Here is what's written in the filing. The restructuring is two parts.
Part I. initial restructuring.
(i) the Investor shall release restrictions on $1,650,000 of Restricted Cash (the “Initial Release”)
One is just saying they will release 1.65 million of restricted cash so they can operate.
(ii) the Investor shall consent to the use of additional Restricted Cash to effect redemptions of the Series A Preferred Shares and the Series B Preferred Shares.
Two is saying to authorize the use of restricted cash to redeem Series A and Series B preferred shares. Basically they are canceling these convertible notes using restricted cash.
(iii) the Investor shall cancel $1,200,000 aggregate principal of the Notes (such portion of the Notes, the “Cancellation Note”)
four and five just saying they are paying back to the investors for the series A and Series B notes 4.2 and 2.006 million.
So initially they are getting rid of the 90 percent of the convertible notes. Basically saying we're giving the money back to you and you cancel the previous convertible agreement. Ok that's good they dropped the previous convertibles.
So when initial restructuring is done they would be left with no cash. So they need refinance for additional funding.
The next part:
"as amended, $2,436,852.80 aggregate Restricted Principal of the Restricted Notes (such portion of the Restricted Notes, the “Exchange Notes”, and together with the Redemption Notes, the “Restructured Notes”) for new warrants to purchase 40,000,000 shares of our Common Stock (the “New Warrants”, as exercised, the “New Warrant Shares”). The New Warrants expire on the 42 month anniversary of the date of issuance and bear an exercise price of $0.35 per share (which shall be adjusted to the new lower purchase price per share if there is a subsequent “down round” financing). The Investor, in lieu of an exercise of the New Warrants pursuant to a cash payment of the aggregate exercise price of the number of New Warrants being exercised, may exercise the New Warrants, in whole or in part, by electing instead to receive upon such exercise two shares and one hundred and twenty-five thousandths of a share of our Common Stock for each Warrant Share exercised pursuant to this provision."
So yes, after RS passes, the remaining 2.436 million will be exchanged for warrants to buy 40 million common shares. The warrants expires 42 months later and will be adjusted if they refinance again for something lower. So yes, if after RS, they may temporary have a 0.35 floor, but as you said, the warrants are good for 42 months and maybe adjusted depends on if company do new finance.
I don't think this alone is enough to convince a yes vote without something else in the mix.
Because assuming they got yes for RS, they canceled the convertible and pay back the money they would still be left without funding !!
Where are they going to get more funding to continue if the 40 million warrants won't exercise right away?
They have to have new round of offering or some sort of deal to solve their funding issue. That is why there has to be something more we don't know yet. It doesn't solve their funding issue. I think we will see more revealed to us soon.
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