I was reviewing the calculations and am reasonably close to your calculations, Paul, except that I think at least the second $ 7.5 mm, and perhaps even the first $ 7.5 mm as well, (which is dependent on a milestone), would have its conversion price set after the milestone were met - press release reads "If the Company meets a certain milestone, the Series A convertible preferred stock will be convertible at a variable price after twelve months from issuance."
This implies to me that if the company can meet this milestone (which is probably one or more contracts and possibly some minimum revenue generation)and trigger the second tranche, it is likely that the conversion price would be higher than the $ 6.00 you are using. My own guess is in the $ 10 - $ 12 range, which would imply a second trance dilution of roughly 600,000 - 750,000 rather than the 1,250,000 your calculations assume. Thus I get a likely overall dilution of 1,250,000 (maximum first tranche, perhaps as low as the 600 - 750 k for the second tranche), plus 675,000 (split the $ 10-$12 difference), plus the 444,000 for the warrants attachec to Carl Berg's note. Thus my dilution estimate is 2,369,000, around the 10% level. I had stated in the 10%-15% range earlier, and I think it reasonable that it will eventually end up around the 10% level.
Now, this depends upon execution of the ability to produce, get an OEM contract, etc. or the naysayers will be right and the second tranche as well as any further financing would be at significantly lower levels.
Also, a word about shorting against the price. There is some pretty stupid speculation about investors, even including Castle Creek Partners, would short common into their conversion price. Doubtful, in my opinion, since (1) the control of the timing of the milestone is not in their hands- it's in management's hands, and (2)VLNC already has access to what I believe are sufficient funds to complete their rampup, so shorting only makes sense if the short seller truly believes the company will fail to produce with the new funding - and that makes that short selling decision really indpendent of the financing. |
