Zeev -
I don't know about a "scenario" or whether I would call an equity line floorless, but your analysis sounds plausible. I am just looking at the past actions of the company at this point.
Joe confirmed to me via email that the warrants are now all exercised. As of yesterday they had not sold stock via the Ailouros deal and were buying in the open market, he says.
I have looked in the SEC filings to see what happened the last times they have bought back stock:
Oct 1, 1998 11,007,468 shares outstanding
Aug 13, 1998 companies announces that it has been buying
May 12, 1998 10,868,932 shares outstanding
Mar 25, 1998 10,837,057 shares outstanding
Since the outstanding shares went up, then in my opinion they did not buy back as much stock as was sold/issued during the time periods both before and after the buyback. Since I can find no mention of the warrant conversions in their most recent 10-Q filings, it is not immediately (to me) obvious exactly why the number of shares went up during the time that they were buying back stock. We do see in the last 10-Q (ending June 30th) that they purchased $18,764 worth of stock (a few thousand shares?) that quarter. We will be able to see in the next 10-Q whether or not the number of shares goes down and how much they end up buying.
In the past they have bought back stock for an average price of $7.45 in 1997 and $7.88 in 1996:
(c) Treasury Stock
During 1997, the Company purchased in the open market and subsequently retired 17,000 shares of treasury stock with an aggregate cost of $126,637. During 1996, the Company purchased in the open market and subsequently retired 10,000 shares of treasury stock with an aggregate cost of $78,841. During 1995, no treasury stock was purchased by the Company.
The have also bought back stock from the officers at various times in the form of loan re-payments:
1995: bought 45,545 shares for $299,644 + $7,073 ?
($6.73/share? what does principally mean?)
1996: bought 49,528 shares for $302,500 + $211,360 ?
($10.38/share? what does principally mean?)
1997: bought 60,000 shares for $554,523 + $8,086?
($9.38/shares?)
Because the filing is unclear to me, I'm not sure about the math above, someone would need to contact the company to find out exactly. I'm doing back-of-the-envelope here. The prices do seems to correspond to prices of the REFR stock during the years mentioned. I can't tell from the filing whether the interest amount was included in the shares mentioned or if there were more shares forefeited for the interest.
(4) Notes Receivable from Officers
In 1987, the Company loaned one of its officers $412,500, of which $302,500 in principal remained outstanding after the officer repaid $134,085 in cash in December 1989. On January 3, 1996 this loan was repaid in full principally through the surrender of 49,528 shares of the Company's common stock. In 1993, the Company loaned another officer $50,000, and in 1994 the Company loaned several officers an aggregate of $529,144. In January 1995, one officer repaid in full two of these loans with an aggregate principal balance of $299,644 principally through the surrender of 45,545 shares of the Company's common stock. In 1996 the Company loaned several officers an aggregate of $350,000. In March and April 1997, the Company loaned several officers an aggregate of $1,390,000. During 1997, officers repaid several loans and made aggregate principal payments of $592,353 of which $39,810 was paid in cash and $552,543 was paid through the surrender of the Company's common stock. In connection with the aforementioned loan repayments, the Company recorded $68,810, $211,360 and $7,073 in interest income in 1997, 1996 and 1995, respectively, of which $8,086, $211,360 and $7,073 was paid through the surrender of the Company's common stock in 1997, 1996 and 1995, respectively. It is the Company's policy to record interest income on these notes as received.
Notes receivable from officers increased by approximately $797,647 during 1997. This was a result of new loans made by the Company to three of its officers which were offset by the repayment by the Company's President of an outstanding note receivable, including $68,810 in accumulated interest thereon. During 1997, the Company received $94,362 in cash from the Company's President, and $6,176 in cash from the Company's Executive Vice President in partial payments of loans, including interest, made to these officers. Additional loan repayments were made through the transfer to the Company of 60,000 shares of the Company's common stock held by the President, which shares were subsequently retired by the Company. Loans to officers are fully secured by collateral.
We all know that past performance is not an indicator of future performance. However, it is interesting to me that in some cases the average prices at which they appear to have bought back stock from the officers and on the open market is higher that the average prices at which they appear to have been selling the stock in private placements. For example, the first placement in 1997 appears to be at $5.17/share, not including that value of some $7 options that were part of the transaction. Am I doing the math correctly? Were these strategic placements of some sort?
(a) Sale of Common Stock and Warrants
During 1995, the Company received $5,474,242 as net cash proceeds from the issuance of 755,246 shares of common stock, as follows: a private placement of 523,749 shares of common stock resulting in proceeds of $4,572,589; the issuance of 27,168 shares of common stock from the exercise of warrants resulting in proceeds of $43,896; the issuance of 79,498 shares of common stock from the exercise of unit purchase warrants resulting in proceeds of $429,289; and the issuance of 124,831 shares of common stock from the exercise of options resulting in proceeds of $428,468.
During 1996, the Company received $1,440,462 as net cash proceeds from the issuance of 250,955 shares of common stock, as follows: a private placement of 172,019 shares of common stock resulting in proceeds of $1,187,511; the issuance of 49,687 shares of common stock from the exercise of warrants resulting in proceeds of $94,999; and the issuance of 29,249 shares of common stock from the exercise of unit purchase warrants resulting in proceeds of $157,952. In addition, 54,066 shares of common stock were issued, of which 43,125 shares were exercised through the surrender of 9,357 shares of common stock and 10,941 shares for which payment was received through the cancellation of 37,121 options resulting in compensation expense of $108,357.
During 1997, the Company received $5,857,791 as net cash proceeds from the issuance of 326,803 shares of common stock, as follows: a private placement of 91,668 shares of common stock resulting in proceeds of $475,004; the issuance of 26,750 shares of common stock from the exercise of warrants resulting in proceeds of $187,250; net proceeds of $4,626,985 from the issuance of a redeemable prepaid warrant with the issuance of 122,685 shares of common stock from the partial exercise of this warrant, and the issuance of 85,700 shares of common stock from the exercise of options resulting in net proceeds of $568,552. In addition, 16,695 shares were issued through the cancellation of 7,397 options, resulting in compensation expense of $133,555; and 8,800 shares issued to acquire certain technology pursuant to a license agreement.
Please no one attack me, I am not making a judgement. I am trying to openly understand what has been reported. I am a student and still learning.
Jon |
