re:dave r Dave,here is the pertinent paragraph from the...

re:dave r Dave,here is the pertinent paragraph from the disclosure document relating to the convertible notes.

"The Company has the right,exercisable at any time,to repay 50% of the face value of each note on payment of an additional capital return. The amount of this capital return varies from 20% in the first two years to 8% in the 5th year".

So let's say KZL takes off to $1 this year and that the company elect this option. Your KZLG (conversion 2:1) may be around $2.20 or so. KZL have the option to buy back half of each note at a 20% premium to the face value of 85c!!(85c/2 *1.2= 51c). This leaves you with the same number of notes but they only convert to ONE share (they beef it up to 11:10 in this case...wow!)

So if you hold the shares and they go to $1 from here you make your 66%

If you buy notes for $1.10 and the company exercises their option with the SHARES at $1 you end up with a 51c capital return and the option to take 1.1 shares at $1 for each note. (1.10 value). So your return is around 46% and this discrepancy will get worse the higher the shares go.

The company may not do this but just being the devil's advocate and something that stopped me buying the notes.

Cheers,

Ed.