ACt has admitted conversions went off at .035 instead of .10 as contracts stated. ACT is wanting ALL holders to agree and sign cancellation and mutual release agreements erasing any future problems.
There are 50 holders, so probably 50 attornies all wanting or asking for different language. ACT does not have the shares, what if shareholders don't approve? When will it happen? Do they get more shares for waiting?
Will ACT ask for selling restrictions?....just to mention a few things.
No easy task by any stretch..
(from CC transcript)
Gary Rabin: Right, ok. The charges are our estimate of the cost to settle the warrant holders liability related to these anti-dilution provisions that were in these 2005 to 2009 financings that the company did. Essentially, the way that this worked was, if there was a financing that was done at a lower price than the price of their warrants, then the warrant strike price would be reset to that lower price. Effectively, that is what we have done here. We have taken the charge commensurate with the effective financing at about 3.5 cents on the repricing of all of these warrants. In terms of impact on the company, other than a balance sheet entry, it doesn’t really have an actual impact on the company. It does not impact our cash accounts. It does not impact our ability to access financing. So, it is simply an accounting charge. The impact is that it requires us to issue additional new shares to these warrant holders. In terms of timing and process, we have send out today these settlement agreements to these warrant holders. There are 50 or so of these settlement agreements that have been sent out, and we are working internally and with our securities litigation outside lawyers to get this to closure as quickly as possible. We are hoping to get these agreements signed as soon as possible. And obviously we want to file a proxy this year so that we can put all of this stuff to bed for once and for all for this company. Thanks.
Well, essentially, what happened was this. In this J&J financing my predecessor attempted to essentially create 10 cents financings by anytime if there would have been financing below 10 cents, the difference between the value of the shares that the investor would receive at the strike price that the deal should have been done at, and 10 cents, the difference would be added back to the principal. So, in so doing, the strategy, I believe, was to effectively have no financings below 10 cents. What happens when you look back at those financings in retrospect, and you look at the effective cost of those financings, in other words, the amount of proceeds the company received divided by the number of shares issued, is you effectively came up with a strike price below 10 cents. So, like I said, his intent was to try to create only 10 cents financings but the court has essentially ruled that constructively these were sub 10 cents financings. The next question from the com line and we take only one more question.
