to explain, this is note 6 in the 10-q...the paragraph should end with "$2.0 million" rather than "$2.0". it's just sloppy.
6. CONVERTIBLE DEBT
On April 23, 2014, the Company entered into a securities purchase agreement (the “Purchase Agreement”), with Magna Equities II, LLC (formerly Hanover Holdings I, LLC), an affiliate of Magna Group (“Magna”). Pursuant to the Purchase Agreement, the Company sold Magna a 6% senior convertible note with an initial principal amount of $1.5 million and an 18-month term (the “Initial Convertible Note”), for a purchase price of $1.0 million (an approximately 33.3% original issue discount). Additionally, pursuant to the Purchase Agreement, on May 23, 2014 Magna purchased an additional senior convertible note with an initial principal amount of $2.0 million and an 18-month term (the “Additional Convertible Note” and, with the Initial Convertible Note, the “Convertible Notes”), for a fixed purchase price of $2.0.
for what it's worth, their sec reporting is as freaking sloppy as any company i have ever seen. they have more mistakes, and issue more amendments, than any company i have ever seen.
i haven't said it much yet, but i have a feeling i'm going to start saying this until i'm blue in the face. unit sales primarily matter only in the sense that they lead to disposable sales. disposable sales are what will lead to value in this company. if they sell 1000 units, that's $15m or so in revenue and about 1.5m of net income.
however, those 1000 units will result in at least $30m of recurring revenue every year (EXTREMELY conservative estimate) and $27m of recurring operating income (even more conservative).
like i said, the direct impact of unit sales don't really matter...it's the recurring revenue from the high margin disposables.
the bod members were owed $70k for the bod services.
the grant date fair value of 152,174 fully vested options at $0.46 is $0. the stock would have to rise to $0.92 to achieve a value of $70k (simplified).
the grant date fair value of 152,174 shares of common stock at $0.46 is $70k.
options are great as incentivisors to get people to strive to reach certain outcomes in the future, particularly those that will raise the stock price. they're forward looking and attempt to drive future action. however, the bod members were owed $70k for prior services.
i hope you see the difference.
honestly, i don't think the likelihood of a refi changes with the rising interest rates. fwiw, i think their chances of a 2016 refi are slim regardless.
as far as econogeopolitics (i intentionally add econo), i agree those events are somewhat random in their occurrence. ultimately, nearly all companies will be negatively impacted by a negative significant econogeopolitical event. however, some companies are inherently and predictably more susceptible to the impact than others. that's the part that, imho, should definitely be factored in investing decisions...at least mid to long term investing decisions. i believe this holds true for value AND growth stocks.
there were in fact 4 form 4's filed after close yesterday (just before 4:30). the shares were awarded on 8/14, and they were awarded at $0.46. there were 152,174 shares awarded to each of 4 directors, which means the shares were awarded in lieu of $70,000 cash compensation. think of it as the company gave each of the 4 bod members a $70k check, and then those bod members turned around and bought 152,174 shares from the company at $0.46, the stock started dropping two trading days later (the 18th), which could have been due to the time it took for the shares to clear into the bod's accounts. a total of 639k shares were traded on 8/18. the total bod shares awarded were 609k. i think it's entirely possible that these shares were dumped. the shares were awarded to niloff, hart, rosenstock and imhoff. we know that hart has been selling previously. imhoff is the largest shareholder with 9.4m shares currently. it will be interesting to see if any of these folks report sales this week. if they did in fact dump, i wonder why, and why they would have done so in the manner that they did. who knows...maybe they agreed they didn't want to collectively pull $280k of cash out of the company, but they immediately dumped because they wanted their cash.
if you're looking for these on the sec website, make sure you click the box for "include" under ownership once you get to the page for the company's filings.
ok...so, since they assigned a unique 800 number to you, you most likely got one of their proxy numbers. they primarily use proxy numbers to track the number of leads that they generate. interesting. i'm assuming that you have been told to assign all of your other forms of advertising to your pre-existing phone number (not the 800 number they gave you).
are you going into a print directory this coming year? if so, it will be interesting to hear how many leads you get. supposedly, lawyers, plumbers, ac repairmen, restaurants (especially pizza places), and a few others benefit the most from print yellow pages these days.
"I think a rate hike is not as dangerous as the variety of explosive situations in the global geopolitical environment."
when it comes to dxm's future, absolutely...especially if you change "geopolitical" to "econogeopolitical". dxm is likely one significant us economic downturn away from ch 7, or an extremely damaging ch 11. the housing bust hit rhd/dexo/idar/spmd/dxm early, and it hit them hard.
are you saying their products do work, or do not work? if you're a lawyer, which i believe you have stated you are previously, you should be in one of the few industries where their products (especially their print products) do provide a positive return.
as far as interest expense, their interest expense (and associated cash outflow) would likely go up, but not necessarily...their interest rates can be based on either prime rate, fed funds rate or libor rate, depending on factors including company discretion. also, like i mentioned earlier, they limit some of their variable rate exposure with variable to fixed interest rate swaps.
in general, it would help dxm by lowering the value of the debt, therefore reducing the amount they have to pay to extinguish debt. however, there are some technicalities here to keep in mind. most of dxm's debt (all except the sr sub notes) are variable rate. this reduces the impact of interest rate changes on the debt. on the flip side, dxm hedges some of their variable rate exposure with variable to fixed interest rate swaps, which increases the impact of interest rate changes on the debt. finally, there's a relatively short period to maturity (2 years) which would again reduces the impact of interest rate changes on the debt value. net net, considering that any interest rate hikes are likely going to be minimal at this point in time and the aforementioned factors, i believe the impact to dxm will be minimal.
ahh...you got that from their 2013 cc transcript. 2013 reported pro forma free cash flow of $176 is not comparable to 2014 $193 adjusted pro forma free cash flow.
this is from their 8k earnings release last week:
Adjusted Pro Forma Free Cash Flow (13)
the $193 is the ytd 2014 adj pro forma fcf, and the $206 is the ytd 2013 adj pro forma fcf.
it's a decline of 6%...i wouldn't define it as mild, but proceed as you see fit.
where do you get 176m for the first 6 months of 2013?
if you're referring to free cash flow (which the $193 that you reference IS free cash flow) the number is 206m for the first 6 months of 2013, and it's adjusted pro forma free cash flow, not just pro forma free cash flow.
in other words, free cash flow has decreased 6% year over year.
this company has issued MANY 424b3's with the same language, and there hasn't been any panic selling by a low iq wealthy investor before. i highly doubt that's the case this time. in fact, many many companies issue 424's to update prior registration statements, and i have never seen it result in a misinformed panic sell-off. i just have a hard time believing that's the case now.
having said all of that, i have previously seen some panicked confusion by commentors on this message board about gthp's 424b3's in the past, so who knows.
i find it interesting that the company needs financing, has 5.6m warrants at $0.359 and the stock price is trading where it's at today. not sure if there's any correlation or not. perhaps somebody is exercising and that's pulling the price down, or perhaps somebody else is attempting to bring the price down to block the exercise of those warrants.