We're OK, it's the psyche of the thread that's been battered. But, numbers are what counts in this game called the stock market. We have to face the fact that there is going to be dilution. The big question on everyone's mind, I think, is how bad can it be?
That's why I asked Ditch, what's his worst case scenario. He admitted he doesn't know, I don't either, but I'm willing to throw some ideas out .....
Worst Case. 100,000,000 million shares are currently authorized.
Management & Beneficials owners currently (presently exercisable options included) control 42, 655, 985 shares as of the date of the report.
$10,000,000 debentures authorized; $2,500,000 allegedly placed (First Tranch) $1,575,000 actually sold and funds received by the corporation. And, we know that: One of the debentures in the face amount of $125,000 has been converted and approximately 531,915 of the escrowed shares are due to be delivered to the investor, plus interest. (Whoever this is got a pretty good price)
So let's extrapolate this last bit of information: $125,000 = 531,915, let's say 532,000 for easier calculations. But first an assumption: let's say this is the average of all the conversions knowing full well that some will be higher and some lower.
If all $10,000,000 are converted we have $10,000,000 divided by $125,000 = 80 X 532,000 = 42,560,000 shares. Plus or minus whatever fudge factor anyone want to employ.
The shares have already been authorized, 100,000,000.
The company gets $10,000,000 to tide them over between contracts.
BUT, what if the $10,000,000 is not needed? What would the worst case be with only $2,500,000 in outstanding debentures?
Then the equation becomes $2,500,000 divided by $125,000 = 20 X 532,000 = 10,640,000 shares. And...
What if, with just the Signature deal alone, we have the cash flow to handle all SG & A, and enough left over to pay off the debenture holders, if they want cash instead of shares, that now have the potential to be worth much more than cash @ 8%. If they opt for shares then $2,500,000 indebtedness is off the balance sheet.
Then throw into the mix a little Babe Ruth action, (those kids better be good doorbell ringers), our relationship with Lifetime gets slowly off the ground with 5,000 of the 100,000 schools participating initially, Ramirez gets in good with the Hispanic Websites that are coming up and MyMusicCard suddenly says "Se Habla Espanol", John Hwang and his minions start beating the bushes and come up with some contracts and enough revenues to pay for his group with some left over for the bottom line, MyPhotoCard gets national exposure along with a couple of other "promo" deals PRd by the new house mouthpiece.
You know when it is all laid out I don't think it looks too bad. It certainly doesn't resemble the TSIG I first bought last April (gosh, I'm long term this month). We will probably have more bad news of some sort or another in the future, but like this current episode, it will pass. And we'll go on to worry about something else.
Agree? Disagree?
Thanks,
Joe |
