BRN Ann: Proposed Issue of Restricted Stock Units - 14th Oct 2022, 10:02am

[annb0t]

BRN Ann: Proposed Issue of Restricted Stock Units
Price Sensitive: Y
Date: 14th Oct 2022, 10:02am

>>> Read announcement: Google: BRN Market Announcements

 

[Slymeat]

Does any one else see this as anything other than a bribe to stave off future blackmail? Makes me wonder what he has over the company for them to give him this $8M gift. Or am I being too skeptical?

He resigned before exercising his options. I’ve been in a situation before where that meant the options lapsed and I accepted that situation. Resigning normally does cause all ties to be cut. Except maybe the “old school tie”.

“Brainchip also considers the issue of the New Rights to Mr Hernandez to be a necessary step in the prevention of any potential claim by Mr Hernandez.”

 

[Deleted member 1270]

It's a "NO" vote from me.

 

[robsmark]

The market doesn’t like this announcement, and rightfully so. What has this chump accomplished and why are they giving this to him?

 

[Deleted member 1270]

I could tell many stories!

 

[robsmark]

I could tell many stories!

Me too, but none of them have anything to do with Brainchip.

 

[SebThatGermanChap]

The way I read it, is Hernandez retired (whether of his own accord or at the request of BRN) but wanted to keep his options which the company agreed to. The Coy then found out that the ASX doesn't have a provision for that and before the Coy could get it sorted, the options had lapsed, through no fault of Hernandez. Now BRN is making good on their agreement with Hernandez by reissuing new rights to cover the lapsed rights, so a net zero transaction.

Is this correct or have I got it wrong? I'm fairly new to all this.

 

[Deleted member 1270]

Me too, but none of them have anything to do with Brainchip.

Mine relate. Getting tired of being kept in the dark and given no meaningful updates. What is the mandate of the Investor Relations part of the company? Defend our primitive old boys school approach to communications or what?

 

[robsmark]

Mine relate. Getting tired of being kept in the dark and given no meaningful updates. What is the mandate of the Investor Relations part of the company? Defend our primitive old boys school approach to communications or what?

I don’t disagree and have made my stance one this clear previously.
I optimistically put it down to NDAs (as per company communications) and I will be watching the revenue (again, as I posted recently) as advised by our CEO - but soon enough the cheese will have to meet the cracker.
So tell me some stories…

 

[SERA2g]

The way I read it, is Hernandez retired (whether of his own accord or at the request of BRN) but wanted to keep his options which the company agreed to. The Coy then found out that the ASX doesn't have a provision for that and before the Coy could get it sorted, the options had lapsed, through no fault of Hernandez. Now BRN is making good on their agreement with Hernandez by reissuing new rights to cover the lapsed rights, so a net zero transaction.

Is this correct or have I got it wrong? I'm fairly new to all this.

Hi mate

I've taken this the same way as you.

In almost all cases an Employee Share Plan will have provisions that lapse options upon termination of employment. In this case, termination doesn't mean 'fired'. It is simply the ending of an employment agreement between an employee and employer.

Any half decent ESOP will have provisions for 'Good' leavers and 'Bad' leavers.

It seems to me that Hernandez has requested in good faith to allow for his options to not be exercised or lapsed. This sort of request would generally only be possible under 'Good' leaver provisions. The alternative to 'carrying over' the options would be:

a) Simply allowing the options to lapse - Use-it-or-lose-it type situation so Hernandez would lose the options completely. Given the options would be WELL in the money and the subsequent shares valued at circa $7.2M, this is simply out of the question.

b) exercising all 8,000,000 options - This would create a taxing point and would very likely be taxed-upfront under the ESS provisions. The 'discount' that Hernandez would receive when you compare the exercise price he'd pay to exercise the options to the current market value of those shares ($7.2M as above) would result in a significant tax liability. It'll make your eyes water reading about the taxed-upfront scheme but if you're interested I've linked the ATO page. The subsequent issue with option B is that Hernandez receives the shares but he will also receive a significant tax liability ($7.2M @ 49c, you do the maths) which he then needs to front up the cash to pay.

This would then likely force Hernandez to sell a huge portion of the 8M shares to cover the tax liability.

So, as above, option A is out of the question and option B results in millions of tax payable and the subsequent sale of a large portion of shares which I would hazard a guess Hernandez thinks will be worth significantly more than $7.2M in a few years and so he wouldn't want to sell those shares for 90cents to cover tax.

This then leaves us in the current position where Brainchip have agreed to allow those options to be carried over. They've then later discovered that they were unable to have done so under the ASX listing rules and so the alternative agreement they've made with Hernandez is to cancel the options and then issue new options to him. This is Brainchip showing good faith and meeting what would have been a 'Gentleman's' agreement before having realised they were unable to meet the agreement they'd made.

Whilst there is a foot note that indicates that the new share issue prevents a potential law suit from occurring, I don't think this means Hernandez has made threats - I believe this is simply an additional note given there has been an 'offer' and 'acceptance' between the two parties and so there is a potentially legally enforceable contract between the two parties which would mean Hernandez would possibly have the ability to make a claim if Brainchip now, due to unintended circumstances, allowed the options to lapse and refused to issue new options.

