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Strategies & Market Trends : Mr. Pink's Picks: selected event-driven value investments -- Ignore unavailable to you. Want to Upgrade?

To: Mr. Pink who wrote (3286)	9/26/1998 1:13:00 PM
From: Jim DH	Read Replies (1) \| Respond to of 18998

HBCO appears to be an excellent short for Monday. It has a floorless convertible preferred according to their latest 10-Q: sec.yahoo.com In May 1998, the Company issued 12 shares, at nominal value of $500,000 each, of Series B 6% Convertible Redeemable Preferred Stock with $0.001 par value per share ("Series B Preferred"). The Series B Preferred are convertible into shares of the Company's common stock at 85% of the two-day low average (not necessarily consecutive) closing bid price of the common stock for the 15 consecutive trading days prior to the trading day on which a notice of conversion is received by the Company, date of conversion, but with a price no higher that $9.685 per share. Therefore, the lower the market price for the common stock, the greater the number of common shares that the converting holder of Preferred Stock B will be able to receive, and the greater consequent dilution to existing stockholders in the event the shares of Series B Preferred are converted. If the average closing price of the Company's common stock is $4.00 or less at time of conversion, the conversion price will be the price on the day prior to the date that the conversion notice is received, without discount. In this event, however, the converters in addition to their common stock will receive three-year warrants for an amount of stock equal to 15% of the stated value of the preferred stock being converted at a price equal to 101% of the Average Closing Price on the date of conversion. Holders of the Series B Preferred are permitted to convert no more than 8.33% of their stock each week. If the Company is unable to issue the common stock because of rules limiting the sale of more than 20% of the Company's stock without shareholder approval, the Company will use its best efforts to secure shareholder approval. If the Company cannot issue the required shares, the holders can demand redemption of their securities plus a premium of 20%. As part of the issuance of these $6 million of Series B Preferred, the Company has the option of selling an additional $2 million of these securities to the investors 30 and 60 days after an effective registration statement. The Company has agreed to have an effective registration statement available for the holders of the Series B Preferred as of September 5, 1998. The terms of the agreement provide for a penalty of 2% per month of the outstanding amount of Series B Preferred for delay in an effective registration statement. The Company is negotiating with the holders of the Series B Preferred for revised terms on the draw down of up to the remaining $2 million, including an extension of time for the required effective date for the registration statement and a delay in the time when holders are allowed to convert their Series B Preferred into common shares. It is not known as to what the new terms might be or when (or if) a new agreement will be completed. This stock reminds me of the ITEX run not so long ago. It has a Reg S placement.