imis...(put something here)
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What can Glenn King say that is not already known from the bankruptcy court filings? At this point I do not see what he can add to the story.
All good points and it would be good to have an explanation as to the low revenues since the company had been touting continuing revenue growth.
I found this on page 9 of the 10-Q and it was not about the new TSA IDIQ as I had thought:
"On October 16, 2014, the U.S. Department of Homeland Security (“DHS”) selected our proposal to develop next generation explosives trace detection screening systems for funding. We entered into a cost-plus fixed-fee contract with the DHS on August 24, 2016. The contract consists of a definitive task and an optional task, each valued at approximately $1.1 million. The total performance period will be twenty-four months, provided the optional task is exercised. The project commenced in the first quarter of fiscal 2017."
So I was wrong in thinking I had read something in there about the new TSA IDIQ.
That law cited is talking about the interest rate not the price of the share conversions.
Sure,it definitely can be "ascertained by reasonable inquiry" they charged 2.5% interest at times. Obviously the Equity Committee found instances where they did. Reasonable inquiry would just be looking at the interest charged over a given time period.
Ok you are right, I was not paying attention to the math. However unless the debt is reduced it is hard to see how there would be any more than $22 million left.
Equity Committee mentioned Massachusetts law but as you point out even if PP claims New York law it is still a violation. Seems pretty straightforward when Equity Committee said PP was at times charging 2.5% a month! It clearly is not legal to charge an effective 30% annual interest rate in NY or MA.
The motion by the Equity Committee said Massachusetts' law also says the loan can be voided by the court. That might just be one possible outcome, but it is the one the Equity Committee cited in their motion.
Somewhere in the 10-Q it said work had begun on the new TSA contract. That seems to imply manufacturing has begun but no deliveries. Seems unfair that L3 will get the revenues when those units are delivered. They are assuming some liabilities which might be the bills associated with manufacturing these units but without knowing for sure, hard to tell if we are paying for these units and not getting the revenues for them or not. Considering everything else, most likely this works against us and in L3's favor. Just one more thing that is unfair about the L3 deal, where work is done against the contract prior to the sale and revenues not recorded until after the sale. Unless units have been shipped and paid for between October 1 and now. All this is a guess but given past history not optimistic that it works out fairly for us.
No, there will be another 37 million shares if they convert at $0.19 so you have to factor that in.
How did they negotiate those $0.19 shares on the $7M debt? As is noted in the 10Q the share price was $0.44 at the time so they had to take that $9M non-cash charge as a result to account for the shares being set at a rate below market price. Why would anyone agree to that unless some coercion was involved? That is some penalty to have to reprice the shares from $1.09 to a price well below the market value of $0.44.
The conversion of $7M was due to the Zapata deal:
"the conversion price for the September 2012 Note was reduced from $1.09 to $0.19 per share for up to $7,000,000 of the obligations thereunder, DMRJ agreed to convert $7,000,000 of the principal under the September 2012 Note prior to the consummation of the Zapata Acquisition, and the remaining conversion rights under the September 2012 Note and the February 2013 Note were waived'
It still is odd about who they transferred some of the preferred stock to.
The preferred stock is still being counted in the total debt figure of $84M, which is good as it almost seemed like there was an additional $7M due DMRJ.
It makes no sense for them to convert those shares to common stock anymore at $0.19 a share.
"The increase in the net loss is primarily due to non-cash interest charges of $9,217,000 and $15,703,000 recorded in the current period in our condensed consolidated statements of operations on the note conversion beneficial conversion feature and warrant derivative liability, decreased revenues and gross margin, increased operating expenses and an increase in interest expense. "
The $15.7M has to do with the issuance of those warrants for DMRJ to purchase 50M shares tied into the Zapata deal. They were to be canceled if the deal does not happen so that non-cash charge should go away.
The $9.2M is due to reprising options on the $7M debt from $1.09 to $0.19 and the fact the stock was trading at $0.44 on the date they were repriced. They had to record the difference between $0.19 and $0.44 per share as a "beneficial conversion feature.
What a mess, but at least those warrants for 50M shares go away, they were canceled when the Zapata deal went away.
DMRJ converted the $7M in debt to 7000 Series H Preferred shares in August, Those are convertible to common stock at $0.19 a share but makes no sense for them to do so. The 7000 Series H shares are worth $1000 each so they get their money back. It also removed $7M in debt from what could be challenged, kind of sneaky on DMRJ's part. Also those shares are distributed between 3 entities:
"Between August 11, 2016 and August 23, 2016, DMRJ converted $7,000,000 of principal into 7,000 Series H Convertible Preferred Stock shares, of which DMRJ assigned 4,401.54 shares of Series H Convertible Preferred Stock to Platinum Partners Value Arbitrage Fund LP and distributed 1,467.18 shares to ED&F Man Capital Markets Limited and 1,131.28 shares to Prime Capital (Bermuda) Limited."
