Understanding Recent Financing
I am having some difficulty trying to understand the recent
convertable financing to determine when it is good for our
company and when is bad for us shareholders.
An important factor should notice is that this is
CSMG doing the financing and not Live Tissue Connect
that was orginally to be IPO;s
CSMG issued Securities Purchase Agreement (SPA) in which
it will issue a 6% convertabel debenture for $1.5M
that matures November 2011
At the election of La Jolla the principal and interest is paid in CTGI stock at the lowe of $2.10 or a lower price
based upon the average 18 days average sales preice.
if the stock is lower than $.38 CTGI can buy the stock
for 118% of the amount to be converted.
UInder the SPA agreement ,LaJolla paid CTI $125K with the balance in the amount of $1,375,000 secured promisory note
that is payable on demand by CTGI anytime after November 30,2011.
Under the terms of the secured note Lajolla will pay 6% intereston the outstanding pricnipal balnace of the first secured note.
Lajolla may elcet to have a prepayment of the interest
and principal due under the first note no later than 6 months in the amount of $250K if there is no defauualt
LaJolla ahs the right to have CTGI isssue a second,third and fourth convertible debenture in the amount of $1.5M each.
and promissory notes of $1.1M with a fallout of $400K.
What I don't understand is that they are only getting
$125K plus a secured promissory note of $1.375 m.
and that they intend to borrow against the secured promissory note to get cash.
But they don;t tell you the promissory is secured with
and how you are going to get cash to finance their operations.
CTGI benefits by paying 118% of the amount of what LaJolla elects to convert into shares that would serve to blunt any erxcessive price advantage over 18$ stock if less than $.38 h
LaJolla has an advantage in that it can forece CTI to issue
several more convertible debentures with these secured promissory notes that wold also be convertible into stock
In seems to be shareholder dilutive on surface but it seems
it is limited by the 18% ceiling in which CTGI can buy the shares back if they are making money or have cash that seems
to limit Lajolla's up when it is more than 18% when th is $.38 or less
It seems like a call and they put a collar on the
stirke price above 18%
Now CTGI intends to do an IPO on LTC for a certain amount of shares in which Empire gave them $7M at 15-18% interest to handle the IPO
So CTGi is borrowing money for the parent and also for LTC
Anyone have any thoughts on trying to figure out
what is happening here that may or may not be the reason for the recent share activity.
regards,
bbhuey
d
It seems now they have a guaranteed buyer for their shares
in the form of Lajolla to take their shares if the IPO
market is a mess and non functional ier
As such CTGI managment must think that the market price shares
at November 2011 will be higher than the lower of $2.10
or the 18 day average with a collar on the share price of no more than 18 % otherwise CTGI will buy the shares themselves
preventing a dump of shares on the market
Another assumption is that CTGI managemnt must think that their business will be cashflowing or that they will have additonal funding to buy the shares ie r
they intend
25K
o
AI
