Fonon Corp. (fka FNON)

[pitboss22]

Oracle, I believe you are correct for the most part.

Dr. Shiong evidently was interested in at least a part of the company's IP, as evidenced by the following:

"On July 5, 2011, Raptor Networks Technology, Inc. (the “Company”) entered into an agreement with California Capital Equity, LLC (“CCE”), dated effective as of July 1, 2011, whereby the Company granted CCE an exclusive, worldwide, perpetual, irrevocable, fully paid, transferrable and sublicensable right and license in and to all of the Company’s intellectual property, including, but not limited to, all of the Company’s registered patents and patent applications (the “IP License”). The IP License is exclusive even as to the Company, such that the Company no longer has any continuing rights in or to any of its intellectual property."

However, through the convertible notes, Sandell held a security interest in all of the company's assets. The convertible notes had matured and could be called at any time. If called, the company could not pay and would be in default. Sandell would then foreclose and posess the company's assets. The company could not dispose of any assets without Sandell's approval according to the loan agreements (you just can't up and sell the collateral you used to get the loan). So anyone wishing to buy the company's IP really had to satisfy Sandell.

What it took to satisfy Sandell was for Dr. Shiong to buy out Sandell, though probably at a discount. That is why and how Dr. Shiong became the note-holder. He was not investing in Raptor, as evidenced by wording in the "extra part" of the 8k:

"As referenced in its Schedule 13G filed with the Commission on July 5, 2011, CCE has acquired all of the Company’s outstanding senior notes, including, but not limited to, the 2006, 2007 and 2008 senior notes."

As he had no interest in trying to revive a dead company, Dr. Shiong called the notes and put the company in default, as evidenced by the following (also from the "extra part"):

" On July 6, 2011, CCE provided the Company notice of default under the senior notes, declaring all amounts thereunder due and payable in full, and of CCE’s intent to exercise its rights and remedies against our assets"

Defaulting on a loan does not clear the debt. There are only two ways to do that, pay it off or declare bankruptcy. How can Raptor pay off $11 million+?


I've noticed that several references have been made to "convertible shares", "convertible preferreds" and "convertible preferred shares". This is incorrect. The company never issued any convertible preferred shares or any other class of convertible share. What they did issue were notes, payable in cash but convertible at the note-holders discretion into shares at a discount to the market price.

One final thing. Dr. Shiong is deemed to have a beneficial interest in 9.6 million shares through the convertible notes and warrants which he could theoretically convert at any time. He actually only held 947,810 shares as a result of the acquisition from Sandell, as evidenced by the following:

"Notwithstanding the above, RA LLC owns (i) 947,810 shares of Common Stock, (ii) notes issued by the Issuer (“Notes”) convertible into 20,603,193 shares of Common Stock and (iii) warrants issued by the Issuer (“Warrants”) exercisable for 69,347,031 shares of Common Stock (all Notes and Warrants described above shall collectively be referred to herein as the “Convertible Securities”)."

"However, in accordance with Rule 13d-4 under the Securities Exchange Act of 1934, as amended, the number of shares of Common Stock into which the Convertible Securities are convertible or exercisable, as applicable, are limited pursuant to the terms of the Convertible Securities to that number of shares of Common Stock which would result in RA LLC having aggregate beneficial ownership of 9.99% of the total issued and outstanding shares of Common Stock"

"The calculations in this Schedule 13G are based on the 88,080,979 shares of Common Stock outstanding"