025 9%
1995 Employee Stock Purchase Plan -- * -- * -- *
Directors Stock Option Plan 22,000 * 22,000 * -- *
Warrants 582,500 2% 582,500 2% 582,500 2%
Total additional shares 21,303,554 36% 32,636,284 47% 14,040,621 27%
FN:
* Less than one percent.
The Series E Stock and the note held by Sumitomo are convertible into
Common Stock at, and the shares to be issued to Kingsbridge pursuant to the
equity line agreement are issuable at, a floating rate designed to provide a
discount to the then-prevailing market price of the Common Stock. The discount
requires the Company to issue a greater number of shares as the market price of
the Common Stock falls. As a result, the issuance of the shares will have a
dilutive impact on the Company's current stockholders and could have an
immediate adverse effect on the market price of the Common Stock. Moreover, the
Company's net income or loss per share could be materially decreased in future
periods, and the market price of the Common Stock could be further depressed.
All of the shares of Common Stock to be issued to the holders of Series E Stock,
Sumitomo and Kingsbridge will be available for immediate resale in the public
market and these resales, or the prospect of resales, could have an additional
adverse effect on the market price of Common Stock, making subsequent issuances
under these agreements even more dilutive.
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