Susan,
Yes, something is going on...
Today, NTN filed a S-3/A related to the pfB share conversion. It was required since the number of shares (I think) authorized needed to be increased to the current 8.82M (at a conversion price of 1 1/16). This is about 30% of the outstanding shares and will have an additional dilutive effect on common shares.
Also, there is some additional information in the S-3/A which I include below. (excerpts)
"NEED FOR ADDITIONAL FINANCING
The Company had a working capital deficiency of $2,120,000 at December 31,
1996, compared to working capital of $19,468,000 at December 31, 1995. The
reduction in working capital during 1996 was due primarily to a reclassification
of inventory to broadcast equipment and substantial charges incurred in 1996 as
previously reported in the Company's Exchange Act reports incorporated in this
Prospectus by reference and to the use of cash on hand and other current assets
to fund the Company's ongoing losses from operations. See "Recent Developments."
The Company's continuing losses from operations during 1997 resulted in an
increase in the working capital deficiency to $5,838,000 as of September 30,
1997, and the Company has continued to experience operating losses since
September 30, 1997.
In October 1997, the Company completed a private placement (the "Private
Placement") of $7,000,000 of Series B Preferred Stock, the Shares underlying
which are being offered by means of this Prospectus. The Company realized net
proceeds from the private placement of approximately $6,740,000, of which
approximately $3,900,000 was used to repay certain indebtedness (included
accrued interest) of the Company incurred in June 1997 in connection with a
previously proposed merger transaction with GTECH Corporation. The balance of
the net proceeds has been and will be used to augment the Company's working
capital and for general corporate purposes. Based upon current plans and
assumptions relating to the Company's business and
3.
operations, the Company believes that the remaining net proceeds of the Private
Placement, together with revenues from operations, will be sufficient to fund
the Company's cash requirements for the foreseeable future. If, however, the
Company's plans change or its assumptions prove inaccurate, or if the Company's
funds otherwise prove insufficient, the Company may be required to seek
additional financing. There can be no assurance that the Company's currently
available resources will be sufficient to support the Company's operations until
such time, if any, as the Company is able to operate profitably and the Company
may require additional financings to fund its ongoing operations. There also
can be no assurance as to whether or on what terms any needed financing may be
available to the Company. If the Company were unable to obtain any needed
financing on terms acceptable to it, the Company could be required to curtail
its non-core business activities until such time, if any, as it is able to
generate sufficient funds from operations to resume such activities and expand
its business."
With regard to the Miller lawsuit ("exit strategy" against NTN and former officers), this is said:
"On July 3, 1997, the Company, on behalf of itself and the named directors
and officers, filed a motion to dismiss the lawsuit. On November 6, 1997, the
motion was granted, with leave to amend, as to the state causes of action and
denied as to the federal causes of action. The Company has submitted this claim
to its insurance carriers; however, there can be no assurances that the
insurance carriers will accept coverage or that, if coverage is accepted, it
will be without a reservation of rights by the carriers."
Now, I read this before and thought it meant that the lawsuit was dismissed but the plaintiffs could amend their cause of action for reconsideration. Trouble is, I don't know why they say the statement about claims to the insurance carriers, to be reimbursed for the legal expense of defending itself? Any lawyer types out there that can translate?
Now, onto info on "short sales"
"In connection with distributions of the Common Stock or otherwise, the
Selling Stockholders may enter into hedging transactions with broker-dealers or
other financial institutions. In connection with such transactions, broker-
dealers or other financial institutions may engage in short sales of Common
Stock, in the course of hedging the positions they assume with the Selling
Stockholders. The Selling Stockholders may also enter into options or other
transactions with broker-dealers or other financial institutions which require
the delivery to such broker-dealer or financial institution of the shares of
Common Stock offered hereby, which such broker-dealer or other financial
institution may resell pursuant to this Prospectus (as supplemented or amended
to reflect such transaction). The Selling Stockholders may also pledge the
shares offered hereby to a broker-dealer or other financial institution and,
upon a default, such broker-dealer or other financial institution may effect
sales of the pledged shares pursuant to this Prospectus (as supplemented or
amended to reflect such transaction). In addition, any Common Stock covered by
this Prospectus that so qualifies may be sold under Rule 144 under the
Securities Act."
" The Company has informed the Selling Stockholders that the anti-
manipulation provisions of Regulation M under the Exchange Act may apply to
their sales of the shares offered hereby and has furnished each of the Selling
Stockholders with a copy of these rules. The Company also has advised the
Selling Stockholders of the requirement for delivery of this Prospectus in
connection with any public sale of the shares."
Anyone have a copy of Regulation M?
What happens to common shareholders in the case of Chapter 7:
" In the event of liquidation, dissolution and winding up of the Company,
each holder of Series B Preferred Stock will be entitled to receive an amount
equal to $100, plus any accrued and unpaid dividends, per share of Series B
Preferred Stock, before any payment shall be made with respect to outstanding
shares of the Common Stock. As long as at least one-third of the currently
outstanding Series B Preferred Stock remains outstanding, the Company will be
prohibited from authorizing or issuing additional stock that ranks senior to the
Series B Preferred Stock as to dividends and distributions or payments on
liquidation, dissolution and winding up. Except as described above, the holders
of the Series B Preferred Stock do not have any voting, preemptive, subscription
or redemption rights."
In other words, series B holders will get the second $7M of breakup value. (Series A holders get the first $170,000) Thismeans that if NTN were to fold tomorrow, the common shares would be worthless. This is only a risk factor; company believes (as stated above) that it can continue as a going concern for the forseeable future.
Well, that's the important parts as I see it. Comments welcome.
Cheers,
Rich |
