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Friday, June 28, 2013 8:00:07 PM
Suppose the company owes the CEO $50K in salary. That debt is transformed in a loan.
So, instead of owing $50K to its CEO as back pay, the CEO "loans" the 50K to his company. The exact same $50K is still owed to him, excep that it is now a nice loan at 24% annual interest, as if the CEO was investing in his own company.
And that's not all.
Once a loan is 12 months old, it can be floated as a convertible debenture, with the consent of the lender.
So, a $50K tranche (plus 24%) is floated as a convertible debenture, with a suitable 45% discount on the share prices, and the proceeds are given to the CEO, which much publicly kicks back 10% of the money by "buying shares" in his own company.
Essentially, the company issues 2 shares so the CEO can "buy" a thrird one.
The two company officers have already a great many shares, plus a sizeable number of deeply underwater warrants.
They have also given themselves a bunch of Series C privileged shares, each Series C shares being worth 30 million common shares.
How to make a bunch money while running a company into the ground.
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