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Tuesday, March 19, 2024 5:41:42 PM
Trillium is also an equityholder - they own a ton of Preferred Shares. They they want to see a high return on those Preferreds when they convert to Commons (at a high share price). They won't shoot themselves in the foot by converting and diluting too early IMO.
Most OTC companies have little to no revenues, no profits and no cash flow. Most OTC companies that take on toxic financing end up in a death spiral as they don't have sufficient free cash flow to repay the principal and interest on the convertible debt before they mature.
ReachOut is the rare unicorn OTC company that is a mature business, revenue generating, profitable, cash flow positive and growing.
ReachOut needs capital to fund their MSP acquisitions. They'll fund the acquisitions with cash upfront from the convertible notes (along with acquisition financing and shares). With "shares as currency" for acquisitions, Trillium can provide the liquidity for the acquired to liquidate.
Moreover, there should be sufficient accretive free cash flow resulting from the acquisitions over time to repay the notes before maturity.
Moral of the story - although most OTC unprofitable companies that take on convertible notes end up in a death spiral, it does not suggest that will translate here if Mr. Rick Jordan successfully executes his serial compounder MSP roll-up.
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