The Company entered into a definitive purchase agreement with the investors pursuant to which the Company has sold 750 units of preferred stock and warrants at a price of $1,000 per unit. Each unit consists of one share of Series B convertible preferred stock and a warrant to purchase approximately 909 shares of common stock, at an exercise price of $1.20 per share. The warrants are exercisable immediately upon issuance and will expire on the fourth anniversary of the date the warrants became exercisable. The Series B preferred stock accrues an annual dividend of 6 percent beginning six months after closing.
The exercise price = $1.20 - so what the share price today? Warrants expire in 4 years from date of issuance, dividend (interest rate) is 6%. In my opinion this is a real positive. The posters on the previous post should read the details before posting. It makes you look ignorant...
Your problem, jc, is you're applying common self. Let's recapitulate what the company has announced. Institutional investors have looked at what the company is making and doing, and agreed to hand over $750 thousand. In return these investors retain the right to purchase company stock, but at what price? Bargain basement? No, a premium price of a $1.20, which indicates to me, at least, that they see this thing headed north eventually. Might not be tomorrow, might not be next month, but the company is picking up distributors and orders. Just look at the latest deal to sell the thing in Hong Kong. I think the distributor there is obligated to purchase for sale in that market some 8,000 units. (I may be wrong on that number, but it is in the thousands).
You said exactly what I was inferring. I just feel sometimes that the bashers on this board keep knocking the company for unjust reasons. The $750k in question is a shrewd deal for the company. For these investors to take such a deal implies that they see value - what else could it be? This is a company that is just starting out and cash flow is required to keep the doors open - either it will be equity or debt. There is no way around it. From my perspective this $750k is a drop in the bucket. This not a Biotech hoping for FDA approval. We have a proven product with committed distributorships. Cash burn is part of the process. If one thinks there is too much cash burn and the story is not adding up - do not invest in this stock and move along silly rabbit
Actually, jcdean, I did read through the details. And nothing you pointed out changes the fact that this a company burning through massive amounts of cash who just put $750k of "debt" on their books. And they will put another $1.8 million of similar "debt" on their books over the next few months - per their own 8K. Out of curiosity, do you think that's a good thing for a company burning through cash like this to do??
If you're the CEO, and you own most all of the common stock, then yes, it could be a positive (assuming you can use the capital to grow - a track record this company is obviously lacking). Why do you think he struck this deal? I never claimed these investors got a good deal either - the dividend should have been 10%, or higher, and the strike should have been the current price...but I digress.
The point I was making, is that if you're one of these posters ignorant enough to believe this company is already worth $20 million, and you own the publicly-traded common stock - then putting $3 million of preferred stock ahead of you (especially when a liquidation is extremely likely in the next 24 months)...sorry, that's not a good thing! No matter how ignorant you are...
This company lacks any quality senior management. The research is all paid for----obviously not objective. The next quarter to be reported with be another disaster. They have a good product but management and the 'yes' board needs to be tossed out.