Replies to post #7349 on Applied Minerals Inc (AMNL)

[MasterSalix]

Here is where we are.

Totally agree - loading zone! they got this!

In all seriousness, I am truly taken aback by some people’s comments on here -

For anyone actually interested in the state of affairs here - the Series A notes are explained in the latest 10Q, note 7 page 17.

Thursday’s release states: “The Company failed to make payment of principal and interest under the terms of the Series A Notes, which have a Stated Maturity Date of May 1, 2023, thereby causing an Event of Default under section 7(a) of the Series A Notes. Under the Event of Default, all outstanding principal and interest of the Series A Notes, totaling approximately $31.3 million, are immediately due”.

Here is how this actually works:

https://www.fundera.com/blog/what-is-a-convertible-note#:~:text=Your%20noteholder%20can%20make%20you,ll%20have%20to%20declare%20bankruptcy

Here I’ll make it even easier for our tic-toc culture:

* “Once again, a convertible note is a loan, and if the maturity date arrives, your noteholder may ask you to pay in full, both principal and interest. However, if you can’t pay the loan, you’ll have to declare bankruptcy. Typically, this is not in the best interest of the investor—if the investor extends the note, on the other hand, they’re giving you the opportunity to raise a funding round and, therefore, making it more likely to receive a return on their investment.
* You can try to convert the note to equity with a new cap. Finally, if you can find a common ground that works for you and your investor both, you can decide to convert the note into equity at a different valuation than the one originally intended.”

I think the post I am responding to by Masta explains how ludicrous the second point would be.

This is not the case where you can’t pay, they call the loan, and all they get is some small converted shares - the debt is due $31M of it - and AMNL, currently, has no way to pay it.

So, the bottom line is the holder can extend the loan - or call the note - the Filing says they are in default and it is due, but the holder can of course extend - however, it begs the question why they didn’t extend prior to this point. I will say that it is obvious AMNL would give the investors next to nothing in a BK - but also, probably no real ability to make payments in the future to rationalize an extension as well - they can issue shares but only to the A/S limit, which is vastly, vastly insufficient…

This site explains what happens when that happens: https://kruzeconsulting.com/convertible-notes/

“But if the startup reaches the note’s maturity debt and hasn’t raised more cash, the angel investors can ask for their money back. If that money’s been spent, there’s no way to repay the investors. At that point, if the startup itself has some value, the investors can join other creditors and petition for bankruptcy.  Convertible note investors are typically ahead of equity investors, but behind venture debt and other debt holders, in a liquidation process. There is a process that creditors can follow, and investors can use the note to exert pressure on the startup to liquidate the company.”

I think AMNL might file for BK protection to maybe try to move the mine to an intended party (Ionic) and this has been the plan all along….but that is just my conspiracy.

But, like I said, with such debt looming and no way to repay it, it doesn’t seem logical that AMNL would want to extend and not be rid of the loans, and reorganize under BK protection.

Bottom line is I guess if you are prone to such things as irrational hope, there is reason to hope they avoid BK because there is simply no win other than write -off for the holder…

“The lender may have little choice if, for example, the company is in real financial difficulties and there is no real prospect of the debt being repaid. This will be the case particularly if the lender is an unsecured lender or if it stands behind other significant secured creditors.”

Whatever happens, the company is precariously close to bankruptcy - it will probably happen, but it might not - but those saying this is no big deal are just incorrect- odds are the holders push or AMNL just files for BK - but there is an outside chance the holders extend and we play this game again in a few years. Why the holders have waited this long if they were to do that is anyone’s guess…

The fact that AMNL is late on the filings, didn’t have a real annual meeting, etc…and have gone silent again seems to indicate to me that AMNL seeing the writing on the wall are packing it in…but that is only one man’s opinion.

GL2A