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Biotech / Medical : Palomar Medical Technologies, Inc. -- Ignore unavailable to you. Want to Upgrade?

To: Joseph Asch who wrote (602)	11/20/1997 5:40:00 PM
From: Ted Molczan	Read Replies (1) \| Respond to of 708

Joseph, You asked who is buying the debentures and why? The who appears elsewhere in the 10Q: "Pursuant to Section 4(2) of the Securities Act of 1933, as amended, on September 30, 1997, the Company sold a total of $7,000,000 in convertible debentures to three investors; $3,500,000 to JNC Opportunity Fund, Ltd., $1,500,000 to Diversified Strategies Funds, L.P. and $2,000,000 to Southbrook International Investments, Ltd. Each investor received shares of common stock upon issuance of the debentures. The number of shares of common stock were equal to 15% of the original principal amount of the debenture divided by the average closing bid price for the three trading days commencing on October 1, 1997. The debentures accrue interest at a rate of 6% over the first 179 days, 7% over days 180-269 and 8% thereafter. The convertible debentures have a conversion price of 100% of the average stock price, as defined. The debentureholder may convert no more than 33% in any 30 day period (or 34% in the last 30 day period). Commissions on this transaction totaled $350,000." As for the why? To profit, of course! This appears to have been one sweet deal. Notice that the investors received common shares worth 15 percent of the principle upfront. I am no expert, and so have not seen very many debentures, but I have never seen that before. That is over and above any interest that will accrue. I wonder what other information is contained in the fine print, that has not been released yet. The contract likely will show up in an upcoming S-3 share registration. Commonly the sweetener is a 10 or 15 percent discount to the current share price at the time of conversion. In this case, the sweetener was paid up-front. What does that say about the debenture investors' perception of risk? Ted Molczan molczan@fox.nstn.ca