Dr. D did earn those million shares that he has now turned down, Just to set the record straight. They were earned by the Company having positive net income for 2010. The employment agreement goes back to a very early date around the time SPIN started trading entitling Dr. to a million shares if the Company earned more then a penny a share in 2010. However, when they changed auditors in 2009, there was some question as to potential ambiguity in that if he took the shares based on the positive earnings in 2010, then there would have been a charge against earnings for 2010 that would then have made the earnings negative by a little. So rather then take them back when he earned them, he agreed to tabled it. This is all reported on page 34 of the 2010 10K.
"William Donovan, M.D., the Company’s Chief Executive Officer and John Talamas, the Company's Chief Operating Officer, each have employment agreements with the Company. The agreements were each determined to contain ambiguous Company performance criteria under which Dr. Donavan would be awarded 1,000,000 shares of the Company's common stock..."
It was subsequently determined that there was no ambiguity by the auditors so Dr. D. was to be issued the shares. However, now that the stock price is so much higher, had Dr. D. taking the shares now, the Company would really have to take a big hit to earnings of close to $2 million.
However, now, not only doesn't the Company take a hit, but due to the debt swap, Shareholders equity increases to over $5 million when Q1 reports, and virtually all debt is gone. Why did he elect to do the debt swap now? IMO, because he knows the stock is not going to get significantly any cheaper, and likely is about to make a big move up. In hindsight, he should have done the swap a few months ago when he would have gotten more then twice as many shares, but I would guess in his opinion, better to get these shares now, then risk getting half again as many in a few months when the stock is twice the current price.
So, yes, this really was an awesome gesture on his part. In my 39 years involved in investments, I can't ever remember a CEO who owned a minority interest in a micro cap, giving up a such a large block of stock that he rightfully earned.
BTW, while I don't think this had anything to do with the decision, by doing this it should make the Cooper debt financing even easier to complete.
Kudos to Dr. D!!!
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