Rightsmile, Inc. (RIGH)

[FullDeck]

"Death Spiral Financing" and "Funding Commitments"...

Nobody "funds" for free...

http://en.wikipedia.org/wiki/Death_spiral_financing

Death spiral financing
From Wikipedia, the free encyclopedia

Death spiral financing is a process where convertible financing used to fund primarily small cap companies can be used against it in the marketplace to cause the company’s stock to fall dramatically and can lead to the company’s ultimate downfall.

Many small companies rely on selling convertible debt to large private investors (see Private investment in public equity) to fund their operations and growth. This convertible debt, often convertible preferred stock or convertible debentures, can be converted to the common stock of the issuing company often at steep discounts to the market value of the common stock. Under the typical “death spiral” scenario the holder of the convertible debt initially shorts the issuer’s common stock which often causes the stock price to decline at which time the debt holder converts some of the convertible debt to common shares with which he then covers his short position. The debt holder continues to sell short and cover with converted stock which along with selling by other shareholders alarmed by the falling price continually weakens the share price making the shares unattractive to new investors and can severely limit the company’s ability to obtain new financing if the need arises.

An important characteristic of this kind of convertible debt is that it often carries conditions like a quarterly or semi-annual reset of the conversion price to keep the conversion price more or less close to the actual stock price. But a lower conversion price also increases the number of shares that a bond holder gets in exchange for one bond, increasing the dilution of existing shareholders. A lower price reset can also force investors that have set up a long CB/short stock position to sell more stock ("adjust the delta"), creating a vicious circle, hence the nickname death spiral.

The companies that are willing to agree to financing on these terms are often desperate and could not obtain funding through any other means. The terms, though viewed by some as onerous, give the lender a potential way to recover their debt regardless of what happens to the shares of the company. The lender would have a potentially greater gain if the shares were to increase in value but if they do decrease in value, there is some protection. If this were not the case they would probably not be willing to lend the money given the poor risk profiles of the companies interested in this type of financing.

And on August 21, 2014, just before the major shorting/dumping occurred (see "replied to" post), RIGH CEO Aaron "Angel" Stanz announced....

http://www.otcmarkets.com/stock/RIGH/news/Bud-Genius-Receives-Funding-Commitment-from-Angel-Investor?id=86569&b=y

Bud Genius Receives Funding Commitment from Angel Investor

Aug 21, 2014
OTC Disclosure & News Service-

Funding to establish Bud Genius’ (OTC:RIGH) new subsidiary, called Genius Biotech Corporation, was received last week, and an angel investment group has committed to putting in initial capital for the new project, which will more than double the scope of the company's business.

Regarding the group of angel investors who have committed to putting in capital, Stanz said, “We think it was a great deal for the investors who put money into the project, and also will be a great deal for us. They were very demanding about wanting full reporting, audits, and internal financial controls. All of our shareholders will benefit from this."

The funding commitment will pay for certain company expenses to be announced after paperwork has been signed.

Connect the dots?