Beneficial Ownership of Selling Stockholders
The following table sets forth information regarding shares of our common
stock beneficially owned by the selling stockholders as of September 30, 2002,
based on information provided to us by the selling stockholders. Beneficial
ownership is determined in accordance with SEC rules and generally indicates
that a person holds voting or investment power with respect to securities.
Shares of common stock that are issuable upon the exercise of outstanding
options, warrants or other purchase rights, to the extent exercisable within 60
days of September 30, 2002, are treated as outstanding for purposes of computing
each selling stockholder's percentage ownership of outstanding shares of common
stock.
Beneficial Ownership of Number of shares Ownership
Common Stock Prior to the to be sold under of Common Stock
Offering this Prospectus After the Offering (1)
------------------- ------------ ------------------- ---------- -- -------------
Number of Shares Percent of Number Percent of
Name Class(2) of Shares Class(2)
---------------------------- ------------------- ------------ ------------------- ---------- -------------
Kingsway Securities
Holdings Limited (3) 29,489,274 4.26% 30,489,274 0 *
HK Weaver Group
Limited (4) 11,000,000 1.59% 12,000,000 0 *
RGC International
Investors, LDC 4,700,720 0.68% 9,000,000 200,720 *
Fredric W. Rittereiser 4,513,500 0.65% 4,000,000 513,500 0.07%
Arthur J. Bacci 286,100 0.04% 275,000 11,100 *
Matthew J. Saltzman 400,000 0.06% 400,000 0 *
(1) Assuming the sale by each selling stockholder of all of the shares of
common stock offered hereunder by such selling stockholder. There can be
no assurance that any of the shares offered hereby will be sold.
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(2) The percentages have been computed assuming the number of shares of
common stock outstanding equals the sum of (a) 691,674,817, which is the
number of shares of common stock actually outstanding on September 30,
2002, and (b) shares of common stock subject to warrants, options and
similar securities exercisable to purchase common stock within 60 days by
the selling stockholder with respect to which such percentage is
calculated.
(3) Includes 12,000,000 shares owned by HK Weaver.
(4) Kingsway Securities Holdings Limited has sole voting or investment power
with respect to HK Weaver.
* Less than 0.01%
Kingsway Securities Holdings Limited and HK Weaver Group Limited
HK Weaver Group, Limited, a British Virgin Islands company (HK Weaver),
is our joint venture partner in Kingsway-Ashton Asia, Limited. HK Weaver is also
a holding company and a subsidiary of Kingsway International Holdings Limited, a
Bermuda company. Kingsway Securities Holdings Limited, a British Virgin Islands
company, is also a subsidiary of Kingsway International Holdings.
On January 30, 2002, HK Weaver agreed to lend us up to $500,000 under a
bridge loan agreement, which agreement was amended on April 29, 2002. The bridge
loan was repayable on the earliest to occur of (i) May 6, 2002, (ii) closing of
Innovations' purchase of our common stock, or (iii) default under the bridge
loan. $250,000 of the loan amount was repayable through our mandatory issuance
of 5 million shares of common stock, and the remaining $250,000 was either
convertible into an additional 5 million shares of our common stock or repayable
in cash, at the option of HK Weaver. We drew a total of $500,000 on the bridge
loan during February 2002. On May 7, 2002, HK Weaver converted the entire
$500,000 note into 10 million shares of our common stock. In connection with the
bridge loan agreement, we granted HK Weaver a three-year option to purchase two
million shares of our common stock at an exercise price equal to the price per
share to be paid by Innovations upon closing of the securities purchase
agreement between Ashton and Innovations, or $0.0448. The options vest in
quarterly installments of 500,000 each, beginning on August 7, 2002.
Pursuant to the terms of a stock purchase agreement, dated as of January
12, 2000, by and among HK Weaver, Ashton, and UTTC, an Ashton subsidiary, HK
Weaver acquired beneficial ownership of 123,240 shares of UTTC's Series KW
preferred stock in a private placement, for an aggregate purchase price of
$3,000,000. HK Weaver subsequently transferred ownership of the Series KW
preferred stock to Kingsway Securities Holdings Limited. In accordance with the
terms of the Series KW preferred, since UTTC had not completed an initial public
offering by December 31, 2001, 41,080 shares of the Series KW preferred was
convertible into 3.477 shares each of Ashton common stock, and 82,160 shares of
the Series KW preferred was convertible at the liquidation value divided by the
average closing price of Ashton common stock for the twenty trading days
preceding conversion. On December 12, 2001, all 123,240 shares of the Series KW
preferred were converted into 18,489,274 shares of Ashton common stock.
On May 3, 2002, we entered into a registration rights agreement with HK
Weaver and Kingsway Securities Holdings Limited, whereby we agreed to register
the 18,489,274 shares of Ashton common stock owned by Kingsway Security Holdings
Limited and the 10 million shares of Ashton common stock issued to HK Weaver
upon conversion of the bridge loan. We also agreed, pursuant to the bridge loan
agreement, to register the 2 million shares issuable upon conversion of the
option issued to HK Weaver.
