I agree with you: If the convertible financing didn't happen the outcome would be worse. So while the dilution route is the lesser of two evils, the fact is it did happen and the share price is dramatically lower as a result.
Knowing there's additional convertible debt due in the pipeline, why buy at a higher price when one knows without doubt the outcome is dilution? Read the filings and respond with what's due in July and August 2012. Here's the link to the last 10-Q: http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=8426106
Depending on how many shares are required, an A/S max out is likely. That put an A/S increase or R/S in play. Management said they're not a typical pinksheet company -- which I take to mean no A/S in the billions and hence a R/S is more likely.
Just last week, Management confirmed they're open to receiving additional convertible debt offers, so for sure the losses have some time to run.
If the TA is gagged you can bet it's not in the shareholders best interest.