Actually Lloyd did not cash any of the 666,666 options, they've only become vested. If you think about it why would he exercise the options at $0.01 when he can purchase the stock at lower prices.
As far as getting rid of the cornell debt (about $2.745 million outstanding) how is the company going to pay this off except by issuing shares. They have no profits so the certainly can't pay it with cash. The original issue of $2.8 million still has $1.845 million outstanding per the conversion table (pg F-25) and is due on 7/21/09.
Also consider that all of this debt ($2.745 million) is bearing interest at 14% as of March 2008 when they ammended the terms of the debentures. That's $384,000 in interest payments annually.
This is taken from the ammended convertible debenture agreement:
Reservation of Shares. On the date hereof, the Company shall reserve for issuance to the Buyers 206,250,000 shares for issuance upon conversions of the Convertible Dentures and exercise of the Warrants (collectively, the “Share Reserve”).
CONDITIONS FOR ADDITONAL FUNDING
First Closing:
· Three Hundred Thousand Dollars ($300,000), with a Closing Date within five (5) business days of the date of the Securities Purchase Agreement.
Second Closing:
· One Hundred Thousand Dollars ($100,000), within five (5) business days of the Company reporting at least $2 million in revenue and $200,000 in net income on its second quarter 2008 Form 10-Q filed with the U.S. Securities and Exchange Commission. If this condition and milestones are not met, the Buyer has no obligation whatsoever to consummate the Second Closing.
Third Closing:
· One Hundred Fifty Thousand Dollars ($150,000), within five (5) business days of the Company reporting at least $3.8 million in revenue and $400,000 in net income on its third quarter 2008 Form 10-Q filed with the U.S. Securities and Exchange Commission. If this condition and milestones are not met, the Buyer has no obligation whatsoever to consummate the Third Closing.
How many of you think the company will show $200,000 in net income in the 2nd quarter or $400,000 in net income for the third quarter???
So the bottom line is that share dilution is even worse than expected.
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