The good, the bad and the ugly...
In reverse order.
The Ugly:
In the last 9 months, the number of outstanding shares has risen 18,230,556. At this rate, it will take another 24,307,408 shares issued to get us through the next year and to Cooper's expected revenues. That means that when we do (if we do) see revenues from the technology, there will be 72,541,645 shares outstanding.
At that same time, at the current rate of accumulation, the total defecit will be $54,102,469.
The Bad:
There are now 4000 shares of Series B Preferred stock out there that are redeemable at $1000 per share. This redemption is triggered by any financing event that exceeds 3 Million dollars. So, any small scale financing efforts could be offset by Series B redemption.
There were $340,000 in bonuses accrued in the 9 month period. In general, it is my opinion that bonuses should only be paid for successful completion of a job well done. Haven't seen much of that.
In the last 9 months, over 4 Million stock options were granted that were outside of the stock option plan. 1.5 Million of those were for Cooper. The rest were hand-outs.
This paragraph really gripes me:
On July 30, 2002, the Company granted a consulting company warrants to purchase 1,000,000 shares of its common stock at an exercise price of $.75. These warrants replaced warrants covering 1,000,000 shares of common stock issued to the consulting company in May 2001 that had exercise prices of $2.50 (as to 500,000 shares), $5.00 (as to 250,000 shares) and $10.00 (as to 250,000 shares). The fair value of stock warrants estimated on the date of grant using the Black-Scholes option pricing model is $.047, or $46,737.
Who is the consulting company, and why are we replacing existing warrants with warrants at a much lower strike prices?
This one also bothers me:
On July 17, 2002, the Company entered into a one-year consulting agreement with an individual for consulting, advisory and related services. The Company agreed to pay the consultant a one-time payment of $250,000 in the event the Company receives gross revenue in the amount of at least $2,250,000 from the distribution of the Company's motion picture.
So, in the event that the movies does generate revenue, the first $250,000 goes to this consultant. For what? OK, as I read further, it looks like this is for Cono. Is this hidden interest for the half million loan? What did this "consultant" do to earn 250K?
This one has always bothered me:
The Company's projects under development stipulate royalty
payments that are based on percentages of revenue.
So, we will owe royalties to ANI when our products sell. How much? What is the percentage? It could be anywhere from 1 to 99%. This is pretty important to future earnings potential.
We also borrowed half a million dollars from Cono. I think it is better to borrow than to sell stock, but the note is a balloon note payable in November. This seems like robbing Peter to pay Paul.
A whole slew of Convertible Notes. Ugh.
There is another "consulting" agreement with "Advisor Associates", AKA Winehouse. He gets 350K of restricted stock and 1,000,000 warrants. For what? Oh, here it is:
The Shares and Warrant shall be deemed fully earned as of the
date hereof, and shall not be subject to or conditioned upon any event or circumstance whatsoever.
and
Consultant shall solely and exclusively determine the methods, details and means of providing the Consulting Services hereunder.
What's more, Winehouse gets expenses for this "consulting". This has Ray's fingerprints all over it.
Should have put that one in the "Ugly" section.
The Good:
Management will be deferring salaries.
AI
