Wednesday, October 14, 2015 12:49:32 PM
On June 30, 2015 pursuant to the terms of the Company Note, the Company elected to deduct and offset the principal amount of $1,300,000 and all accrued interest thereon owing by the Investor under the remaining nine Investor Notes from the amount owed by the Company under the Company Note, leaving an outstanding balance of $252,188 under the Company Note as of June 30, 2015 and total unamortized debt discount of $60,096.
So, as I read all this complex language, it surely seems to me that there will be no further tranches of that particular Typenex credit facility put into play. In fact, the company's newer loans with BofI and Iliad (admittedly another tentacle of Typenex) have obviated the need to draw upon the November 14 credit facility.
This would leave you with a very fascinating question as to why the company wouldn't just sort of repeal most of the large increase in authorized shares. My answer would be that the company has already indicated that it's searching for new capital (via either debt or equity) and that some of those authorized but currently unissued shares would be needed if the equity route is selected.
When you take a look at the June 30 balance sheet, you see that the short term financing debt of the company is only around 577K (192K in convertible notes payable and 385K in notes payable). I would believe that what's the problem is not the size of the debt (I think it to be rather small in the context of the company having roughly $2.5 million market value of its stock). The problem is that the short term debt is short term debt which means all you can do is try to keep on rolling it over until the company starts making a positive bottom line. How close is the company to making a positive bottom line - just as a gross oversimplification, a one cent loss per share strikes me as being rather close.
This company could go under, it really could. But this company could also keep on growing its sales explosively and reach/surpass breakeven to the point where new cash would begin to be adequate to begin reducing the debt exposure. Where I come out on all this is that I think the company will do what it says it's trying to do, namely find some new sources of capital. I think that some of those new sources will indeed be equity, so that there may indeed be some dilution, based upon what price the company can get for new shares. Most significantly, I think the current share price of the stock has already discounted for that eventuality.
All this is just my opinion, and as they say "your mileage may vary." One can make a rational bearish case for the stock, but right now I think that the bullish case is somewhat stronger. We'll pick up this conversation again, I hope, when Q1 sales of the new fiscal year have been announced.
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