Hallelujah !!! A believer!! :)
And the information is in there.
The ability or intention of the Company to repay the notes by the due date can probably be concluded by the cash on hand to pay them off. Get the picture?
According to the filings Asher has done nine notes with the Company has converted all the debt thus far to newly issued (dilutive) stock. The Company (RFNN) must, as a condition of the notes, reserve a certain number of free-trading shares with the transfer agent (the company that issues the certificates) as a condition of the note as when Asher converts, they get free-trading shares as the holding period for restricted stock is 6-months and the clock starts when they lend the money, not when they request conversion. Hense the 6-month maturity.
This type of financing to raise cash can be dangerous ( as delineated in the 10-K filing under Risk Factors). Hense the commonly referred to name "Death Spiral Financing".
Look at "Note #5 - Derivative and Liquidating Liabilities" section of the latest 10-Q and you will see the number of shares that Asher "could" convert into at the then (3/31) price of the stock with the discount they get at conversion for each note outstanding.
Look at the dates of conversion under "Note #6 - Equity Transactions" in the 3/31 10-Q and you will see the Notes entered into with Asher as well as the list of conversions and at what price. I believe Asher has a clause in their note that requires that they never own more than 4.99% of the Company stock at any one time so they dont have to file certain forms so they never convert huge chunks all at once. But when they have converted they appear to have sold rather quickly based on what I can gather by comparing the stock action to the dates of conversion. It appears (at least to me) that Asher has no desire to own a position in the stock.
Under "Note #7 - Subsequent Events" you can see three additional Asher conversions that occurred after the quarter close between 3/31 and 5/15.
There is "no limit" to the number of shares they can convert into. The higher the price the less shares. The lower the price, the more shares. Simply based on share price.
As per the terms of the Notes, the Company has the ability to pay off the notes at 150% of the principal amount means, that if a note was for $50K, it could be paid pay off for $75K (plus interest of course) at the 6-month due date. 100%+ interest. Nice huh?
As long as the stock keeps trading, the Company can sell securities to raise cash, but with the share price risk, the interest rate is very high.
Obviously the sooner the Company can get to "cash flow positive" the sooner it can control it's own destiny and stop taking "blood money".
One interesting thing to remember is that the Company has taken (by law) a certain amount of "Derivative and Liquidating Liabilities" in the event that they default on the Asher notes as shown in the liabilites section of tyhe balance sheet. As of 3/31 these Derivative and Liquidating Liabilities totalled $388,397.
If Asher converted all of their $170,500 Notes on 3/31, that liability would disappear and then show up as $388,397 of income. Strange rules but thats the way they are. The liability that the Company must carry is larger than the outstanding balance of the note itself. The derivative and liquidating liabilities carried on the books cause large swings in profit and loss. That's whay they are put down at the bottom of the P&L along with interest so you can get a truer picture of the "operating" gain or loss from operations without being skewed.
Cash flow positive and the Asher notes paid off means almost $400K hitting the bottom line as gain. I'm sure management is pedaling as fast as they can to get there.
:)
AI