I'm sure @Fact Finder could expand on this further if he felt the need to do so.

This is two parties working in good faith to meet an agreement they'd previously arranged which was unintentionally not met.

Nothing to see here other than Brainchip management showing they're upstanding and honest operators.

 

[SebThatGermanChap]

Hi mate

I've taken this the same way as you.

In almost all cases an Employee Share Plan will have provisions that lapse options upon termination of employment. In this case, termination doesn't mean 'fired'. It is simply the ending of an employment agreement between an employee and employer.

Any half decent ESOP will have provisions for 'Good' leavers and 'Bad' leavers.

It seems to me that Hernandez has requested in good faith to allow for his options to not be exercised or lapsed. This sort of request would generally only be possible under 'Good' leaver provisions. The alternative to 'carrying over' the options would be:

a) Simply allowing the options to lapse - Use-it-or-lose-it type situation so Hernandez would lose the options completely. Given the options would be WELL in the money and the subsequent shares valued at circa $7.2M, this is simply out of the question.

b) exercising all 8,000,000 options - This would create a taxing point and would very likely be taxed-upfront under the ESS provisions. The 'discount' that Hernandez would receive when you compare the exercise price he'd pay to exercise the options to the current market value of those shares ($7.2M as above) would result in a significant tax liability. It'll make your eyes water reading about the taxed-upfront scheme but if you're interested I've linked the ATO page. The subsequent issue with option B is that Hernandez receives the shares but he will also receive a significant tax liability ($7.2M @ 49c, you do the maths) which he then needs to front up the cash to pay.

This would then likely force Hernandez to sell a huge portion of the 8M shares to cover the tax liability.

So, as above, option A is out of the question and option B results in millions of tax payable and the subsequent sale of a large portion of shares which I would hazard a guess Hernandez thinks will be worth significantly more than $7.2M in a few years and so he wouldn't want to sell those shares for 90cents to cover tax.

This then leaves us in the current position where Brainchip have agreed to allow those options to be carried over. They've then later discovered that they were unable to have done so under the ASX listing rules and so the alternative agreement they've made with Hernandez is to cancel the options and then issue new options to him. This is Brainchip showing good faith and meeting what would have been a 'Gentleman's' agreement before having realised they were unable to meet the agreement they'd made.

Whilst there is a foot note that indicates that the new share issue prevents a potential law suit from occurring, I don't think this means Hernandez has made threats - I believe this is simply an additional note given there has been an 'offer' and 'acceptance' between the two parties and so there is a potentially legally enforceable contract between the two parties which would mean Hernandez would possibly have the ability to make a claim if Brainchip now, due to unintended circumstances, allowed the options to lapse and refused to issue new options.

I'm sure @Fact Finder could expand on this further if he felt the need to do so.

This is two parties working in good faith to meet an agreement they'd previously arranged which was unintentionally not met.

Nothing to see here other than Brainchip management showing they're upstanding and honest operators.

Thanks for the detailed explanation, really appreciate you time here mate.

 

[Cardpro]

BrainChip has amazing remuneration offers for non executive directors & chairman considering it's size... tbh, as a retail shareholder who has put significant portion of savings, I find this very annoying lol

 

[Milo]

This is smelly no matter how we try to spin and sugarcoat it.
So much for high standards of the top people in this company!

 

[toasty]

I'm sure the institutions don't like this..........

 

[Milo]

BrainChip has amazing remuneration offers for non executive directors & chairman considering it's size... tbh, as a retail shareholder who has put significant portion of savings, I find this very annoying lol

and these directors, chairman, CEO and other KMPs don't even think about buying on market because they get millions of dirt cheap options.
Buying on market would show their confidence in the company, not wanting to keep the options after leaving.
Why should the company amend the original conditions to suit his requirements? This is BS!

 

[wilzy123]

Hi mate

I've taken this the same way as you.

In almost all cases an Employee Share Plan will have provisions that lapse options upon termination of employment. In this case, termination doesn't mean 'fired'. It is simply the ending of an employment agreement between an employee and employer.

Any half decent ESOP will have provisions for 'Good' leavers and 'Bad' leavers.

It seems to me that Hernandez has requested in good faith to allow for his options to not be exercised or lapsed. This sort of request would generally only be possible under 'Good' leaver provisions. The alternative to 'carrying over' the options would be:

a) Simply allowing the options to lapse - Use-it-or-lose-it type situation so Hernandez would lose the options completely. Given the options would be WELL in the money and the subsequent shares valued at circa $7.2M, this is simply out of the question.

b) exercising all 8,000,000 options - This would create a taxing point and would very likely be taxed-upfront under the ESS provisions. The 'discount' that Hernandez would receive when you compare the exercise price he'd pay to exercise the options to the current market value of those shares ($7.2M as above) would result in a significant tax liability. It'll make your eyes water reading about the taxed-upfront scheme but if you're interested I've linked the ATO page. The subsequent issue with option B is that Hernandez receives the shares but he will also receive a significant tax liability ($7.2M @ 49c, you do the maths) which he then needs to front up the cash to pay.

