Aiming, Good question. I've had no previous experience with companies that have floorless convertibles (the dreaded "death spiral" financing). I understand basically how it works in theory, but have never followed those types of companies. When I started following bio, I remember experienced posters discussing the dreaded death spiral deals, so I vowed to stay away from those type situations like the plague.
There's a guy over on Yahoo, Irgoudy, who seems to have considerable experience with penny stocks / distressed micro caps though. In one post he pointed out that firms like Cornell actually stand to make more profit when the company succeeds. I don't know though. I'm way out of my depth with this type stock.
The company was down to around $50,000 in cash last Fall, so I guess that would certainly qualify as distressed. Dew could probably give you better advice, but I don't think he follows Cobalis. Mention death spiral floorless convertible to him though and I'm sure he'd say stay away. I wish I could provide some better advice.