Corp: In connction with H. Campagna being the “savior” of the company because of his $112,500 loan, I would say your analysis of available cash at the time of the loan does not present a true picture. IMO during the second quarter of 94 when the loan was made there was a severe cash crunch. However, during the quarter there was a lot of short term financing activity that took place, with Mr. Campagna’s loan being the smallest amount involved. So to give Mr. Campagna credit for saving the company with his loan is an overstatement.
From available SEC reports The following represents Cash balances ($ 000) as ot end of quarter:
Dec 31, 1993... $8,211
Mar 31, 1994... 4,213
Jun 30, 1994... 1,728
Sep 30, 1994... 3,196
Dec 31, 1994... 6,264
It is quite obvious that during the the 2nd quarter a cash crunch existed. According to the SEC reports the following actions were taken during the 2nd quarter to help alleviate the cash problem
In March 1994, the Company entered into a $3.0 million secured borrowing arrangement, evidenced by Promissory Notes, in connection with a proposed long-term financing arrangement. The Promissory Notes, which bore interest at 11% per annum, were repaid in 2 installments in June and July, 1994 when the parties to the long-term financing arrangement agreed not to proceed.
During the second quarter of 1994, the Company received $2.4 million in proceeds from the issuance of a series of Promissory Notes. The Notes were collateralized by the proceeds from the sale of Haviland, accrued interest at a rate of 11% which was payable at maturity and had initial terms of 90 days, with original maturities occurring during August and September 1994. At maturity, the holder could elect to have the repayment of principal, in whole or in part, in the form of Common Stock at the conversion price of $3.75 per share. In the event of such election, the Company's obligation to pay interest to noteholders
was to be waived. Additionally, as an inducement to enter into the note
agreement, the noteholders were granted 280,000 warrants with a term of 10 years and an exercise price of $3.75 per share. At September 30, 1994, $2.3 million of the Notes were extended in consideration for a reduction in the conversion rate to $1.78 per share and a reduced exercise price in the warrants. As of December 31, 1994, $2.2 million of the Notes had been repaid and $189,000 had converted in exchange for 106,000 shares of Common Stock.
In connection with the private placement of Short Term Convertible Notes of the Company in May 1994 (the 'Notes') Messrs. David A. Burns, Michael W. Burns and Jeffrey S. Burns, sons of William Burns, loaned the Company an aggregate amount of $251,250 and Mr. Campagna loaned the Company $112,500. The Notes bore interest at a rate of 11%, and as additional inducement for the lenders to advance the loans, the Company issued warrants to the lenders to purchase shares of Common Stock. Mr. Campagna waived all payment of interest on his Notes and received warrants to purchase 15,000 shares of Common Stock at a per share
exercise price of $2.50. David, Michael and Jeffrey Burns were issued warrants to purchase an aggregate of 33,500 shares of Common Stock at a per share exercise price of $3.75. The Notes issued to the Burns were repaid in full on November 3, 1994 with interest, and the Note issued to Mr. Campagna was repaid in full on October 7, 1994. Although, under the terms of the Notes, the holders had the right to demand a late charge of 5% of the amount due, neither the Burns nor Mr. Campagna made such a demand.
