Long as far as being wrong that is spit hair scenario or potatoe /potahto. It comes down to this ... In Sept 2000 I had a bad feeling watching the trading and certain information not coming out. I suspected CD (convertible debentures) now a convertible whether it is a debenture or whatevers makes no difference because as long as this formula is within the conversion it is like a convertible debenture.
x (aggregate $)/y (lowest price over a certain number of days as the basis before conversion) = z (amount of stock to cover the agregate $) is the Adjustable Conversion Clause
Now I do not care if it is whatever it is still a convertible and the ACC makes it a death spiral regardless if it is done for debt, capital venture or whatever.
Now I could not put my finger on it in Spet when I last traded in the market but told BOP, OB, Smitty and others if my hunch was correct we would be at .10 by the end of the year. We were and when the 10K came out it disclosed the ACC on all the prefered and there had been two CDs but the prefered is written just like a CD. Of course poeple began screaming there was no CD just prefered stock. But I told everyone that the OS would increase from 33M to 48M by the end of the first quarter of 2001 and I missed that by 750K.
The rest is simple math ... take the G&A and divide that by the share price and you can arrive at a good question for the OS. In other words if 1.9M is required for the quarter and the stock price stays around .125 that woudl equate to 15.2M per quarter just to cover the G&A of course you could tweak it by revenues.
Based on this speculative caclulation you do the following guesstimation. 15M per quarter x 4 quarters is 60M annually or 5M a month.
Take 33M 12-31-2000 and it would calculate to the following
Jan 36m
feb 39M
Mar 42M
Apr 45M
May 48M
Jun 51M 54,638,173M OS as of Monday June 17th
Jul 54M
Aug 57M
Sep 60M
Now this is pure speculation and merely a guess but uses the filings as the underlying basis for the guessing. Now this is based on .125 average stock price.
Convertibles are shareholder equity killers. Plain and simple whether a debenture or investment or whatever. But as we have used this as a guessimation as to what we believe as you can see people can scream we are wrong and that is fine but the guessimation is pretty much right on.
:=) Gary Swancey
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