Ok - further thought tells me that my last post should be ignored (I told you I struggle with 8k's!)
This clearly wasn't a financing of any kind, if I'm reading this correctly now. Sorry about that. This was an exchange of warrants for non-voting stock. The company received no cash for operations. So - pure dilution - Hispeed was correct. The compensation is to make what I read to be all the holder's shares to be non-voting shares.
The warrants appear to be those issued in April (2,280,000) with an exercise price of $0.83. But more shares were offered than the warrants exchanged for. At present value ($.30) then, we paid about $718,000 in present $ (as well as foregoing almost $1.9 million in potential future payments at full exercise price) for the holder to agree not to vote their shares.
The 8k says that the purpose of this was to provide the company with 'additional flexibility' as to financing.
Warrants don't have voting rights. So what's going on here? Why are someone's warrants worth $7xx,xxx of a strapped company's assets? Unlikely that the warrants would be exercised anytime soon - unless the exercise price wasn't adjusted in any reverse split (very unlikely) - so it isn't a concern about the voting rights associated with the warrants, I'd think.
I have some thoughts on this, but none are particularly persuasive. As I surmised, would assume the holder has considerable shares in addition to these warrants - but who knows? It's not Spangenberg as he has very few warrants on file. Maybe Feinberg - but why would he have bought warrants in April while, at the same time, he was a regular seller of his stock?
Again asking if anyone has thoughts on this. Hispeed is right that this is dilution - but it is dilution with a purpose obviously. What was the concern and how does this position ourselves for additional financing flexibility?
Anyone? Anyone? Bueller?
~ yanqui
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