Juli - cute!
For what it's worth ........ I have finished my first reading of the 8K...... It's not good in many ways, and in others it's better than the last round of convertibles.
First, the net proceeds of the $8.5 million, if fully executed would be $7.45 million ($1.05 million in expenses).
The biggest plus is that there is an anti-shorting clause. The bad part is that the Series B can be converted to common shares 20 days after purchase, and the Series C 5 Days after purchase!!!
For every Preferred shared bought a warrant for (1) common share is issued. Meaning that if NPCT takes all $8.5 million an additional 850,000 warrants will be issued. From the calculations I've made Mr. Hirsch (the single investor) stands to make just as much off the warrants as he does the preferred, and the common shares, assuming there is a market maintained for the stock.
A benefit to the buyer that hasn't been getting much press...... They get $0.70/share ($0.175/ per quarter per share) cash or stock dividend every year for every share of Preferred stock they hold. I assume this means that if the holder holds 150,000 shares of Series B stock come Oct. then they will receive $0.175 times 150,000, or $26,250 per quarter those shares are held. The more shares they hold the higher their quarterly check goes. This dividend is valid starting 4Q '98 (Oct. 1), and can be paid in cash or freely trading common stock.
The 8K appears to state fairly clearly that the Series B shares will be sold in 3 increments, of 50,000 shares each, 30 days a part. So, 90 days after the July 23, 1998 closing date all 150,000 Series B shares should be closed, and 20 days after each 50,000 share lot is sold those preferred shares can be converted into common shares.
The Series C shares can also can be purchased every 30 days, in 25,000 - 50,000 unit tranches, but a start date is not specifically given. However, there is a penalty imposed on NPCT if they don't sell the buyer at least 250,000 of the available 700,000 Series C shares by July 22, 2000. In essence the $8.5 million in financing is a max of $8.5, but a min. of $4 million between the Series B and C offerings. NPCT more or less must take $4 million over the next 2 yrs.....and all of that can be converted within 5-20 days after the preferred shares are bought.
Interestingly, there are clauses requiring that the stock trade in a certain range before the sale of Series C shares can occur.
For a 25,000 share tranche, the average daily trading dollar volume for the stock for the last 60 days must be at least $60,000/trading day. For 50,000 share tranches, this number must be $75,000 US, and the avg. daily volume must meet or exceed 25,000 shares/day. Lastly, the average daily share price for the 10 day period prior to purchase of the preferred shares must equal or exceed $1.75.
I can't tell if this is supposed to protect the buyer, or the company. It seems to put a requirement on NPCT to keep their share price, and the trading volume up. While I was reading through all of this I was constantly trying to analyze who benefited by each specific clause; the buyer or the seller.
There is only one buyer, Mr. Y.L. Hirsch, of Jerusalem ISRAEL. Portfolio Investment Strategies Corp. is mentioned as his US point of contact. They are located in Monroe NY. A Mr. Harry Schwartz is the contact at that firm.
There is so much more contained in the 60+ page document, but that should give one a flavor of its content. The Preferred shares can be converted in less than 30 days after purchase, but their is an anti-short clause. The buyer gets $0.70/yr. per preferred share in stock or cash dividend, but I assume that vanishes if they Preferred shares are converted to common.
I stick to my views that this is a fairly costly form of capitalization, and that NPCTs and INCEs common shareholders will over time see their positions significantly diluted. At today's prices the Series B will convert at roughly $1.80 share (80% of the closing bid price for the 5 days prior to conversion), and will produce 800,000+ common shares. It also produces 150,000 warrants for common stock at basically the closing ask price for the stock at this level. Warrants of course require the stock to increase in value for them to be in the money. So, if the stock price stays level through the 2nd and 3rd closing period for the Series B stock, about a million shares get added to the float.
The Series C stock, for simplicity purposes, offer up about the same scenario. So, you could see about 2 million shares of common added to the float if $3 million of Series C was converted using today's pricing. If the price goes up, the addition to the float goes down. If all $7 million was taken, you could end up with 4-5 million common shares added to the float, plus 700,000 warrants. If the stock trades lower the dilution increases.
If everything was executed, and we used today's pricing as our closing bid price for all calculations, you end increasing the float by 5-6 million shares (or a 50% increase from the present 12 million), not considering the minor additional impact of giving away freely trading common shares to cover the required quarterly dividend (as I doubt they'll want to pay cash).
We'll have to see what happens.
Bill |
