PositiveID Corporation (fka PSID)

[kappak]

Rob,

You're chasing this rabbit down the wrong hole, and we are talking about two different things.

It is a voluntary restriction in that it was a business choice to enter a PIPE deal or perpetually enter into a PIPE deal. IR can chose to increase it's ownership beyond 9.99%, but not through *this* PIPE deal. Choosing to not go on beyond 9.99% is a business decision. There is nothing preventing them from buying up shares to increase their position outside this prospectus, which would require greater reporting requirements, but that is not their model.

Suffice it to say, PIPE deals are extremely dilutive as evidenced by the ever increasing share count. This share count accelerates as the price drops.

As the stock goes down, the 'next' PIPE deal requires even more shares to cover the capital requirements to pay dividends, or raise the same amount of money.

If a company needs $100, and issues shares at $0.70 to an investor, that would be 142 shares.

When the company needs its next round of financing, it still needs $100, but now the SP is at $0.50, and issues shares at $0.35 to an investor, that would be 285 shares.

When the company needs its next round of financing, it still needs $100, but now the SP is at $0.25, and issues shares at $0.1875 to an investor, that would be 533 shares.

A fascinating study would be to correlate shares outstanding, with stock price. You are welcome to do so. You will find at the SP drops, the rate of shares issued in Series F conversions accelerates. The only way this happens is if IR dumps more shares so that they can convert even more shares, while still maintaining their 9.99% ownership.

Eventually the company does a R/S wiping out everyone except the insiders.

http://stockcharts.com/h-sc/ui?s=PSID&p=W&b=5&g=0&id=p13339895607