Let me explain somethings.
(1) "They haven't produced any income (revenue/profits) in years."
Correct! You see all this little business lessons I have been writing this past week?
That is what they should have been doing in the interim while there claiming portfolio was being built.
This is what angers me. I see laziness or incompetency there.
BUT, with that said, doesn't mean they HAVE to go that route. After all this is a RESEARCH COMPANY. They are not obligated to go any route they don't want too, folks. JEEZ!
(2) "Why did they even take a toxic loan?"
I hate to tell you folks, but guess what? ANY loan can be considered toxic! O-M-G...he said what? IMPOSSIBLE. WRONG!
Toxic loans have certain qualities that make them more of a toxic loan and are therefore considered (and usually dubbed by many) "toxic" loans. For example, loans that have really high percentage pay back rates.
(3) "Why would any CEO/CFO do this?"
This one is tough to explain (and it hurts), so bare with me, okay?
You know how I have been saying many times over that it's all about management? Guess what, this is where it comes home.
CEO's/CFO's don't fully understand toxic debt? WHAT?!
And I will let you in on another little secret... Examining the terms of a convertible note and understanding how they could impact a company can be challenging, even for an experienced securities attorney. :) Boy that's the truth!
CEO's have no business trying to raise funds. There's a few reasons from lack of knowledge to believing they can pay back the loan within the term structure.
Contrary to what most believe, there are also instances when a defaulted note is converted and it becomes good for the company by increasing shareholder base and providing working capital that doesn’t need to be paid back.
Again I am not saying any of this is really true for this company! I don't know what they did!! But they mismanaged alright.
