well, to answer you honestly; im not really sure. The whole point of a debenture is to basically "sell" an equity position because the company is unable to find more buyers than sellers to finance its operation. If the company were financially healthy, and had good PR, then you may see more people wanted to buy and hold the stock, which would then help to fund your operation. the major problem i see with the company at this juncture, is that because of the high accumulation of debt, and the fact they are running the business at a loss, they are having a hard time finding buyers who are look for specifically financial fundamentals -- most buyers, like me, are buying on speculation, which for an average investor may be difficult to stomach. my personal feeling is risk v. reward...
with that said, the debentures help to give working capital dollars to fund operations (salary, rent, insurance, inventory, paying interest on their accumulated debt, etc.) that their revenue would not, or could not cover. unfortunately, because they can't fund their expenses off of straight revenue, they are forced to get funding. Most of the time, an investment bank like merrill, or ubs, or goldman sachs would provide this type of debt instrument -- coroware/innova would not fit the profile or size requirements to have a major i bank do it, so they have to go to smaller and smaller companies, like cornell. So, cornell gives cash in exchange for shares when the company has to draw cash. but, because they are taking a risk, their "charge" is much higher. because they hold so many shares, it begins to dilute the stock -- and if they are exercising shares, obviously all sells, the share price suffers as a result.
As a point of fact, i think debenture funding is the "hot thing to do" in the business world to use as a debt instrument, because it doesn't require you to use collateral like a bank loan would require -- and because its an untangible asset (you can't touch or feel it), its easy for a company to want to use... no cash out of your pocket at the end of the month to pay the bills. but as i said before, the dilution is what is worrisome. Im not sure that there are "easier" ways to get financing for startup companies, but certainly more adventageous situations that are available. I don't think that cornell is trying to bleed coroware or inra out of business; i just think that by virtue of the arrangement, the stock become less attractive to new investors, which eventually bleeds them dry. it would do no good for cornell to want inra to fail -- they are in it for the return on investment -- or they are trying to recoup their investment by selling more shares at a lower price... if they were trying to manipulate the market, you would see big spikes where they were out buying the shares to drive the price up, and big dumps where they were trying to liquidate their positions... i haven't seen either as of yet -- i think the reason for the low pps is what i said above -- dilution.
now, lets look at the other financing options available... venture capitalism (basically what cornell is doing), angel investing (only makes sense with a private company), or taking bank loans (im not sure that a bank would take a risk on a company with such high debt, and, if they did, the interest rate would be so high that it wouldn't make financial sense). If it was my opinion, i would take this operation back to the private sector -- because clearly using the market to raise capital is not doing them much good. It would really take a VC to come in any take an equity stake with a contract to hold the company for certain benchmark periods before they are able to sell (not stock price benchmarks, financial benchmarks -- such as revenue or profit margin). This would allow the company to grow without the concern of having to issue tons of shares while the pps dumps, and allow them to grow with cash in hand but not under pressure. As a result revenues grow, profits grow, and pps grows as well. the other major point that HAS to be made is that in the meantime, their needs to be a serious look at cost cutting measure (spending on what you NEED to in order to continue innovation), determining what you are best at and focusing on that (not expanding product lines without cash on hand to support them), and better emphasis on PR and sales efforts.
while i think there is huge potential in coroware, im not sure the corobot is the end all product for this company... at $2800 a pop, these things are great for hobbiests (spelling?), but they are not a huge revenue stream... its like the first altair computers that gates and allen fooled around with -- did you ever hear about altair computers after the 1970's? great product at the time, but lets limit our business in the hardware area to this small market, and lets get into the real meat of the this technology. I think that the real potential at this point is the software side. using microsoft is a GREAT example of this -- when microsoft assembled msdos and a couple of other technologies to make an os for robotics, that has become almost universally used in PC's, they make something the market needed... standardization. obviously microsoft is doing that now with MS RS, but we need to focus a large majority of the resources (cash and people) on doing what we are best at, software. either choose to be the best at software, or hardware... if you choose both, both will be mediocre.
second, use what other people are doing right now, and try to make improvements. be a leader at whatever you do.. if its jaus, do jaus better... if its AI, do AI better. if its corobot, make it better than a packbot... push the technology ahead, not just working to play catch up. second of all, liquidate everything that belongs to former innova (property, equipment, etc), and put the headquarters in redmond... in house. the holding company should be nothing more than an extension of coroware -- the public face. All of the executives of coroware will be executives of the new holding company. third, change the name from innova to coroware corporation, and call coroware -- coroware company. this way you get rid of the negative connotation of innova -- they have f'd way too many people over AND you get the added benefit of when people hear about coroware and google it, they can invest in it immediately instead of trying to understand the convolution of how they are owned. fourth, hire someone with financial experience that knows nothing about the technical side of things. a technical guy should be able to show the finance guy WHY its so cool by demonstrating it; not by explaining how it works... the general public doesn't care about that crap -- they care about the cool factor. in fact, if you can't find one, i will be that guy for christ sake -- accountants and techies should not run corporations -- they're not experts at it! would you go have a plumber do your taxes-- why not? because he KNOWS plumbing, not taxes... its one of the oldest rules of economics -- thats why service economies work! i pay my dry cleaner 1.50 a shirt to do it because i dont have the expertise, just like the dry cleaner pays me to do his taxes, because he's not an expert!
i know i went on a rant, but there are so many fundamental issues that should be addressed that im not sure anyone has tried to tackle. maybe that wasn't the answer you were looking for pergamon, but i hope i answered your question. i should be getting paid consultant fees for christ sake.
