KiK..SCKT Info from CFO on warrants & 4th Q
My question to him: I was very surprised when you said Hudson Bay was down to 280K warrants left----it didn't make sense in that there is no way 720K have sold (I'm assuming they aren't holding any shares) and there is no way Socket got 725K x $1.25 in exercise money. I was perplexed until it hit me what may have happened. Is Hudson Bay trading warrants for cash? I know it happens in stock grants very often. Instead of paying the company money, the recipient pays the company by taking fewer shares. Is this what is happening? If so, how many warrants are they trading for the $1.25. My guess would be 1 warrant for each $1.25. No one I know caught this during the cc call, but after I had several people wonder what was up. If this isn't what's happening, then where did the exercise cash go on the balance sheet?
Response: The Hudson Bay warrants have a provision enabling cashless exercise (paying for the shares exercised by giving up others) until remaining shares are fully covered by a registration statement. We have 500,000 shares registered and Hudson Bay has exercised 10,000 of those for cash. The balance have been exercised on a cashless basis which has brought down the overhang quickly to the 280,000 warrant level without incurring as much dilution. Remaining warrants must all be exercised for cash at $1.25 and expire on May 20, 2016. Most of the activity was in October. Our current balance of shares outstanding today is 5.3 million.
As far as 4th Q goes, he said they have a number of "deals" in the works for 4th Q but they don't control the timing on them and, as such, they aren't highlighting them in them their projections. They think the Apple slowdown is primarily over and they expect to give a better outlook on everything during the LD Microcap Conference presentation Dec 2-4.
Side note: This is the first investment conference they will attend in approx 3+ years.
