Here's a perspective on the proposed increase of the A/S to 5BB shares and one that might explain why Cornell has such a voting right on that. Seems plausible, and necessary to me. Nothing bad there, just assurance against default. I've come to respect this poster and I don't see it as a bash against NEOM, just an examination of the filings. Would love to hear any thoughts on this.
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By: seabiscuit_in_the9th
14 Jun 2006, 12:39 PM EDT
Msg. 72990 of 73015
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Thoughts on the proposed increase in A/S to 5 billion :
DISCLAIMER ....these are ONE person's thoughts as to the severe predicament that NEOM is in !!!!! I welcome any logical and impersonal comments / rebuttals .
NEOM longs have an affinity for " connecting the dots " so I challenge any reader of this post to connect NEOM's tangible dots rather than fictional dots .
IMO NEOM's purchase of the acquisitions at guaranteed share prices of ~ .37 cents has dug a hole for NEOM that is deeper than the Grand Canyon .
From the DEF-14/A Filing :
" Failure to increase the number of authorized shares constitutes an event of default under the investment agreement, at which time the principal and any accrued interest or dividends become immediately due and payable in cash. " **** This declaration is extremely foreboding and it implies that NEOM must sell sufficient shares of the newly authorized shares to avoid being in default . The alternative to not selling the needed shares is for NEOM to declare bankruptcy ....page 21 of the 10Q : " The 8% cumulative Series C convertible preferred stock contains consequences in case of default. Events of default which could subject the Company to penalties and liabilities as specified in the Agreement include:
· Any case or action of bankruptcy or insolvency commenced by the Company or any subsidiary, against the Company or adjudicated by a court against the Company for the benefit of creditors; "
Page 53 of the 10Q :
" Existing Shareholders Will Experience Significant Dilution When Certain Investors Convert Their Preferred Stock to Common Stock or When the Investors Exercise Their Warrants and Receive Common Stock Shares Under the Investment Agreement with the Investors
The issuance of shares of common stock pursuant to the conversion of Series C Convertible Preferred Stock pursuant to our transaction with Cornell Capital Partners will have a dilutive impact on our stockholders. As a result, our net income or loss per share could decrease in future periods, and the market price of our common stock could decline. In addition, the lower our stock price is, the more shares of common stock we will have to issue pursuant to the conversion of our preferred stock. If our stock price is lower, then our existing stockholders would experience greater dilution. "
More from the DEF-14/A :
" The potential aggregate dilutive effect on stockholders of financing and acquisition arrangements in place as of the date of this filing, assuming various stock prices at the time of the transactions, are as follows: "
Abbreviated by me :
NEOM will need to sell shares through Cornell and raise the Outstanding Shares to 1,536,031,708 shares if the PPS is .20 cents . ( Readers may confirm by reading the DEF-14/A Filing ) .
Here is the problem for NEOM as I see it . To avoid being in " default " NEOM needs to raise the Authorized Shares to 5 billion and the Outstanding Shares by approximately 900 million shares to 1.536 billion .
If one can imagine the enormous downward pressure on the PPS by NEOM's necessity to sell so many shares through Cornell it is reasonable to think that the PPS may not hold
at .20 cents .
Consequently NEOM would need to sell even more shares if the PPS drops .
By my rough calculations NEOM would need to sell
947 million shares if the PPS drops to .19 cents ; 1 billion extra shares if the PPS drops to .18 cents ;
one billion 58 million at .17 cents ; one billion 125 million at .16 cents ; one billion 200 million at .15 cents ; one billion 285 million at .14 cents ; one billion 385 million at .13 cents ; one billion 500 million at .12 cents ; one billion 636 million at .11 cents ; one billion 800 million at .10 cents ; two billion at .09 cents ;
2 billion 250 million at .08 cents ; two billion 571 million
at .07 cents ; three billion at .06 cents ; three billion 600 million at .05 cents ; 4 billion 500 million at .04 cents . *** One way or the other , NEOM has put themselves in a situation where they MUST sell shares through Cornell .
Not even the almighty Cornell could support the PPS at .20 cents with the enormous amount of shares that NEOM must convert to avoid being in default .
From the PROXY :
The additional shares will be issuable for proper corporate purposes, such as future acquisitions; the issuance of common stock upon the exercise of outstanding options and warrants; conversion of outstanding convertible preferred stock; and for dividends or splits. Stockholder approval of the amendment to NeoMedia’s Certificate of Incorporation to increase the authorized shares of Common Stock will give NeoMedia greater flexibility by permitting such stock to be issued without the delay of obtaining stockholder approval. The Board of Directors believes it to be in the best interests of NeoMedia to increase the number of authorized shares of Common Stock to ensure that adequate shares are available for issuance if such issuance becomes desirable.
Notice the word " SPLITS " !!!!! If NEOM's PPS can no longer be falsely supported as I allege and in my opinion ,
and if the PPS drops to any lower level as I roughly calculated , then NEOM could and likely would reverse split the stock ....in the best interests of NeoMedia ....
and not in the best interests of NeoMedia SHAREHOLDERS .
Best of luck to those who connect the REAL dots that NEOM has meticulously articulated in SEC Filings that are seldom read or understood and are minimized by NEOM's profound and over-compensating news releases .
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Comments?
lns
AI
