Yes, you are right golfer; sorry, my mistake - I glossed right over the note 4 on page 19 where it says Lloyd's options have "vested." And, upon second reading of the share declaration, I see it covers any shares that can be acquired ... within 60 days. , which would include any options that have vested. And, I also see in note 4 that on Dec. 31, 2007, the share fairies also magically converted 500,000 options into 500,000 shares. I also note that at the same meeting, a total of 2,212,128 options that had been previously granted to Mr. Gartlan were converted to 2,212,128 shares. ... "Presto Chango!!"
So, that is a total of at least 9,984,853 options that were converted into 9,984,853 shares at that Dec. 31, 2007 meeting. Why bother paying anything, when you can get your shares for free?
Golfer or anyone, what are the actual SEC rules in regard to moves like this and the April meeting that set up the current director compensation scheme? Are there any rules governing these things for OTCBB companies? (I am pretty sure there aren't, and I can go digging, but I am just curious).
So, taking golfer's recent points into account, there are two amounts and issues that need to be accounted for in regard to share dilution:
A) DIRECTOR/EXECUTIVE COMPENSATION (both current and former)
As stated before, this is fixed and will be/has been paid out in 2008/2009 (ie. it has to be paid out under present agreements).
Current Directors
Direct stock payout for 2007/2008:
23,597,814 shares
2007 Stock Options ($300,000 @ $0.01-$0.017 - possible grant prices from Jan. share prices):
17,600,000 - 30,000,000 shares
2008 Stock Options (250,000 @ $0.004-$0.009 - current price range, which is probably an overestimate if debt is not cleared):
28,000,000 - 62,500,000 shares
Current Employee Agreements:
Direct stock payouts to Robert Smith for 2008 (calculated @ $0.004-$0.009):
12,000,000 - 27,000,000
Direct stock payout to Linda Robinson (currently - no employee agreement on file yet, so this will probably increase):
7,426,653
Options for Lloyd Spencer at $0.01:
2,000,000
Options for Robert Smith at $0.01:
1,000,000
Options for Linda Robinson:
unknown
Former Employee Agreements:
Gartlan payout in 2008 (3,000,000 shares (the 1 mill. in options were converted) plus $79,000 @ $0.004-$0.009):
12,000,000 - 23,000,000 shares
Weisel payout in 2008 (2,800,000 plus $110,000 @ $0.004-$0.009):
15,000,000 - 30,500,000
(Weisel's still has 1,000,000 but they are at $0.1, so not really a worry).
Dividends on 200,000 restricted shares (but see below):
1,500,000 (@aprox. $0.006)
Totals for this share dilution class:
Direct payouts:
73,024,446 - 113,024,467
Options at $0.01 (Smith's options vest over 3 years, but the rest vest in the next 24 months):
48,600,000 - 95,500,000 (think about this when you calculate the chances of this rising to 5 - 15 cents as all these options will probably then be exercised).
*** very important note ***
The above does not include aprox. 18,000,000 extra options outstanding as of Dec. 31,2007 (22 mill. minus Lloyd's, Weisel's and Gartlan's that were converted). These have an average exercise price of $0.05 but most have actually been repriced at $0.01.
B) FINANCING DILUTION
As golfer pointed out, 206,250,000 shares have been reserved for Cornell redemptions and warrants. I tend to agree with him that there don't seem to be many refinancing options available for Innova. However, if the only way the company can pay off the debt is by selling shares, then they will need many more than the current reserve. Accordingly, in the agreement, it stipulates that if they need to reserve more, they simply will.
That means that before the due date of the initial 2.825 mill debenture, Innova would have to issue 205,000,000 - 461,000,000 shares (calculated at current range of $0.004 - $0.009 ). And this does not include the min. $1 million they will still have outstanding (so, another 111,000,000 - 250,000,000 shares).
Even if the company managed to refinance or gained a huuuge contract in the next few quarters, there will still be significant redemption payouts in the meantime. Last year, they ran at 17,983,864, but that was at far more favorable stock prices. As such, I think if we take $50,000 a month as a figure (which was a very low monthly figure for redemptions last year (pg. F-25)), at a minimum for two more quarters of 2008, we are looking at : 33,333,333 - 75,000,000 shares. If it continues to the end of 2008: 50,000,000 - 112,500,000 shares. And this will still leave 2.4 million in debt outstanding.
Also, even if the debt is cleared, there are still millions of warrants to Cornell that will have to be paid out as well (ex. 10,000,000 in the last $550,000 loan and 9,300,000 from the 2.85 mill. deal). And this does not include the 7,467,852 warrants granted to "consultants and directors" that are still floating around out there.
Sigh .....
Truthfully - and particularly under current tight credit conditions - I don't know who would be willing to refinance this debt. If you were a bank and someone walked in with this type of balance sheet (current debt; negative cash flow; current and future payment obligations; director/executive compensation schemes that are gobbling up outsider shareholder wealth at an alarming rate, etc.), would you sign over a check for $3,000,000. I don't think so. And, I also don't think that someone like Microsoft is going to step into the picture. Why would they? Remember, just "buying out" the debt from Cornell is not going to give ownership to Microsoft or any other potential "buyer". In order to get that, they would have to actually buy shares from current shareholders - both inside and out (or keep the same horrible debt terms and take over that way). Why would a company like Microsoft just step in and "relieve" Coroware of its debt? For that matter, what does Coroware have that Microsoft cannot either a) gain by buying one of Coroware's private and therefore far cheaper competitors (therbey gaining total ownership); b) get by just purchasing product/services from one of these competitors if Coroware goes under; or c) produce themselves in-house (possibly with the assistance of Coroware employees who either jump ship or come looking for a job after the party is all over). Microsoft (and any other successful company for that matter) buys out other companies when those companies have good products with either a) proprietary rights or b) significant market share. As Microsoft is Coroware's only real customer, why would they buy Innova? What market share do they stand to gain?
Anyway, I know I have sounded doom and gloom in the last couple of posts, and I am sorry for that. However, these are real issues, and I don't think we can put our heads in the sand. As I've said before, the only way I think this company can survive is by landing a major contract. Nothing else is going to do it.
P.S. Golfer, I did find this in the last debenture agreement: 175,000 shares of Preferred Stock are issued and outstanding, which gives us another number again. Also, if you don't mind me asking, how do you know that the Cornell deal came from Gartlan? Was that public knowledge that I have just missed in my reading? Oh, and thanks again for the posts - they are always insightful.
Finally, that debenture agreement also stipulates that if Innova does actually want to finance the outstanding debt by issuing stocks, said stocks must be offer first to Cornell. So, they cannot actually go directly to the open market even if they wanted to.
Rights of First Refusal. So long as any portion of Convertible Debentures are outstanding, if the Company intends to raise additional capital by the issuance or sale of capital stock of the Company, including without limitation shares of any class of common stock, any class of preferred stock, options, warrants or any other securities convertible or exercisable into shares of common stock (whether the offering is conducted by the Company, underwriter, placement agent or any third party) the Company shall be obligated to offer to the Buyers such issuance or sale of capital stock, by providing in writing the principal amount of capital it intends to raise and outline of the material terms of such capital raise, prior to the offering such issuance or sale of capital stock to any third parties including, but not limited to, current or former officers or directors, current or former shareholders and/or investors of the obligor, underwriters, brokers, agents or other third parties. The Buyers shall have ten (10) business days from receipt of such notice of the sale or issuance of capital stock to accept or reject all or a portion of such capital raising offer.
Market Data 
Markets 
