Innovation Pharmaceuticals Inc (IPIX)

[olden_grumpini]

As an IPIX shareholder, I agree that it’s good for IPIX to get financing. It’s also good to understand the quality of the financing they’re entering into. There are differences. Companies with poor prospects that need constant financing exhaust traditional methods and end up burdening their shareholders with financing that dilutes their investments unnecessarily.

While I was no great fan of the Aspire deal, in my opinion this latest financing is predatory. You need look no further than the fact that the purchaser has stated that they can and will short the stock (see (hh) Acknowledgment Regarding Purchaser’s Trading Activity), they can and will trade on the basis of material, non-public information (see 4.9 Non-Public Information), and there is no lock-up period (see 4.1 Underlying Shares.).

This is not an “investor” who is interested in seeing the company succeed. The purchaser will set about maximizing their profit. Their profit will be maximized by driving down the share price to purchase and selling heavily on any spikes. This is dilution at it's worst.

Another poster suggested that this deal was proof that IPIX had a strong hand (material, non-public information sealed the deal). That’s not the way the deal reads. The purchaser gets 10% right off the top (they pay $982.50 for a preferred share that immediately becomes worth $1,080). The purchaser then buys shares at 85% of the lowest volume weighted average price of IPIX’s common stock on a trading day during the ten trading days prior to and ending on, and including, the conversion date. That’s a sweet deal!

IPIX had some control of the rate at which Aspire purchased the shares and, in turn, fed them to the market. That is not present with this latest purchaser. They have the control and they can manipulate the market down to purchase shares at rock bottom prices and sell at the first opportunity.

I hope IPIX has big news. It has to be big because there will likely be many millions of new shares sold into the market.

Here’s another tidbit from the deal: A usury clause.

5.17 Usury. To the extent it may lawfully do so, the Company hereby agrees not to insist upon or plead or in any manner whatsoever claim, and will resist any and all efforts to be compelled to take the benefit or advantage of, usury laws wherever enacted, now or at any time hereafter in force, in connection with any Action or Proceeding that may be brought by any Purchaser in order to enforce any right or remedy under any Transaction Document. Notwithstanding any provision to the contrary contained in any Transaction Document, it is expressly agreed and provided that the total liability of the Company under the Transaction Documents for payments in the nature of interest shall not exceed the maximum lawful rate authorized under applicable law (the “Maximum Rate”), and, without limiting the foregoing, in no event shall any rate of interest or default interest, or both of them, when aggregated with any other sums in the nature of interest that the Company may be obligated to pay under the Transaction Documents exceed such Maximum Rate. It is agreed that if the maximum contract rate of interest allowed by law and applicable to the Transaction Documents is increased or decreased by statute or any official governmental action subsequent to the date hereof, the new maximum contract rate of interest allowed by law will be the Maximum Rate applicable to the Transaction Documents from the Closing Date thereof forward, unless such application is precluded by applicable law. If under any circumstances whatsoever, interest in excess of the Maximum Rate is paid by the Company to any Purchaser with respect to indebtedness evidenced by the Transaction Documents, such excess shall be applied by such Purchaser to the unpaid principal balance of any such indebtedness or be refunded to the Company, the manner of handling such excess to be at such Purchaser’s election.