The Convertible Debentures are structured as a derivative:
Everytime the stock price tanks a little, PVSP has to raise the Outstanding Shares number, because the CD agreement specifies that the company must issue the shares beforehand, and have them ready when the conversion fax arrives.
THe CD holders are not affected by a drop in share price (except for the unduped part of the last batch of shares they converted). From time to time, they ask for $10K or $20K more worth of shares, wgich they obtain at a price based on 45% of the lowest share price in the last 5 days of trading.
So, if there was, say, a 10% hike in SP, the CD holders would rush to convert shares at the pre-hike price, and rush to dump shares, which would neatly halt and reverse the rally.
The CD holders are making money all the way, unless the drop is more than 45% over a short period of time.
The CD holders are slao making money on the untapped part of the debenture, it appreciates at a rate of 17% (depending on the CD), like a shylock loan. The interrests will all be converted to shares too.
A company can buy back a CD (to prevent the dilution), but there is a 25% penalty for doing so.
A company that was so badly in need of cash that it resorted to a Convertible Debentures, is extemely unlikely to buy it back. No more than a money-losing company can buy back its shares.
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If PVSP was to declare BK now, the $200K of Riss-owned debt that he was allowed to convert into a CD, would probabaly be clawed back, "avoided", by the BK judge, as a sweetheart deal.
But, with the new $200K CD "loan", I think BK has been pushed back 1 or 2 quarters.
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