NGHT has a huge stock overhang and selling pressure could remain very significant.
There are 3 significant groups of derivative securities O/S. These relate to debentures issued in 2011 and 2012. They are toxic transactions that either force or motivate the holder to convert them to common stock and sell the stock acquired: thus having a constant pressure on the stock and a significant overhang.
2011 debentures - NGHT issued $480,818 of convertible debentures on 12/30/11. These debentures were converted to 2.9 million shares of common stock in March 2012. These are not a significant issue at this time. But the related warrants are a big issue and apparently have been. I suspect the heavy paid stock promotion in 2013 has been by these warrant holders to liquidate blocks of shares from exercise transactions. 24,040,900 warrants were issued and they expire on 12/31/2014. A related provision is in place to not allow the holder to own more than 5% of the O/S common stock at any time. This means they don’t have to report anything on a 13D/G or Form 4. The exercise price will be 70% of the 20 day average trading price. They also allow for a cashless exercise so no proceeds go to NGHT on exercise. The combined provisions and the short time left force the holder to exercise them and liquidate the shares.
For instance, at a $0.04 share price, they exercise at $0.028 cents and anything they sell them for above that is a profit. They’ve already recovered their entire loan balance and interest.
At 12/31/2012 there were 21,540,900 warrants left. Per the last 10-Q, 12,139,780 of these have been exercised through September 2013 (cashless exercise for 4.7 million shares). This leaves 9.4 million more warrants that have to be exercised by the end of 2014. Estimated this will result in cashless exercises for 3.2 million more shares.
2012 Debentures – NGHT issued $500,000 in debentures on September 12, 2012, due September 2015. These convert to common stock at 50% of the 20 day average price of the common stock. With a $0.04 stock price, this would result in 25,000,000 shares of common stock. The conversions of the debentures would likely be done in blocks over the next 21 months and sold into the market. They can sell for a 50% “profit” and still cause a 25% drop in the stock price to do so. Each conversion and liquidation is toxic as it would tend to force the stock price lower.
On top of this, the issuer of the debentures received 25,000,000 million warrants with an exercise price also equal to 50% of the 20 day stock price. These warrants expire in two years (12/31/2015). On a cashless exercise, this would involve 12.5 million more shares to hit the market, all of which have a toxic impact due to the 50% exercise price.
From the warrants and the remaining convertible debt, you could see over 40 million shares hitting the market in the next 24 months. NGHT gets no proceeds from any of this.
Then with NGHT’s pattern of very expensive and toxic financings, any additional debt transactions in 2014 could have an additional significant dilutive impact.
At September 30, 2013, the fully diluted share count was 109,000,000. That’s 51 million above the existing O/S shares. That suggest my calculations are even to low, or there are other derivatives I didn’t break down and include.
The details I discussed can be reviewed in Footnotes 8 and 10 in the last form 10-K and in Footnote 6 in the last Form 10-Q.
AI
Market Data 
Markets 