That looks rather fishy!! Who are these other two entities?
It is supposedly confidential material, but the judge will get to see the unredacted filing, which is filed under seal with the court. Unfortunately the rest of us may never get to see the redacted text, unless it is later decided it is not confidential.
In their motion it says:
'The Complaint contains sensitive information concerning the Defendants' businesses and provisions in nonpublic agreements and other documents between the parties and is largely premised on documents and information that were provided to the Committee subject to the terms of a confidentiality agreement (the "Confidential Information"). Reserving all rights with respect to such Confidential Information, including but not limited to whether such Confidential Information is indeed confidential, the Committee has redacted those portions of the Standing Motion that describe the allegations set forth in the Complaint, as well as the Complaint itself, in an abundance of caution, in order to avoid the public disclosure of any Confidential Information"
Exactly. They are now using the indictments as an excuse not to produce any more items under discovery, even though the discovery deadline was December 9! I'm sure the judge is going to love that.
So the investigation cannot be completed without the rest of the discovery.
Time to freeze any funds due Platinum, stop interest from accumulating, as it's their fault that the discovery authorized by the judge is not being fulfilled.
Platinum's lawyers probably knew the indictments were coming down, so they stalled turning over anything and then now are using this excuse that they won't be able to at all until the criminal case is resolved. Too bad the Platinum CFO's deposition was scheduled two days after the indictments, if only it had been scheduled for sometime last week...
Yes, item #78 implies that they would not renew the financing unless Bolduc was gone as there's some redacted text in that item. Before that as you show, they lay the groundwork to show that at that time, there was good reason to expect they should have been able to obtain better financing.
Whatever is behind the huge amount of redacted text must be some very fascinating information!
In this case money from the sale is to be paid to a lender who according to the motion filed, engaged in illegal activity directly involving those loans. What everyone is talking about is whether that lender should be paid the money owed them, when the loans have had this illegal activity by the lender.
The motion points out one law broken that says the debt to the borrower is canceled.
Hard to expect that if this illegal activity directly involving the loans to IMSC is proven, any case can be made for the money to be paid back to Platinum.
They've filed a motion to request the time be shortened a little, so the hearing can be held on January 10. They are asking for the deadline for objections to be filed be moved to January 6. Of course if that motion is denied the hearing will be on January 13.
There's too much redacted text in the section titled "Implant Sciences' Attempts To Refinance, And DMRJ Dominates And Controls Implant Sciences To Preserve Its Lucrative And Illegal Relationship With The Company. "
Probably in that redacted text is the evidence they've found - see http://www.kccllc.net/imxacquisition/document/1612238161222000000000004 - starts at bottom on Page 16. That section also has something about Bolduc's firing but it is also heavily redacted.
Hard to see how anyone in good conscience could suggest any funds be paid to Platinum now that they are under SEC charges and their principals under criminal indictment. Any money paid to them will disappear with no hope of recovery. That should simply be enough to make a strong case to hold any funds due them until this gets sorted out.
There has to be a lot to back up the charges made about extortion, coercion, divulging insider information and/or trading stock on it, in all that redacted text! Not to mention that they got all that without any cooperation from Platinum, just based on what they got from IMSC.
One can also argue if the company had obtained better financing, they could have developed the new handheld sooner and that could have made a real difference.
Same here, let the bankruptcy judge rule on the amount of money owed, anything else can be settled later in criminal court. Platinum's involvement in Bolduc's dismissal as well as other affairs of the company, makes them an insider which says all their share trading violates federal security laws. It is blacked out, but they made a lot of profit on the debt they converted to shares. So all those profits are illegal, which may be quite a bit. At the very least those illegal profits should be subtracted from the amount owed.
The motion says: "In fact, as set forth more fully below, DMRJ exercised such control over the corporation that it, at all relevant times, was and still is, an affiliate of the Company as defined by federal securities law. Therefore, each of DMRJ's sales of the
Company's stock constituted a sale of restricted shares in violation of federal securities law. "
That does not take into account anything else in the motion, which may further cut the debt owed.
