I have been following ADY for several months. I did not buy shares yet because I thought that the price was too high considering the company has not filed a 10-Q or a 10-K form for quite some time.
Recently, the share price sunk low enough for me to take a second look at the company. Unfortunately, I found some **horrible** information that has caused me to remove ADY from my watch list.
ADY's (supposedly) 1% notes for $80,000,000 are **TOXIC**.
Read the following paragraphs from ADY's prospectus dated July 10, 2007:
"The June 2007 Notes bear an annual interest rate of 1%. All the net proceeds will be used for the Company’s working capital and acquisition plan.
Under the June 2007 Notes indenture, the June 2007 Notes are convertible, by the holders thereof, at any time on or prior to maturity, into common shares of the Company initially at the conversion price of $24 per share (subject to adjustment in certain circumstances, including semi-annual reset of the conversion price and upon occurrence of certain dilutive events, in each case subject to certain conditions). If the June 2007 Notes are not converted before maturity, the June 2007 Notes will be redeemed by the Company on the maturity date at a redemption price equal to 100% of the principal amount of the June 2007 Notes then outstanding plus an additional amount of 18.0% per annum, calculated on an annual compounded basis, plus any accrued and unpaid interest."
The current share price (close on Sept 19, 2008) for ADY is $10.34. Do you think the note holder would want to exercise the conversion at $24 per share? Of course NOT. The note holder merely needs to wait until June 1, 2012 when the notes mature to receive 19% (1 + 18) **annual** return.
