The warrants issued for preferred share stock conversion are only necessitated to be 50% of the value of the conversion value. The agreement states the company must maintain availability of shares up to the full conversion of preferred stock share value (per the terms of the agreement). So you should double the amount of warrants issued/exercisable, and immediately take those out of the equation. Then add in the rights of the financiers to purchase up to an additional $1.8 MM above the amount initially invested, for a total of $6 MM, and the further necessity for the company to maintain adequate common stock holdings to fulfill this agreement, and you leave very few shares for the company to dilute. I am too tired to do all the math for you, right now, but you can read through the initial announcement of sale (stating conversion rate to 55 MM shares at the lowest), and the filing's terms to find all the information you need. The company cannot dilute 45 MM shares into the open market without serious detriment to the value of the share price, or risk having to increase A/S to a level necessary to protect initial investor value. The terms of the agreement also state that the company cannot make offerings of common stock or preferred stock furthermore, without also accommodating allowances for initial investors the same price offerings or share value issued. This restricts the ability of the company to dilute openly into the market without approval and proper procedure/filings to protect the initial investment made by the new investors (and also would notify common shareholders of any dilution by the company). Again, the only people allowed to currently exercise warrants and offer shares into the open market would be the financiers, but that would still necessitate the proper filings to notify the public of their actions. The 8k has the full terms of the agreement, and even includes the initial PR of new investment amounts and requirements. Please read all the way through, as boring as it may be.
