I know it is being called a 1.1m load at 26% interest, but be aware it may not necessarily turn out that way.
Remember, they only really received $983K cash from Telefox (although they did get $1.1m of debt)
While the announcement calls it a $1.1mloan with the first 5 months of 2% interest paid upfront (or deducted from cash received), another way of looking at it is a loan of $983K with the first 5 months of 2.4%interest added on upfront ($117K / 5 months = 2.4%). From the 5 month mark onward, the remaining balance costs 2% per month.
If the company pays out the balance in cash during the term of the loan, the payout figure required is the outstandingbalance plus a further 5%
The best case scenario would be to pay off the outstanding balance within the first 5 months, something they may be in a position to do if they do secure further finance. This would require a payment of the outstanding $1.1m plus 5% ($55K). In total, this would amount to borrowing$983K for up to 5 months and paying 17.5% interest ($172K)
Of course at the other end of the spectrum, they could pay none of it off and owe all the interest on the outstanding balance (7 months at 2% of $1.1m or $22K x 7 = $154K). The total owning would be $1.254m (amounting to 28% interest on the $983Kthey originally received). The total would be converted to shares at a further 5% discount to the 5 day vwap and probably be sold on market.
No idea how they plan to manage this loan. It could go either way..
