RE: $10 Millionbrokenowen, Good comments....
Were I to guess, they thought they might NOT get financing and this would keep their salaries coming in the door. There may have been back salaries owed but regardless, just the top four "executives" make - in salary - over $500,000 per year plus benefits. They also have other employees not among the top four and they need to, as you succinctly state, money to wine and dine those bankers. If we can't repay that debt - ie we're NOT in production in 36 months [now 34 months] they can end up with a lot more than 15% of this company.
The company has 35,836,992 shares outstanding. That may include the 5,750,000 shares to Coalcorp and the 1,333,375 shares in the "private placement" for the $2 million raised. I don't think it includes the warrants granted to both. The reverse split was announced March 24, 2010 but the Coalcorp loan was announced March 18, 2010 so I'm not sure whether the "units" are based on the pre-split or post split. Also, the final announcement of May 7, 2010 makes no mention of whether they shares granted are based on pre or post split that I could find.
The combined shares given to make the loans is 7,083,375 common shares. Pre-split that amounts to [post split] 1,011,910 / 35,836,992 = 2.8% of the stock. If post-split that number is 7x higher or 19.765%. That does not include the warrants. Add the usurious rate of interest our board gave for those two loans, the seat on the board and the right to convert their loan [payable interest only each quarter] into 15% of the company? That's NOT a very good deal but management was hungry/desperate for that money as you've mentioned.
A word about Peter Grandich. His newsletter is subscribed to and read by many investors. They pay him for his research. So do the companies he writes about. If he doesn't get paid by a company he doesn't write about that company. I don't think he liked getting e-mails from angry investors regarding FCO's lack of performance and made the best of a bad situation but no question this isn't something he likes. His reputation is on the line which is how he makes his living. I don't think he will be writing this time next year about FCO unless they DO have permanent financing and the mine is under construction. We won't hear about it if he does quit unless a subscriber asks and even then we probably won't know. That said, he IS paid by FCO to write nice things about the company.