Including Golden State, mentioned above, and other investors/debtors The company has a total of about$975,000 in long-term notes and/or debentures. These notes can be paid back in cash or stock. The investors have been working with the company to try to find the best balance between maintaining solid company fundamentals, growth plans and cash flows while trying not to dilute the stock too quickly to cause a significant decline in price. However, there are no guarantees or pre-arranged agreements for how much the investors will or will not convert in the future. All the notes have a conversion mechanism that allows then to convert at a discount to market rather than a set price. The overall average discount price of all the notes is around a 30% discount to market. This means if the stock goes up and shares are issued then less shares are needed to reduce the debt obligation and if the stock price goes down more shares are needed to honor the debt obligations. No one debtor will ever own more than 9.9% of the common stock at one time but if every debt holder converted their entire notes over time the company may have to increase their authorized number of shares and may have to issue between 250,000,000 and 500,000,000 additional shares to reduce this debt to zero, based on the current estimated stock price. If the stock price goes down that amount may go up and if the stock price goes up the amount of shares that will be needed will go down. Keep in mind this is a process that may take multiple years or may never happen. These types of conversion decisions are made between the debt holder and the company on a case by case basis. Both parties have the company’s overall best long-term interest in mind but there are no set plans or agreements as to the amount of debt that will be paid back in cash vs stock or the timing of any of these conversions.
