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Manuel Asensio Report: Jul. 17, 1997 Diana will realize no gain from Concentric's offering or suit. |
Manuel Asensio and Asensio & Company, Inc. ("Asensio") report that investors have sharply bid up Diana's shares anticipating that a possible $29.5 million gain from Concentric Network Corporation's ("Concentric") planned initial public offering ("IPO") may alleviate the Company's "going concern" crisis. However, Manuel Asensio and Asensio note, Diana has failed to disclose that Concentric will effect a 1 for 15 reverse stock split immediately prior to the offering. This makes Diana's Concentric investment immaterial. Based on the expected pricing, Diana will realize no gain from Concentric's IPO. In fact, at the expected price Diana would realize a 50% loss and generate under $1.3 million.
Manuel Asensio and Asensio further report that the confusion arises from Diana's failure to file required financial statements. Diana has been unable to file its annual report because it "is experiencing a significant liquidity shortfall" that has impacted its "ability to continue as a going concern". As a result some investors relying on 6 month old financial statements are claiming Diana owns and can sell 1,890,876 Concentric shares and a warrant to purchase 551,470 additional Concentric shares at $1.36 per share. Manuel Asensio and Asensio do not believe this is true. Adjusted for the 15 to 1 reverse split, Diana will own 126,058 non-registered Concentric shares and a warrant to purchase 36,765 additional Concentric shares at $20.40 per share. These securities are only worth $1.3 million, or $1.2 million less than Diana's cost.
Investors are also fully expecting Diana to collect $4.4 million in past due receivables from Concentric within two months. Payment is still not assured but Diana long ago accrued $5.9 million in revenues related to this receivable. As a result, Manuel Asensio and Asensio believe, Diana will realize a loss, if it collects, of over $1.5 million.
Diana is a defendant in nine (9) separate shareholder lawsuits accusing its managers of stock fraud. Diana's nine year old DSS products are obsolete. The company has been delisted, barred from NASDAQ and has no ability to generate profits or cash flow. In fact, Diana has announced fourth quarter sales of only $1 million and recent quarterly expenses of over $5.0 million. Manuel Asensio and Asensio believe that Diana has little or no chance of continuing as a going concern. As a result, Manuel Asensio and Asensio believe that Diana shares will give back all of their recent gains and may soon trade well below $1 per share. We strongly recommend the sale of Diana shares.
The Diana Corporation (Symbol: DNAK) (Price: $6.75) |
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