In regards to not allowing IMSC to refinance:
"From the outset of its dealings with the Debtors, DMRJ exploited its relationship as secured lenders to the Debtors to amass an unconscionable profit through the use of threats, manipulation and coercion to permit DMRJ to reap the benefits of, among other things, insider trading and a usurious interest rate—all the while tortiously interfering with the Debtors' ability to obtain more favorable financing. Through its coercion and manipulation, DMRJ has, among other things, amassed over (BLACKED OUT) in illegal proceeds in addition to the millions of dollars in illegal interest it has received, all to the detriment of the Debtors' estates. "
The evidence of "threats, manipulation, and coercion" had to have been found in information given to them by IMSC. Platinum/DMRJ have not been cooperating with the discovery:
"The Committee has yet to receive the majority of Platinum Partner's and DMRJ's document production. The Committee's counsel engaged in discussions with counsel for Platinum Partners and DMRJ regarding the delay in production of relevant documents and was promised the documents no later than Friday, December 16th—more than a week later than the Discovery Deadline. Even with the additional time, Platinum Partners and DMRJ failed to produce the documents as required by the Stipulated 2004 Order. In light of the aforementioned indictment against the DMRJ Executives, the Committee was informed by Platinum Partner's and DMRJ's counsel that it is unlikely to receive this critical discovery within any reasonable timeframe, and depositions of any Platinum Partners
or DMRJ individuals have been delayed for the foreseeable future. Indeed, at this juncture, Platinum Partner's and DMRJ's counsel has indicated she cannot even predict when the documents in question may be produced. "
Right - who really thinks the full extent of "the brazenness and the breadth of the defendants' lies and deceit" has been uncovered? The DOJ and SEC might have gone after the low hanging fruit and not even up until now looked into Platinum's dealings with IMSC. Perhaps that will be what they look into next.
Seems like if any debt is paid back, given the lenders are DMRJ, Montsat, and BAM - money has to first be paid to those entities who then somehow move the money to the mother organization Platinum, which would then pay money to its investors. That assumes the money is actually going to get to the investors and not disappear somewhere within Platinum like the other $920+M.
One would think being under all these charges, Platinum's money may be frozen not allowing them to move money around between their entities.
This would be another argument for not paying out the money due to Platinum and holding it. Also since this is not IMSC's fault that Platinum is under all these charges, no more interest on the loans should be allowed to accumulate.
No one in management has to have colluded with PP for there to be problems with PP's loans to IMSC. They were allowed to freely convert debt to shares, and then trade those shares at anytime, without being considered as insiders even though they had to have information regular shareholders did not. There's also the questions surrounding Glenn Bolduc's departure and if Platinum had a role in that, they certainly would have to be considered insiders. That could have been coercion, were they threatening not to extend the debt if Bolduc was not let go?
You are right, I stand corrected. I should have said no reasonable argument can be made to stop the investigation.... Mr. Turmelle when he is deposed ought to be asked why he is so anxious for the investigation to be stopped. After all this time, he is all of the sudden looking out for shareholders and trying to preserve their equity? It is as unbelievable as Platinum having all this other illegal activity yet there's nothing at all illegal with their dealings with IMSC.
I'm sure the judge would not have given the equity committee additional time if it weren't for the fact that at the time he made the ruling, he knew Platinum was under investigation. That is what makes this case unusual compared to other bankruptcy cases. The situation has gotten worse since then, with the criminal charges against Platinum's senior management and the SEC case against Platinum itself. There's no case that can be made for stopping any investigation into the Platinum debt now. Anyone can conclude that since Platinum was involved in all this other illegal activity it is quite probable there was illegal activity involving Platinum's loans to IMSC and that needs to be fully investigated.
I also don't think this is quite the same as the Madoff case. True, just like with Madoff, investors put money into Platinum's hedge funds and were given false information on how the funds were doing. Madoff did not use the money in the funds to make loans to companies and make it impossible for them to ever get alternate financing, causing them to never able to be profitable, so that's where this case is different. In this case if there is illegal activity on the part of Platinum, illegal loans should not be repaid.
PP made money off of converting debt to equity, possibly they made back a good part of the principal selling cheap shares for a much higher share price. Let someone figure out where the proceeds from those share sales went and pay the PP investors out of that money.
In this case there's nothing equitable about paying a bunch of criminals $80M. I don't think there are many Chapter 11 cases out there where the primary lender has both criminal indictments and SEC charges filed against them.
Allegedly according to the company they do not think they are liable for the $350K fee to Zapata. Not that anything the company says can be believed...
The L3 sale was accepted last Friday. All that is left is for the debt to Platinum to be resolved. The calculations in that alpha article, the author based on L3 being the buyer for $117.5M and Platinum being paid in full. They came up with $0.15 a share minimum. Platinum's debt is the only remaining unknown factor if it is reduced and how long the investigation continues.
They must have made all the principal back just on share conversions and selling at a much higher price than they converted. There is no doubt they must have felt highly threatened by the TSA IDIQ showing the company would have a steady stream of income and would help it get better financing. They had to expect Glenn Bolduc was pursuing alternate financing, getting rid of him and replacing him with someone who did not have a financial background would be a great way to stop that from happening.
Turmelle seems to want the investigation stopped as quickly as possible. There must be something threatening to him if it continues, perhaps showing Platinum had influence on him. We know from the criminal investigation they exerted influence on other companies' board of directors.
