Northwarm,I dont follow this in detail anymore, but warned...

Northwarm,

I dont follow this in detail anymore, but warned holders a while ago. Just to reiterate:

The 5 Aug conversion is just another one along the way. La Jolla earn 4.75% interest on unconverted loan balances. So whenever you see them convert (and so forego that interest), expect some selling. Their modus operandi has been to convert to cheap new shares and quickly sell to realise a margin between their cost price, and the market price.

LJ pick and choose their conversion dates to get the lowest conversion price. They will note each days VWAP. Each day they will check the previous 4 week period and work out the average of the lowest 3 days VWAP in that period. From that low figure they can then deduct 20%. If they like the figure, they will elect to convert to shares (up to the $ value of the advanced convertible note balance that hasnt already been converted). They can do this on any day up to the notes maturity in Dec 2011.

The market only matters to them, to the extent it can absorb their shares at a price which gives them their margin.

This creates a snowball:
LJ sells all, making a margin.
Lower market price, but ok for LJ as on next conversion even more shares are issued, at still cheaper prices.
LJ sells all, making a margin, and repeat.

So when does this end. On maturity, or if LJ can no longer sell shares as they've destabilise the company, or if they agree to a floor on conversion terms (why would they).

The directors were amazingly incompetent in signing an agreement that permits a huge number of shares to be issued at a continual discount, with no effective floor price for conversions.