The announcement of a US$8.3-million loss in the fiscal year ended March 31 and a subsequent restructing plan have given rise to unprecedented trading in the shares of Montana-based sapphire producer American Gem (GEM-T)
The share price, which had been more than $2 a year earlier, sunk to 3cents on Sept. 18, only to bounce back to 11cents on Sept. 23, and 19cents the following day.
In five days, nearly 13 million shares changed hands.
The net loss did not faze shareholders, even though it was 36% greater than that of the previous fiscal year. Revenue increased to US$1.4 million from US$131,000.
Company officials blamed the loss on an inventory writedown of US$4.4 million, which resulted from the company’s inability to sell its gemstone products fast enough.
Concerned over its operating losses and declining cash position, American Gem engaged Yorkton Securities as financial advisor for the purpose of restructuring the company. The directors of American Gem have since approved Yorkton’s restructuring plan, in which debenture holders are offered 55cents on the dollar in shares at a price of 12cents per share (which would result in the issuance of 50.4 million shares), and creditors that are owed a total of $316,693 are offered either 20cents on the dollar in cash payable on Feb. 20.
1998, or 40cents on the dollar in shares at 15cents per share payable on the closing
date of the restructuring.
The company has taken steps to conserve its cash resources. The company has currently issued and outstanding 41.1 million shares. If the restructuring is implemented, the company expects to have 92 million shares issued. The anticipated closing date for the restructuring is Oct. 28, 1997.
Be the first to comment on "American Gem to restructure"