Porch: You still must be learning about toxic debt. Unlike normal convertible notes and warrants, where share conversions are fixed and limited, in toxic debt the shares are variable and increase dramatically as the stock's price goes down. The IGOR Note, if I recall, was amended to give the holder the right to convert debt at 85% (or 80%) of the average stock price for the past 20 days. Let's just assume that the conversion price today is 0.0001 (actually it is probably lower, because the stock is bouncing below 0.0001 a lot). At a $6,000,000 note balance due, assuming a conversion price of $0.0001/sh, this means the holder can convert to 6,000,000/0.0001 shares or 60,000,000,000 shares (that's 60 Billion shares). Sixty billion shares is 400% of the current balance of unissued shares of the company. And remember, the IGOR Note is earning interest, since GTCH isn't paying it down. I forgot the rate, but for example, 8% annual interest on a $6M debt is $480,000.
Surprised that the IGOR Note holder has a virtual infinite amount of shares left to draw down? The company's market capitalization--total value of all issued shares-- fluctuates between $800,000 to $1,600,000. The IGOR Notes balance due is $6,000,000 + accrued interest that can convert to shares at less than par. Think about that.
The only limit on the IGOR Note is the cap on ownership of 5% of the company's issued shares. But as the issued shares increase quickly (by conversion and dumping), so do the number of shares the IGOR Note holder is able to draw down by conversion of debt without breaching the 5% cap (assuming he dumps his shares regularly).
How safe is it for naked shorters to borrow 100,000,000 shares at $0.0001 hoping to cover quickly at a lesser price? Pretty damn safe if you know the IGOR Note holder just drew down 300,000,000 shares at a sub-0.0001 conversion price and wants to dump those shares immediately.
GTCH has to find some cash, probably from a sale of a patent, to payoff the hyper-toxic IGOR Note. It is that simple.
