Previous 10-k: edgar-online.com
1 MIDLP converts to 35 MIDL.
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Secondary Offering:
The Company, on August 14, 1996, completed a secondary offering
to the public of 54,000 units (Units) , each Unit consisting of
one share of Series A Preferred stock (Series A Preferred Stock)
and fifty Redeemable Common Stock Purchase Warrants (Series A
Warrants). The Series A Preferred Stock and the Series A Warrants
are now being traded separately.
The Series A Preferred stock will automatically convert into
thirty-five shares of Common Stock on October 1, 1998. If the
Company fails to have $300,000 of pre-tax earnings for the twelve
months ended June 30, 1997, exclusive of extraordinary and
non-recurring items and, upon such failure, the Common Stock does
not trade for at least $2.50 for ten days between June 30, 1997,
and August 15, 1997, then the Company will declare a dividend on
each share of Series A Preferred Stock of one-tenth share of
Series A Preferred Stock and five Series A Warrants. The Company
will declare a similar dividend on the Series A Preferred Stock
unless the Common Stock trades above $2.50 per share for 20
consecutive days after August 14, 1997, but before August 15,
1998, and the Company fails to have pre-tax earnings of $450,000,
exclusive of extraordinary and non-recurring items. Each Series A
Warrant entitles the holder thereof to purchase one share of
Common Stock (Warrant Share) at an exercise price of $1.00 per
Warrant Share until August 14, 2001, unless earlier redeemed. The
Warrants are subject to redemption by the Company at a price of
$0.05 per Warrant at any time after August 15, 1997, on thirty
days prior written notice, provided that the closing sales price
per share for the Common Stock has equalled or exceeded $2.50 for
ten consecutive trading days. Each share of Series A Preferred
Stock is entitled to thirty-five votes on each matter submitted
to a vote to the Common Stock as if the two classes constituted
one class; however, the approval of the holders of two-thirds of
the outstanding Series A Preferred Stock is required to: (i)
amendment or repeal or revise the Company's Certificate of
Incorporation if such action would alter the preferences, rights,
privileges, or powers of, or the restrictions provided for the
benefit of, the Series A Preferred Stock; (ii) authorize, create
or issue any security having any preference or priority superior
to any preference or priority of the Series A Preferred Stock or
securities convertible into a security having such preferences;
(iii) reclassify any Common Stock into shares having any
preferences or priority as to dividends or assets superior to
that of the Series A Preferred Stock; or (iv) make any provision
in the Company's Bylaws fixing special qualifications of those
who may be holders of Series A Preferred Stock or any restriction
upon the right to transfer or hypothecate such shares. In the
event the Company is liquidated, dissolved or wound up, the
Company is required to pay out of the Company's assets $21.00 per
share of Series A Preferred Stock before any payment may be made
to holders of the Common Stock. If the assets of the Company are
insufficient to pay this amount, the assets will be distributed
ratably among the holders of the Series A Preferred Stock. The
Series A Preferred Stock also contains provisions that protect
the holders against dilution by adjustment of the conversion
price in certain events such as stock dividends paid on Common
Stock and distributions, stock splits, recapitalizations, mergers
or consolidations and certain issuances below the fair market
value of the Common Stock.
Each A Warrant entitles the holder to purchase one share of
Common Stock at a price of $1.00 per share. The Warrants are
currently exercisable until August 14, 2001, unless earlier
redeemed. The Series A Warrants are redeemable by the Company at
$.05 eac on 30 days' notice at any time after February 14, 1997,
if the closing bid price per share of Common Stock for ten
consecutive trading days' prior to the date notice of redemption
is given equals or exceeds $2.50 per share. In the event the
Company gives notice of its intention to redeem, a holder would
be forced either to exercise his or her Series A Warrant within
30 days after the date of notice or accept the redemption price.
The exercise price of the Series A Warrants may be reduced at any
time from time to time in the discretion of the Board of
Directors when it appears to be in the best interests of the
Company to do so. Any such reduction would impair the value to
holders exercising their Warrants prior to the effective date of
the reduction. The Series A Warrants contain provisions that
protect the holders against dilution by adjustment of the
exercise price in certain events, such as stock dividends and
distributions, stock splits, recapitalization, mergers or
consolidations and certain issuance's below the fair market value
of the Common Stock. The Company is not required to issue
fractional shares upon the exercise of a Series A Warrant. The
holder of a Series A Warrant will not possess any rights as a
stockholder of the Company until such holder exercises the Series
A Warrant.
The Company paid the underwriter of the offering a commission of
10% of the gross proceeds, 3% as a non-accountable expense
allowance and $24,000 in advance for a two year consulting
contract which is now in default by the underwriter. A referral
fee of $15,000 was paid at closing to William Walker, an
unaffiliated third party, for his services in introducing the
Company to the underwriter and assisting in arranging the
underwriting. The Company also delivered in exchange for nominal
consideration warrants to the underwriter in connection with the
offering allowing it to acquire Units at 120% of the public
offering price for a four-year period which began on August 14,
1996.
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