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Microcap & Penny Stocks : Tech Squared (TSQD)- Internet Commerce -- Ignore unavailable to you. Want to Upgrade?

To: David Browning who wrote (2548)	1/7/1999 8:31:00 PM
From: Art M	Respond to of 2752

David, I'm impressed. I have no idea what you are talking about - but I'm still impressed. If Ronning did as you said (whatever that means) would that mean that we TSQD shareholders (and Ronning, presumably) recognize more value for our shares? And more to the point what in the world is a peppercorn option ? Thanks Art

To: David Browning who wrote (2548)	1/8/1999 12:12:00 AM
From: Gary H	Respond to of 2752

Dave, I've got a general grasp of what your getting at but far from complete. The last I heard was that full dilution of TSQD was 16% of DRIV price. Should what you suggest give us that 16% value in share swap of DRIV? I should think it would but not sure.

To: David Browning who wrote (2548)	1/8/1999 3:24:00 AM
From: captaintime	Respond to of 2752

David, If shareholders receive 1 share of DRIV for 6 shares of TSQD based on a 16% valuation then the float of DRIV would only increase some 500,000 shares which would be a minimal dilution. Correct me if I'm wrong but that would give a TSQD share a value of about $8.50. If however the 3,000,000 shares were sold for $150,000,000 and we divide that figure by 16,000,000 we get a value of about $9+ but there would be immediate tax consequences. I for one would definitely prefer a swap. Captaintime

To: David Browning who wrote (2548)	1/8/1999 4:45:00 AM
From: Mike C2	Read Replies (1) \| Respond to of 2752

10Q/K gleanings & responses to JM & DB (densely wordy) Commentary and conjecture re. the valuation % TSQD/DRIV is valuable and much appreciated for those doing DD. I view this situation as a rare opportunity for the small investor to take advantage of an arbitrage situation. IMO, the fair value of TSQD shares is currently about 11% of DRIV's share price. Here's why: Although TSQD via MacUSA can take 3 mil. DRIV shares from Ronning in the "peppercorn" option thru 12/2000 and the current outstanding shares of DRIV at the secondary offering is 18.7 mil, the 16.01% does not account for tax considerations. <In December 1995, the Company obtained a bargain purchase option to acquire 4,800,000 shares of Digital River common stock from the Company's majority stockholder and CEO, representing at the time a 60% ownership in Digital River. The option is not transferable and is exercisable at any time through December 31, 2000 for a total exercise price of $1. At the end of the 3rd Quarter TSQD'sInvestment in Digital River was valued = 3mil x 8.75 (9/30/98 close) 27,966,028 Deferred income taxes 10,765,500 10.765/27.966= 38.49% Elsewhere the current Mn. tax rates are listed: <U.S. statutory rate 34.0% State taxes, net of federal benefit 3.2% > If the gain is not offset by tax loss carryforwards (TLCs)you can reduce 16.01% by 37.2% and come up with 10.05%. But what of these accrued losses? <As of December 31, 1997, the Company had net operating loss carryforwards of approximately $2.0 million. Certain restrictions caused by the change in ownership could limit annual utilization of the net operating loss carryforwards. The losses expire in various years from 1998 to 2007. The Company recorded a full valuation allowance in 1997 and 1996 due to the uncertainty associated with the Company's ability to realize the benefits related to net operating losses generated. If DRIV could fully use TSQD's TLCs the value to them is worth ___, something I am not qualified to quantify. David asked about TSQD's outstanding options. Here's the latest from the Q3 10Q (which may print ok on a full screen with fixed font): A summary of the Company's various stock option plans at year-end, with changes during the year then ended, is as follows: 1997 1996 ---------------------- ---------------------- Weighted Weighted Average Average Exercise Exercise Shares Price Shares Price ---------- ---------- ---------- ------- <S> <C> <C> <C> <C> Outstanding, beginning of year 6,201,958 $1.18 6,974,468 $1.27 Granted 1,354,000 0.75 1,602,500 0.75 Forfeited/cancel (1,894,474) 1.72 (2,375,010) 0.75 Options and warrants assumed in the Merger - - - - ---------- ---------- ---------- ------- Outstanding, end of year 5,661,484 $ .89 6,201,958 $1.18 ---------- ---------- ---------- ------- Add the 5.66 million to the most recent # of outstanding shares <As of the close of business on November 1, 1998, 11,400,825 shares of Common Stock, no par value, of the Company were outstanding.> and you come up with a fully diluted share total of just over 17 million. Taking a DRIV close of 50 on 1/7/99 and substracting 37.4% from TSQD's 3mil. options and dividing by the fully diluted 17 mil TSQD shares yields about 5.5. Even if TSQD is worth nothing as a business, the share price is undervalued by upwards of 30%. From another perspective the respective closes yield a current % differential of about .086 when it should be .11 or higher. IMO, TSQD is a compelling buy when it's trading below 10% of DRIV. I think the situation is tradeable. David expressed concern that current TSQD shareholders could be hit with a lot of dilution: <Such considerable uncertainty provides the primary reason for the lack of constancy in the price relationship between the two stocks.> But I think that the uncertainty is mostly due to tax considerations. It's the 25-30% undervalue discrepancy that we small fry can take advantage of. If the internet sector stays hot I believe we could see positive results, a compression of the discrepancy, sooner. Look what happened to Ciena when Tellabs jumped 13 points this week. The currency value of superheated share prices makes takeover targets move some- what in tandem. Many more comments welcome. Let's keep working this thing. Mike C. BTW I am a buyer below 3.5. Have started nibbling and haven't completed my DD. PS (OT) Has anyone considered puts on theStreet.com Index (DOT) as a hedge against profits in the internet sector. 475 is alltime high. Aren't we due for a correction?