On April 6 the current loan was extended, but no new money was provided. Then at some point that extension was deemed not to be effective due to them being in default of the agreement ending March 31. There were revisions as a result of that, which weren't announced until July.
Perhaps the reason they were determined to be in default as of March 31 should be investigated. It sounded like there was some disagreement about that, and they were not determined to be in default until some time later which then caused the agreement signed April 6 not to take effect. Did PP force them into agreeing they were in default?
This is what they 8-K says as to them being in default:
"However, despite the best efforts of the Company, DMRJ and the Assignee, certain post-closing effectiveness conditions to the Fourteenth Amendment with respect to the delivery of an opinion of counsel and payment of the fees and expenses of DMRJ and the Assignee were not satisfied, and the Fourteenth Amendment was, therefore, never deemed effective, resulting in the Company being in default of its obligations to DMRJ and the Assignee since March 31, 2016."
All of that may somehow play into why they were not paying rent.
Glenn Bolduc was removed right around the time the company should have been able to obtain better financing after getting the TSA IDIQ. It was during the Morpho protest of the TSA award, but they should have been able to arrange financing pending the dismissal of Morpho's protest. Let's hope that it can be shown PP exerted pressure to remove Bolduc for that reason.
The SEC filed charges against Platinum yesterday, in addition to the criminal charges the DOJ filed against Platinum's officers. Maybe the SEC needs to investigate Platinum's involvement in IMSC. The charges the SEC filed were the same as the criminal charges against its officers. Platinum could be facing huge fines in the SEC case.
Fine then, management may be dishonest but it wasn't in regards to the QS-B220. That seemed to be one of the things you were suggesting. If so they hoodwinked the TSA and a bunch of other countries into buying them. The QS-B220 was tested by the TSA's testing lab so they would have had to been in on the scheme too. Not sure how anyone could believe the QS-B220 was not genuine.
Platinum Partner's Chief Financial Officer is scheduled to be deposed on Wednesday by the Equity Committee!
That is exactly the problem, any federal fraud case will take a long time to resolve. All we can hope for is that Platinum will want to make the distraction of the IMSC bankruptcy case go away and will be willing to settle for a much lower payment on the debt. Otherwise the interest on the debt keeps accruing, unless the judge were to rule that could no longer happen due to the delays caused by the criminal investigation.
Perhaps a subpoena should be made to obtain the IP address of "Percy14".
It seems to be the reason they were found in default is on this paragraph:
"On April 6, 2016, the Company, the Company’s subsidiaries C Acquisition Corp., Accurel Systems International Corporation and IMX Acquisition Corp. (collectively, the “Guarantors”), DMRJ Group LLC (“DMRJ”) and Montsant Partners LLC (the “Assignee”) agreed to enter into an Omnibus Fourteenth Amendment to Credit Agreement and Sixteenth Amendment to Note and Warrant Purchase Agreement, effective as of March 30, 2016 (the “Fourteenth Amendment”), subject to certain conditions and post-closing effectiveness conditions, to extend the maturity date of the Company’s obligations to DMRJ and the Assignee and change other various elements of the Company’s credit arrangements with DMRJ and the Assignee, including the removal of the “blocker” provision that limits the conversion by DMRJ and the Assignee of their convertible secured promissory notes into common stock to 4.99% of the then issued and outstanding shares of the Company at any one time. However, despite the best efforts of the Company, DMRJ and the Assignee, certain post-closing effectiveness conditions to the Fourteenth Amendment with respect to the delivery of an opinion of counsel and payment of the fees and expenses of DMRJ and the Assignee were not satisfied, and the Fourteenth Amendment was, therefore, never deemed effective, resulting in the Company being in default of its obligations to DMRJ and the Assignee since March 31, 2016."
So because the 14th amendment never became effective they were in default since March 31. The question not answered above is when it was determined the 14th amendment did not become effective. It probably was known by May so in that case it should have been disclosed.
The paragraph above is taken out of the Zapata announcement when they finally disclosed this. They had to know sooner, and it should have been disclosed as soon as it was decided the 14th ammendment never became effective.
Clearly the May earnings call was highly misleading, around that time they appeared to be trying to arrange DIP financing for Chapter 11. That is mentioned in the court docs on the DIP financing!
Plenty of ammunition for the Equity Committee for the depositions!
The court documents about the DIP loan showed IMSC first tried to get it from Platinum several months earlier, then from L3, and finally they got it from the initial DIP lender. Platinum knew well ahead of time IMSC was going to go Chapter 11.
There is the BAM loan for $20M but hard to know what the relationship between BAM and PP is.
It could very well be that most of the $80M Platinum was saying they would return to their investors was going to come out of IMSC paying back the Platinum debt.
I remember him disclosing it was in the certification process, and don't remember him misleading what steps were left to go through. I don't remember him giving some specific timeline but it's been awhile, admittedly.