Just a couple of final share dilution tidbits:
There are two new employees - Linda Robinson and Robert Smith. Robert Smith will be paid $92,690 plus quarterly bonuses of $$3,750 to be paid in the stock of Innova. That is yet another 11 million to 27 million more shares to be issued in 2007 (at present rates of $0.004 - $0.01 a share). He also has 1 million options at $0.01. Linda Robinson has been appointed as Secretary of the Company. Although she has been included in the "employee agreement" section of the 10K, no details of such an agreement are given. I imagine that the 7,426,653 shares declared in a her recent form 3 filing have something to do with it. These shares will be/have been added to the bottom line.
Also, there were 22,411,585 options outstanding as of Dec. 31, 2007, with an average exercise price of $.05 (this includes outstanding options to Walt Weisel and the estate of Eugene Gartlan). The $0.05 price doesn't sound so bad, but it doesn't mean anything really because a small number of outstanding options have very high exercise prices ($0.10, $0.13, $0.17, $0.18, $0.20, and $0.23 and $0.26), which is skewing the average. On Dec. 31, 2007 (along with other magical "conversions" that have already been noted), the share fairies (and I mean that in the Disney/Harry Potter sense :-) ) transformed the price of all options held by current Innova/Coroware employees to $.01 per share (no matter what their previous prices had been).
Considering the high exercise prices of options held by non-employee options, I would say that the majority of the options outstanding are priced at $0.01. As a result, if the share price finds a relatively stable level above $0.01, there will be 22.5 million more shares added to the bottom line over the next few years as the options come due. 2,454,165 of this number were exercisable as of Dec. 31, 2007, and a few have been cashed in (Lloyd Spencer cashed in 666,6666 of his options price at $0.01 just recently - no form 4 yet, but the amount shows up in his 10K declaration. Again, I give kudos and respect to Mr. Spencer - even if the option price had been reduced, at least his shares were cashed in rather than magically converted).
And, just for the sake of clarity on the preferred stock dividend issue, let's look at what happened in 2007: dividends that were paid on outstanding series B stock were converted into 169,179 and 62,190 shares of common stock at $0.06 and $0.175 respectively. These series B shares pay a dividend of 5%, and as the share price has fallen to $0.006 (1/10th of the lower value above), we can probably expect the share conversions on the dividends to run about 1.5 million in 2008. To be fair, the board seems to be trying to get rid of the series B, but they are still there.
Lastly, there is the issue of the $35,000?? worth of series C (could be $60,000) shares. These have a complex warrant conversion scheme (and I need to get back to work) but they will also result in the creation of millions more outstanding shares.
So, that about does it on this issue. As I said before, if the option price can be lowered to protect against the drastic fall in share prices, why can't the director/executive compensation scheme be altered as well? With all due respect to the current board and management, my rights as an owner should actually take precedence.
In addition, and again, as I have said many times, I hold some optimism regarding the current management of this company, but this issue is worrying. What is at stake is not just an issue of share dilution - in reality, under the current compensation schemes, wealth and equity are effectively being transferred from outsiders to insiders. I am very concerned about the idea of "leaving the debt issue" for a few quarters. If the situation persists after December of 2008, director/executive share compensation for 2008 will be based on share prices in January 2009 that reflect the Cornell debt. If the debt has not been cleared, that means the number of shares they receive will be astronomical. If the debt is not cleared up until early 2009 (after the "few quarters of profit"), these directors/executives could end up holding over 50% of the company (possibly more, but I haven't done the math). Is the motivation there to clear this debt ASAP?
I really hope so.
jt
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