The dilution point in my note relates to dilution which occurs (if and when) the convertible notes are converted to shares and the warrants are exercised (if ever). GAAP accounting requires a company reflect this potential dilution in their financials under mark to market rules. I didn't say any dilution had actually occurred.
Since it is all but impossible to convert the ECOS notes into freely trading common shares my bet is that the notes just stay out there accruing default interest until they are redeemed (if ever).
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