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Posted On: 04/11/2019 4:06:48 PM
Post# of 149448
thanks trding. Due to the features of the convertible note, there may be the unfortunate potential for this drop in SP to become self-reinforcing.
For those unaware, the two convertible notes permit conversion of up to $350,000/month (the Jan 2019 note will not allow this until June 2019).
The conversion price is the lower of: $.55 (for 2018 note)/$.50 (for 2019 note); or the lowest closing price for the 20 days prior to conversion, multiplied by a conversion factor of .85.
For example, today we closed at .45 and change. By my understanding, this means that any stock converted under the 2018 note in April 2019 will convert at .45 * .85 = $.3825/share. This means the company will have to issue $350,000/.3825 = 915,032 shares just to cover $350,000.
The company can elect to pay in cash, but it hasn't done so to this point for reasons we all understand.
And then the noteholder will have almost a million shares to sell into the market, where it can make a profit selling at $.39 cents.
I am not trying to turn this board into ihub doom and gloom, I just want everyone to have eyes wide open on this, as I really just started examining the implications for this in the last week as the delays appear to be mounting.
Once the Jan 2019 note can begin converting in June, the number of dollars convertible per month will double to $700,000. Lets hope by that point the SP is much higher, so that the conversion price is $.50 * .85.
I hope this underscores, not that we needed any reminder, the CRITICAL importance of nondilutive financing ASAP.
If I've missed anything or my math is incorrect, I welcome corrections!
For those unaware, the two convertible notes permit conversion of up to $350,000/month (the Jan 2019 note will not allow this until June 2019).
The conversion price is the lower of: $.55 (for 2018 note)/$.50 (for 2019 note); or the lowest closing price for the 20 days prior to conversion, multiplied by a conversion factor of .85.
For example, today we closed at .45 and change. By my understanding, this means that any stock converted under the 2018 note in April 2019 will convert at .45 * .85 = $.3825/share. This means the company will have to issue $350,000/.3825 = 915,032 shares just to cover $350,000.
The company can elect to pay in cash, but it hasn't done so to this point for reasons we all understand.
And then the noteholder will have almost a million shares to sell into the market, where it can make a profit selling at $.39 cents.
I am not trying to turn this board into ihub doom and gloom, I just want everyone to have eyes wide open on this, as I really just started examining the implications for this in the last week as the delays appear to be mounting.
Once the Jan 2019 note can begin converting in June, the number of dollars convertible per month will double to $700,000. Lets hope by that point the SP is much higher, so that the conversion price is $.50 * .85.
I hope this underscores, not that we needed any reminder, the CRITICAL importance of nondilutive financing ASAP.
If I've missed anything or my math is incorrect, I welcome corrections!
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