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Technology Stocks : XYBR - Xybernaut -- Ignore unavailable to you. Want to Upgrade?

To: MSB who wrote (1231)	7/19/1998 2:47:00 PM
From: Hope	Respond to of 6847

Yes. It does. Thank you very much for your quick response. I have pasted the paragraphs that are applicable here. I have also added the highlights. POSSIBLE NON-CASH FUTURE CHARGE In connection with the Company's IPO, the representative of the underwriters for the transaction (the "Representative") required the Company's officers, directors and certain other stockholders to deposit an aggregate of 1,800,000 shares of Common Stock into an escrow account (the "Escrowed Shares"). The Escrowed Shares will be subject to release to such stockholders in increments over a three-year period only in the event the Company's gross revenues and earnings (loss) per share for the 12-month periods ending September 30, 1997, 1998 and 1999 meet or exceed targets which have been established through negotiations with the Representative (the "Performance Targets"). If the Performance Targets are not met in any of the relevant 12-month periods (and the price of the Common Stock has not met or exceeded the price described below), the Escrowed Shares will be returned to the Company in amounts which have been agreed upon between the Representative and the Company for each period and canceled. In addition to the foregoing, all then Escrowed Shares will be released to the stockholders if the closing price of the Common Stock as reported on The NASDAQ SmallCap Market equals or exceeds $11.00 for 25 consecutive trading days or 30 out of 35 consecutive trading days during the period ending September 30, 1999. In the event any Escrowed Shares held by officers, employees or consultants are released, the difference between the initial offering price and the market value of such shares at the time of release will be deemed to be additional compensation expense to the Company. If the price of the Common Stock at the time of any release of the Escrowed Shares is greater than the value of the common Stock at the time of the IPO, an earnings charge could result which would have the effect of reducing or eliminating any earnings per share and could have a negative effect on the market price for the Common Stock. The earnings per share target calculation will be based on the average number of shares issued and outstanding during each period, but excluding shares issued pursuant to the representative's option to purchase units of Common Stock and Warrants issued at the Company's IPO ("Unit") at a price of $9.075 per Unit (165% of the offering price of the Units) during a period of four years commencing one year from the closing of the IPO, extraordinary items, or compensation expense charged to the Company related to the release of the Escrowed Shares. The Company's gross revenues and allowable losses did not meet the Performance Targets for the 12-month period ending September 30, 1997, and the stock price did not meet the levels described above by that time. Pursuant to the terms of the escrow agreement, 300,000 of the Escrowed Shares were canceled, resulting in no earnings impact and a reduction in shares outstanding at that time of approximately 2.1%. Given the expected start of full-scale production of the MA IV in the quarter ending December 31, 1998, the Company's management believes that it is likely that the Company's gross revenues and allowable losses will not meet the Performance Targets for the 12-month period ending September 30, 1998. Accordingly, the release of the escrow shares for this period is only likely if the stock price equals or exceeds $11.00 for 25 consecutive trading days or 30 out of 35 consecutive trading days prior to September 30, 1998. If conditions are not met for release from escrow, then 750,000 shares of stock will be returned to the Company on September 30, 1998 and canceled, resulting in no earnings impact and a commensurately lower number of outstanding shares. Since the Company has reported losses, the loss per share for the Company is calculated using outstanding shares less shares held in escrow to avoid antidilution. Therefore, the cancellation of shares from escrow does not affect the reported loss per share.