Suzanne, pull out the last S-2B. They mentioned there 17 MM shares in escrow, of which 2 MM shares were delivered against conversion of some $430 K or so, these might be the "Bernie" people, that should have left us about $2 MM. Now put yourself in the bandits place, they have 5 days look back, you think they will convert at the maximum price over that trading period? I think not, to the extent they converted, they would have done it at $.04 less 30% or under $.028, lets take $.03. Just these two millions thus would have converted to 67 MM shares. Add to that the 7 MM shares that Gordon had to wait to get back until authorization of additional shares. The last count before the AGM was 97 MM shares, so the additional 25 MM shares, less the 7 MM to Gordon leaves only 17 MM shares as possible conversions. There is an unknown of 7.5 MM shares in additional options granted (I have no idea what was the pricing, but Gordon uses repricing so often, I would assume he could have done that again), thus maybe only 10 MM of the additional shares are from conversion, which at $.03 is only $300 K.
You may want to go back to some recent 8-k describing settlements of outstanding suits, since I believe (if memory serves) that on top of the 7 MM shares temporarily donated by Gordon, the settlement also involved 4.5 MM shares directly from the company. This is from memory, so you may want to check it. If that was the case, then without the additional burn rate of $1.5 MM for the last quarter and $1.5 MM for the present quarter, you still have more than $1.5 MM to convert, and with the last Q and present Q burn rate a total in the neighborhood of $4.5 MM still needs to be converted. At $.03/share, that comes to a cool additional 150 MM shares. That is how the spiral works. That is why I believe that a large reverse split is probably unavoidable. The only miracle to expect is positive cash flow, and so far Gordon has not shown he knows exactly what that term means.
Mind you, the bandits game is not to convert, their game is to short more and more, collecting their money on the first short and doubling up as the price is pushed down. Maybe these bandits are different, but from the time they came on the scene at $.5, they have managed to push the price to less than 1/10 of their original price and I do not see why it is in their interest to stop here, except to provide small rallies (and higher volume) into which to short further.
Zeev |
