Golfer or anyone who is adept at financial accounting,
Could you please help explain a few things about the last S-8. This one is a little more confusing than previous ones, and I would like someone else's take on it if possible.
Points of confusion:
1) This Offering (from page 6)
Shares of common stock outstanding prior to this offering:
288,517,898 (1)
Shares of common stock offered pursuant to this prospectus
200,000,000
(1) As of July 22, 2008. Does not include shares of common stock issuable upon exercise of outstanding options or warrants, and assumes that all options registered herein are exercised and sold.
In previous registrations, the number of shares O/S after the offering was always listed and the note on shares outstanding "prior to this offering" has never "assumed" that "all options registered herein will be exercised and sold." What does this mean here? Does the July 22 number somehow include some or all of this 200,000,000 registration or is this just poorly worded?
2) Selling Shareholders (from page 11)
The selling shareholders named in this prospectus (the "Selling Shareholders") are offering 200,000,000 shares of our common stock that may be offered and resold from time to time by certain eligible participants and existing selling shareholders. The selling shareholders named in this prospectus were granted the options in consideration of services rendered as directors of the Company and such shares are issuable upon exercise of stock options at an exercise price of either $1.51 per share or $1.44 per share, depending on the dates of grant, which were November 27, 2007 and December 4, 2007, respectively.
These options do not seem to be listed or accounted for in the 2007 annual report. Where did they come from and does this mean that the shares being registered for sale here by Messrs. Spencer and Mandrell are options that strike at $1.44 or $1.51???? First of all, what is the point of that (when the current price is $0.0009)? And, second, 30,000,000 "new" shares/options are being registered for resale here for/by each man, so does that mean they were granted approx. $45,000,000 each in options? That seems a little odd.
3) Share Registration Info. (from page 11)
Shares Beneficially Owned Prior To This Offering (1)
Lloyd Spencer: Number(1): 9,181,642 Percent(2): 3.18%
Jon Mandrell: Number(1): 1,453,136 Percent(2): 0.50%
Number of Shares That May Be ReOffered Pursuant to the Prospectus
Lloyd Spencer: Number(1): 39,181,642
Jon Mandrell: Number(1): 31,453,136
Shares Beneficially Owned Upon Completion of the Offering (1)
Lloyd Spencer: Percent(2): 11.93%
Jon Mandrell: Percent(2): 9.57%
Here are the notes for the above table (page 11), which are a little dense, but my questions follow.
1) Under Rule 13d-3, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights. As a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the person's actual ownership or voting power with respect to the number of common shares actually outstanding on January 2, 2008.
(2) Applicable percentage of ownership is based on 288,517,898 common shares outstanding as of July 22, 2008. Since our company does not currently meet the registrant requirements for use of Form S-3, the amount of common shares which may be resold by means of this reoffer prospectus by each of the selling stockholders, and any other person with whom he or she is acting in concert for the purpose of selling securities of our company, must not exceed, in any three month period, the amount specified in Rule 144(e) promulgated under the Securities Act.
Sooooo, if you do the math, the percentages owned by Messrs. Spencer and Mandrell after the offering do not match the number of shares that may be reoffered puruant to the prospectus, which, I assume, means they intend to sell a small number to the market. In the case of Mr. Spencer, the difference is 4,761,457 shares and in Mr. Mandrell's case it is 3,841,973 shares. Is my assumption correct or am I missing something/not understanding something here?
Any take on these points/issues would be much appreciated.
jt
