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Technology Stocks : TAVA Technologies (TAVA-NASDAQ) -- Ignore unavailable to you. Want to Upgrade?

To: Judge who wrote (20749)	7/16/1998 4:54:00 PM
From: CalculatedRisk	Respond to of 31646

Cathleen, here is how I calculated the 22% interest rate on the initial $4M: 1) the specified interest rate is 11.5% payable quarterly. 2) the discount on the warrants (155,000 shares) at $6.25 per share is $315,000 (IMO this should be higher). The "discount" is estimated and would usually be taken over the life of the loan ... but that is not true here. The discount will actually be adjusted as the warrants are exercised, to reflect the market value at the time of exercise. Since additional warrants will be issued in Dec '98 and Dec '99 (if the loan is still outstanding) this discount should be applied to the first 9 months (March 27th to Dec 31st). NOTES: a) I am not including any costs associated with the loan (this would increase interest rate). b) money received from the exercise of the options is not included. If you want to include this additional $950K as part of the loan principal, then you would need to include this same sum ($950K) as part of the discount. Now the calculation: $315K / $4M / 9 months = 10.5% + 11.5% interest rate = 22% cost of money. This is a very steep price to pay for money. Regards, Bill