This would then likely force Hernandez to sell a huge portion of the 8M shares to cover the tax liability.

So, as above, option A is out of the question and option B results in millions of tax payable and the subsequent sale of a large portion of shares which I would hazard a guess Hernandez thinks will be worth significantly more than $7.2M in a few years and so he wouldn't want to sell those shares for 90cents to cover tax.

This then leaves us in the current position where Brainchip have agreed to allow those options to be carried over. They've then later discovered that they were unable to have done so under the ASX listing rules and so the alternative agreement they've made with Hernandez is to cancel the options and then issue new options to him. This is Brainchip showing good faith and meeting what would have been a 'Gentleman's' agreement before having realised they were unable to meet the agreement they'd made.

Whilst there is a foot note that indicates that the new share issue prevents a potential law suit from occurring, I don't think this means Hernandez has made threats - I believe this is simply an additional note given there has been an 'offer' and 'acceptance' between the two parties and so there is a potentially legally enforceable contract between the two parties which would mean Hernandez would possibly have the ability to make a claim if Brainchip now, due to unintended circumstances, allowed the options to lapse and refused to issue new options.

I'm sure @Fact Finder could expand on this further if he felt the need to do so.

This is two parties working in good faith to meet an agreement they'd previously arranged which was unintentionally not met.

Nothing to see here other than Brainchip management showing they're upstanding and honest operators.

This is on the money IMO

 

[Iseki]

Does any one else see this as anything other than a bribe to stave off future blackmail? Makes me wonder what he has over the company for them to give him this $8M gift. Or am I being too skeptical?

He resigned before exercising his options. I’ve been in a situation before where that meant the options lapsed and I accepted that situation. Resigning normally does cause all ties to be cut. Except maybe the “old school tie”.

“Brainchip also considers the issue of the New Rights to Mr Hernandez to be a necessary step in the prevention of any potential claim by Mr Hernandez.”

It's always good to be skeptical, however he's not asking for cash is he? No. He's asking for what he had that's linked to the future value of BRN. In effect what he's done is to leave early when he wasn't needed. How many people simply hang on at other companies for their options to mature?
It's a win win for mine.

 

[Deleted member 1270]

I don’t disagree and have made my stance one this clear previously.
I optimistically put it down to NDAs (as per company communications) and I will be watching the revenue (again, as I posted recently) as advised by our CEO - but soon enough the cheese will have to meet the cracker.
So tell me some stories…

Stories are possibly for a later time! And, you can't continue to hide behind NDA's! Just my view.

They can come out more frequently and address the real concerns that shareholders who aren't insiders have. Sean has been in the chair now for some time and all we get is an odd interview which if I am correct was around the time of the AGM in May and a quarterly report that is lacking in detail.

What measueables do we have to see what his performance is like?

They are clearly not thinking from the point of view of the investor. Whether that be past, current of future for that matter.

Why can't we get a presentation that positions the company in a good light that draws attention to the company from retail and Institutional Investors alike?

 

[Space Cadet]

BrainChip has amazing remuneration offers for non executive directors & chairman considering it's size... tbh, as a retail shareholder who has put significant portion of savings, I find this very annoying lol

This is my opinion but here goes. We are a company trying to go from start up to the big time against some of the biggest companies on the planet. I think we have the goods to achieve this but you don't just need a good product you need good people or you will go nowhere fast. Due to our very limited revenue we must entice good talented people in other ways because we cannot compete with these big behemoths on wages. Therefore we need to have good incentive plans and align the interest of our people with shareholders. IMO we are just paying wages they would get elseware with incentives and that keeps good people to grow us to where we as shareholders want to be. It always looks bad from the outside but we need these employees and if we were to pay them competing wages instead of using incentives we would be a hell of a lot more diluted than just giving some options or performance rights. If we made an agreement make good on it.

SC

 

[Iseki]

Stories are possibly for a later time! And, you can't continue to hide behind NDA's! Just my view.

They can come out more frequently and address the real concerns that shareholders who aren't insiders have. Sean has been in the chair now for some time and all we get is an odd interview which if I am correct was around the time of the AGM in May and a quarterly report that is lacking in detail.

What measueables do we have to see what his performance is like?

They are clearly not thinking from the point of view of the investor. Whether that be past, current of future for that matter.

Why can't we get a presentation that positions the company in a good light that draws attention to the company from retail and Institutional Investors alike?

Nah. The fluff pieces that you're talking about very soon look stale and fake-hype and just backfire.

On the positive side - We get to see the revenue at the quarterlies. We also get to see the outgoings. Nothing about this company looks like it's hyping their prospects or wasting money. Each of the arrangements we have with our EAP customers would be highly individualized - comparing possible future revenue against the cost of helping them to market. There is simply no possibility of making an announcement to the ASX that is as open and flexible that would satisfy both investors and clients and the ASX rules. It would be a disaster.

If you like, the real culprits are us retail investors. We know if it jumps and we're not ready we'll miss out. So we load up and hope.

All we can say is that the company has everything under control and you should take comfort in that, and know that we are all in the same boat.