Subject: Re: The loan
Date: 1/1/99 7:41 PM Eastern Standard Time
From: LQQX
Message-id: <19990101194131.11228.00005492@ng37.aol.com>
holloway writes:
<< Here is the quote (from EDII financials): >>
"During fiscal year 1998, the Company advanced Mr. Dror a total of $74,404, and in November1998 Mr. Dror executed a promissory note payable to the Company in the amount of $74,404 payable on demand at prime interest rate."
<< First of all, why did he wait until November to sign a promissory note? Was it because the auditors questioned the transaction? >>
Yes, it was brought to his attention by the accountants, and was told that a promissory note was the best way to handle it. Of course, he intended to dispense with the debt legally and correctly, regardless. It was the result of an expense account that related to non-company expenses. If he flew to Europe on business, for example, and wanted to play a game of tennis at the local club. He would just charge that cost on an EDII card,
along with a rented car, dinner and entertainment. Non-EDII related items would be subtracted from the charges at the end of the year and subtracted from any bonuses or salary considerations. Most companies have this ability, even mine.
Daniel received no salary for most of 1998. From the SEC approved financials:
<< In May 1998, Mr. Dror entered into a three-year employment agreement with the Company which provided for compensation of 100,000 shares of Common Stock and options to purchase 2,000,000 shares of Common Stock at $0.12 per share expiring in May 2001. In October 1998, Mr. Dror terminated the employment agreement dated May 1998, and
entered into a new three-year employment agreement with the Company, which provides for a monthly salary of $1,000. The employment agreement provides for a bonus to be determined by the Board of Directors. >>
Daniel quotes Warren Buffet by saying:
"Why would I take a large salary when growing a company, if $100,000 out of company coffers, when multiplied by a P/E of 30, would equate to $3,000,000, and diminish shareholder equity by that much?"
<< Secondly, I wonder if Daniel Dror the CEO of EDII will ever demand repayment from Daniel Dror the borrower? This is an open ended loan that most likely will never be repaid. Would that we could all get terms so sweet! >>
To continue Daniel's quote:
"Should the Board decide to forgive that debt in the form of a bonus at the end of the year as a reward for a job well done, it would be their prerogative to do so."
<< This is only one of a long list of related party transactions that are not in the interest of you shareholders. I would run, not walk, away from this company. >>
Twopac's most elloquent recomendation:
<< START RUNNING FATBOY >>
LOL Everything Daniel has done to this point has been in the best interest of the shareholders, and that concern will continue.
Also Twopac's post, which focuses our attention on one of the most pertinent parts of the financials:
Revenues (For 3rd. Quarter) 625,000 4,606,533 737%
Cash 62,991 2,527,143 4,012%
Working Capital 344,093 2,952,230 858%
Stockholders Equity 3,488,728 11,457,020 328%
Total Assets 4,588,081 19,311,820 421
LQQX
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