Xan,
Sorry I didn't reply sooner.. been MIA the last few days. I think we're really saying the same thing, just in different ways. I agree JF asks for money, but the actual transaction isn't quite the way you interpret it. The sec filings clearly state how the convertible debenture works.
For starters, "we" (GZ) have already received the debenture ($300K) from GGI. We do not continue to receive debentures. We "repay" this debenture by converting shares and "giving" them to GGI.
"The debenture bears interest at 4 3/4%, matures three years from the date of issuance, and is convertible into commmon stock, at Golden Gate's option."
When JF needs money, a portion of the debenture is converted and GGI receives these converted shares . At the same time, GGI must exercise warrants at a purchase price of $1.09 per share. This is the money that goes to GZ, not the money from the sale of the converted shares. The converted price of the shares provides an 18% discount, which is where GGI makes it's money once the shares are sold. GGI DOES NOT have to sell the converted shares nor the shares from the exercised
warrants unless holding them would increase their ownership to more than 9.9% of the OS.
Now, I do understand where you are coming from, and in simple terms, we are basically getting our own money minus GGI's profits. Yes, it is a great deal for GGI as long as the converted price is below the bid. However, JF has already received money in the bank before GGI ever starts dumping the converted shares.
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