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Microcap & Penny Stocks : IELSF-Flight to Fortune Or? -- Ignore unavailable to you. Want to Upgrade?

To: Intrepid1 who wrote (293)	7/21/1998 10:38:00 PM
From: Zeev Hed	Read Replies (2) \| Respond to of 520

purething, let me explain why I am not as sanguine as you are on this subject. The following was lifted from IELSF recent S-3/A filing: All of the 2,637.443 outstanding shares of Class A Preference Shares are held by B/EA. The Company has an agreement with B/EA pursuant to which B/EA and the Company have agreed that the Company will redeem the Class A Preference Shares held by B/EA at their redemption price of $1,000 per share plus accrued and unpaid dividends in installments equal to $100,000 on June 30, 1998, $200,000 on each of July 31, August 31 and September 30, 1998 and $100,000 on the last business day of each month thereafter beginning October 31, 1998 through May, 2000. If the Company is in compliance with its redemption obligations, B/EA has agreed not to convert any of its Class A Preference Shares. Subject to the terms of such agreement, the Class A Preference Shares are otherwise convertible by their terms at any time into a number of shares of Common Stock, determined by dividing $1,000 per share of Class A Preference Shares, plus any accrued and unpaid dividends thereon by: (i) prior to February 28, 1999, a conversion price equal to 70% of the average mean of the closing bid and ask prices of the Common Stock for the 20 trading days prior to the conversion (the "Market Price"); (ii) after February 28, 1999 and prior to August 31, 1999, a conversion price equal to 65% of the Market Price; and (iii) after August 31, 1999, a conversion price equal to 60% of the Market Price. In the event the aggregate value of (i) the number of shares of Common Stock then issued upon conversion of the Class A Preference Shares multiplied by the then prevailing Market Price plus (ii) the number of shares of Common Stock issuable upon further conversion of the Class A Preference Shares in accordance with the foregoing formula multiplied by the then prevailing Market Price plus (iii) all amounts received by B/EA in redemption of the Class A Preference Shares by IEL plus (iv) all amounts received by B/EA as proceeds from the sale of shares of Common Stock issued upon conversion of the Class A Preference Shares is less than $2,737,443 (the "Loan Amount"), then IEL would be obligated to either (x) issue such additional number of shares of Common Stock to B/EA such that at the Market Price the aggregate value of B/EA's Common Stock, Class A Preference Shares and redemption proceeds would equal the Loan Amount or (y) purchase all Common Stock and Class A Preference Shares issued to B/EA for an amount equal to the Loan Amount less B/EA's prior redemption proceeds. Dividends on the Class A Preference Shares are cumulative as of February 28, 1997 and payable quarterly at an annual dividend rate of 9% per $1,000. IEL, at its option, can redeem the Class A Preference Shares, in whole or in part, at any time and from time to time, at a redemption price of $1,000 per share to be redeemed plus any accrued and unpaid dividends thereon. IEL is not required to redeem the Class A Preference Shares. Ielsf has a "burn rate" of $350,000 month and only some $400,000 in the bank. They now have to pay the sums stated above or BE/A can convert in the floorless manner described. Guess what is happening as we speak, someone is hedging its position (namely shorting against the block), and the more they short the more shares they will end up with. Now, you may say that $2 MM or so converted at let say $1.5 is really not a problem when the total number of shares is close to 30 MM. Maybe, but there is no floor, and thus these numbers can rapidly become quite ugly. Furthermore, with the number of shares they have, they need to get much more than just one airline using the system to justify the price of $4/share (cap of about $120 MM without the floorless and all the new shares they still need to issue to pay for their burn rate). The concept maybe great, but there is no money in the till to get it to fruition, and thus they may rapidly bump against the max 50 MM shares authorized. I take it you get my drift. Zeev