news-3b, page-7

Convertible bonds are hybrid securities, part debt part equity

CKK sold convertible bonds for cash when they issued them ,what, 6 months ago.

CKK received something like $3 million at this stage.

The holder of the bond has 2 choices

A) Hold bonds without converting to equity. They were issued with a return of 10% so the principal will be paid back with the interest

Or

B)

Convert the $50,000 face value of the bond into equity

From memory the terms of the bond was the holder could conver to equity at 22 cents or the VWAP for the 14 days before conversion.

So the amount of share issued in this case was $50,000/$.14

Shares issued = Bond value/VWAP share price

So therefore these bond holders had incentive to drag the shareprice to as low as they could to convert their bond into as many shares as possible. Once the share price is over 22 cents there will no longer be any incentive for bond holders to drag the price any lower because the conversion price will be set at 22 cents (assuming they cant drag it below 22 c). Once the price is over, all convertible bonds will be converted to equity (in theory).

If you still don't understand, wiki may provide a better explanation.

All I think this means is that the people that converted, knew that the contracts were on their way and it would be their last opportunity to drag the share price significantly below the 22 cent mark, thus receiving more stock for their bond.

Warning: The exact details of the contract I have quoted are by memory and may differ. But i'm confident they are pretty close.