My analysis of new funding deal
I believe Jason is only looking at the shares resulting from the swap, and is forgetting about the warrants remaining from the earlier funding that are outside of this swap.
In my analysis, the shares resulting from the initial funding where the company received $3MM in cash are not included, as that deal is already done and the company already has the cash. My analysis only focuses on the remaining warrants.
ORIGINAL FUNDING
$5 Million cash to be received from exercise of warrants at $0.06 = 83.333 MM shares issued, which would complete the original funding arrangement.
NEW FUNDING
50 MM original warrants exercised at $0.06 = $3 MM in cash to company now.
50 MM old warrants exercised x (3 new warrants/4 old warrants) = 37.5 MM new warrants
The 37.5 MM new warrants exercised at $0.12 = $4.5 MM in additional cash to company.
However, there are still 33.333 MM warrants remaining from the original funding, which can still be exercised or forced to exercise at $0.06 = $2 MM in additional cash to company.
50MM + 37.5MM + 33.333MM = 120.833 MM shares issued when this new deal is fully completed.
120.833MM (new deal) - 83.333MM (old deal) = 37.5MM additional shares issued
The original funding would provide a total of $8 MM, while the new funding will provide a total of $9.5 MM. This additional $1.5 MM / 37.5 MM additional shares = $0.04/share, which was the purchase price in the original funding for $3 MM. So, this swap appears to be an extension of the original deal, sweetened with new warrants in order to spur investors to execute their warrants now to provide funding to the company sooner rather than later.
While this "swap" does appear to result in some additional dilution, I am encouraged that the original investors would accept this deal and provide the $3 Million funding now. I expect this deal is being done ahead of additional news to be released over the coming weeks.
If anyone sees flaws in my analysis, please point them out.