RGC International Investors, LDC
On April 11, 2002, we entered into a securities exchange agreement with
RGC International Investors, LDC, a Cayman Islands limited duration company
(RGC), pursuant to which RGC exchanged its 9% secured convertible note in the
original principal amount of approximately $5.1 million for a four-year, 7.5%
non-convertible zero-coupon senior secured note in the principal amount of
approximately $4.75 million (the Exchange Note) and a five-year warrant to
purchase 9 million shares of our common stock at an exercise price of $0.0448
per share. The Exchange Note is secured by a blanket, first priority lien on all
of our assets (excluding certain
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intellectual property assets given as consideration to us as part of the
transactions with Innovations).
We may redeem the Exchange Note at any time, in whole but not in part,
for an amount equal to: 30% of the principal amount thereof plus all accrued and
unpaid interest in year one; 53.3% of the principal amount thereof plus all
accrued and unpaid interest in year two; 76.6% of the principal amount thereof
plus all accrued and unpaid interest in year three; and 100% of the principal
amount thereof plus all accrued and unpaid interest thereafter.
The warrant becomes exercisable as to 2,250,000 shares on each of the
90/th/ day, the 180/th/ day and the 270/th/ day after the date of the warrant
and becomes exercisable in full on the 360/th/ day after the date of the
warrant. In addition the warrant becomes immediately exercisable in full in the
event we experience a change of control, as such term is defined in the warrant.
In no event, however, is RGC entitled to exercise and purchase a number of
shares of our common stock which would result in RGC's beneficially owning more
than 4.9% of the outstanding shares of our common stock. The warrant includes
standard anti-dilution provisions pursuant to which the exercise price and
number of shares issuable thereunder are adjusted proportionately in the event
of a stock split, reverse stock split, stock dividend, recapitalization or
similar transaction.
On May 3, 2002, we entered into a registration rights agreement with RGC,
whereby, under certain circumstances, we agreed to register the 9 million shares
issuable upon exercise of the warrant. The shares that may be offered pursuant
to this prospectus include the 9 million shares of common stock issuable upon
exercise of the warrant.
Fredric W. Rittereiser
On April 15, 2002, we entered into a separation agreement with our former
Chief Executive Officer, Frederic W. Rittereiser that became effective on May 7,
2002. As consideration for Mr. Rittereiser's resignation, release of claims and
on-going non-solicitation, non-competition and non-disclosure obligations, Mr.
Rittereiser received: (i) a $100,000 cash payment, (ii) expenses incurred by Mr.
Rittereiser from January 18, 2002 through May 7, 2002 totaling $6,000 and (iii)
4 million shares of our common stock to be registered on the first registration
statement we file within 60 days of the effective date. According to the terms
of the separation agreement, Mr. Rittereiser would also receive (i) a $50,000
payment within one year of the effective date and (ii) healthcare insurance paid
by us for one year following the effective date. On July 3, 2002, we paid the
final $50,000 payment to Mr. Rittereiser, and we and Mr. Rittereiser agreed to
amend the separation agreement to extend the 60-day deadline for filing a
registration statement to register the resale of his shares to September 30,
2002. The shares that may be offered pursuant to this prospectus include the 4
million shares of common stock issued to Mr. Rittereiser.
Arthur J. Bacci
On January 7, 2002, we entered into a consulting agreement with Arthur J.
Bacci, the former President and Chief Operating Officer, and a former director,
of Ashton. In consideration for his services in the negotiation of definitive
purchase agreements with Innovations, we paid Mr. Bacci a cash payment of
$10,000 and Mr. Bacci's medical coverage through April 1, 2002. Further, on June
13, 2002, we agreed to issue 275,000 shares of common stock to Mr. Bacci in
connection with his services in the Innovations transaction. We did not grant
Mr. Bacci contractual registration rights with respect to these shares, however
we agreed to include the resale of his shares in this registration statement.
The shares that may be offered pursuant to this prospectus include the 275,000
shares of common stock issued to Mr. Bacci.
Matthew Saltzman
On April 30, 2002, we entered into a final settlement agreement with
Matthew Saltzman, the former President of our subsidiary, Electronic Market
Center, Inc., in connection with an arbitration award granted to Mr. Saltzman by
the American Arbitration Association. Pursuant to the terms of the settlement,
we: (i) paid Mr. Saltzman an aggregate of $150,000 in cash; (ii) are obligated
to pay Mr. Saltzman an additional $50,000 in cash, together with interest
accrued thereon from January 30, 2002 at an annual rate of 9%, on or before May
7, 2003; and (iii) issued 400,000 shares of our common stock to Mr. Saltzman.
For such consideration, Mr. Saltzman executed a release and waiver of all claims
against Ashton, including, without limitation, claims in connection with the
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arbitration. As part of the final settlement agreement with Mr. Saltzman, we
agreed to register the 400,000 shares of common stock we issued to him on our
next registration statement. The shares that may be offered pursuant to this
prospectus include the 400,000 shares of common stock issued to Mr. Saltzman. |
