Replies to post #2395 on Ignis Petroleum Group (IGPG)

[cottonmather]

Quick study suggests Cornell has their hooks in pretty deep.....

This link doesn't explain the IGPG situation, but only offers a possibility and some likelihood a financier has dug in on us. Warrants and options on convertible debt can have very long and powerful tentacles.

http://sec.edgar-online.com/2006/08/21/0001144204-06-035049/Section3.asp

[johnnyfiber]

2. RESTATEMENT OF PRIOR FINANCIAL INFORMATION
We identified an error in the three and nine month periods ended March 31, 2007 in our accounting for the derivative and warrant liabilities applicable to Cornell Capital Partners LP. Under the Secured Convertible Debenture, Section 3(b)(i) limits the number of shares issuable to Cornell Capital Partners, LP upon conversion to 4.99% of the outstanding stock at time of conversion. Under section 39(a)(ii) of the same agreement, we are required to pay cash in lieu of shares for the portion greater than 4.99%. The amount of cash is determined by the number of shares issuable upon conversion and the current market price of our stock. Since the number of shares issuable is calculated using 94% of the market price, the cash conversion results in approximately a 6% premium paid on conversion. As a result, the value of the derivative and warrant liability related to the conversion in excess of 4.99% will be based on the conversion premium at the end of the reporting period, the Cash Premium Method rather than using the Black-Scholes model. We corrected the derivative and warrant liabilities for the period ended March 31, 2007 resulting in a decrease (increase) in the liability of $3,991,713 and $(613,541) for the nine and three months ended March 31, 2007, respectively. In the event of a default of our obligations under the registration rights agreement, including our agreement to file the registration statement no later than May 3, 2006, or if the registration statement is not declared effective by September 5, 2006 we are considered in default. As of September 30, 2006 the registration statement had not been declared effective, therefore we are considered in default and accordingly we reclassified the derivative liability from long term to short term liabilities.


We also identified an error in the three and nine month periods ended March 31, 2007 in accounting for the amortization of the debt discount related to the $5,000,000 convertible debenture issued to Cornell Capital Partners, LP. We calculated the amortization of the debt discount using an amortization method that is not in accordance with generally accepted accounting principles. We corrected the calculation using the effective interest method, which results in near zero amortization in the first year and exponentially increasing in the later years because the debt balance (net of discount) is zero at inception. We corrected the method of
amortization in this restatement resulting in a decrease to interest expense and increase to the debt discount of $34,374 and $21,528 for the nine and three month periods ended March 31, 2007. As of December 31, 2006, therefore we are considered in default on the convertible debenture as described above and accordingly we reclassified the debt and debt discount from long term to short term liabilities.

http://yahoo.brand.edgar-online.com/displayfilinginfo.aspx?FilingID=5951187-915-92894&type=sect&TabIndex=2&companyid=644095&ppu=%252fdefault.aspx%253fcik%253d1296524