leslunier, I have looked through my past posts and don't see any where I asked you that question. I think you’re confusing me with someone else.
There is a 30% discount up front as you stated but that will be recovered upon Nasdaq uplisting as I will explain later on. There is no conversion with a 20% discount to market. If Yozma converted and immediately sold, they would have no immediate profit as you claim. You need to go back and read the filings again if you believe this is the case.
I’ll give an example based on the declining share price that has occurred since the funding was announced. In my opinion this is merely likely due to increased shorting of the stock (link previously posted) and not because Yozma is dumping shares. They would lose money doing that in this environment.
Let's assume Yozma decided to start converting $1M of the principle loan amount every week, starting at the initial conversion price of $0.0599 per share. That is the price they convert. There is no 20% discount from that price at the time they declare their intent to do the initial conversion.
$1,000,000 / $0.0599 = 16,694,491 shares
For the sake of this discussion with the share price declining as it has, I'm going to assume a reasonable lower volume-weighted average share price (VWAP) instead of actually calculating the 10-day VWAP (too much work).
Since the share price has moved lower, if Yozma dumped these 16.7M shares on the market they wouldn't even get their $1,000,000 cost basis back, and because they converted those shares, that's another $40K in lost interest from Todos over the term of the loan.
After the second week, because the share price has continued to trade lower, Yozma declares intent to convert another $1,000,000 of the principle loan amount, utilizing the lower conversion price calculated for the 10-day VWAP, which by its very definition in a declining price scenario MUST be higher than the CURRENT share price. If the current share price is now $0.05, the 10-day VWAP is probably around $0.055.
$1,000,000 / $0.055 = 18,181,819 shares
If Yozma decides to dump these new conversion shares into the market, they will do so at the current price of $0.05, and they would take a loss of about $91K on the transaction, plus the $40K in lost interest on the converted amount.
After another week passes with the share price continuing lower, Yozma does another $1,000,000 conversion. The stock is now trading at $0.047 and 10-day VWAP is now $0.050.
$1,000,000 / $0.050 = 20,000,000 shares
If Yozma dumps these shares in the market at the current price of $0.047, they take a $60K loss on the transaction plus the $40K in lost interest on the converted amount.
So, there is no instant profit for Yozma when converting if they were to sell the converted shares. In each conversion, the conversion price is ALWAYS higher than the current share price if the share price is declining. There would be no incentive to convert and then sell the converted shares unless they enjoy losing money. The current share price is very close to the $0.04792 minimum conversion price dictated by the terms of the agreement that provides a maximum of 20% discount to the initial conversion price of $0.0599.
The only scenario where Yozma would have a profit potential immediately after conversion is if the share price was rising and the 10-day VWAP was below the current share price. As I've stated before the VWAP will always trail the current price, no matter which direction the share price is moving. In the terms of this agreement the share price would need to move significantly higher than $0.0599 in order for Yozma to have any incentive to unload their shares after conversion.
In my DD, Yozma doesn’t appear to have the reputation of a toxic financier. Their best strategic move in this scenario with a declining share price is to convert as the conversion price adjusts lower and hold the shares, and then work with the company to promote and advance the business. If they waited 6 months or a year to convert, they may have to convert at the $0.0599 price instead of the lower adjusted price they have now. They have to weigh the risk of converting now and losing the 4% interest payment on the converted amounts. If they are converting now, since no profit can be made at current prices on the conversion, they must believe the share price is going higher.
The 30% original issue discount will be returned to the company in a share transaction automatically when the uplist is executed, per the terms of the agreement, which I posted earlier. The effect of this transaction will be no different than if the company had received the entire $4,857,142.86 up front and Yozma converted this entire amount to shares at the conversion price.
Sorry for the long post. I hope this helps some better understand the mechanics of this funding and conversion agreement.
