(Total Views: 963)
Posted On: 03/01/2019 12:46:03 PM
Post# of 15624
I disagree with the second sentence in your post:
There seems to be a misunderstanding regarding this. Fact is the number of authorized but not issued shares will NOT be proportionately reduced.
https://seekingalpha.com/filing/4372569
Bottom of page 5 and top of page 6
Quote:
Authorized Shares of Stock
The reverse stock split would affect all issued and outstanding shares of Common Stock and outstanding rights to acquire shares of our Common Stock. We will not change the number of shares of Common Stock currently authorized. However, upon the effectiveness of the reverse stock split, the number of authorized shares of Common Stock that are not issued or outstanding would increase due to the reduction in the number of shares of Common Stock issued and outstanding as a result of the reverse stock split.
This is the part that is problematic. If the # of authorized shares were also reduced proportionally to the R/S then it would be ok.
Quote:
As of February 6, 2019, we had (i) 500,000,000 shares of authorized Common Stock, par value $0.00001 per share, of which 156,897,345 shares of Common Stock were issued and outstanding, and (ii) 20,000,000 shares of authorized preferred stock, par value $0.00001 per share, of which 500 shares were designated as Series A Convertible Preferred Stock, par value $0.00001 per share, and of which 465 shares of Series A Preferred Convertible Preferred Stock were issued and outstanding. If we issue additional shares, the ownership interest of holders of Common Stock will be diluted.
So here is the picture. Right now there are still approximately 343 million share that could be issued. After a R/S of 100-1 the number of shares would be reduced to 1.57 Mil., but now the company would still have room to issue another 498.43 Mil new shares!!
Not sure if the existing loan agreement prevents this type of dilution. You would think so, but if Discovery is paid off then this would be a moot point. However, I can't imagine a new investor being thrilled with such a share structure. Quite likely any new funding would include clear restrictions and consent requirements regarding future dilution.
Quote:
Since the number of authorized but not issued shares will be proportionately reduced I do not believe we will be less significant in terms of shares held by shareholders.
There seems to be a misunderstanding regarding this. Fact is the number of authorized but not issued shares will NOT be proportionately reduced.
https://seekingalpha.com/filing/4372569
Bottom of page 5 and top of page 6
Quote:
Authorized Shares of Stock
The reverse stock split would affect all issued and outstanding shares of Common Stock and outstanding rights to acquire shares of our Common Stock. We will not change the number of shares of Common Stock currently authorized. However, upon the effectiveness of the reverse stock split, the number of authorized shares of Common Stock that are not issued or outstanding would increase due to the reduction in the number of shares of Common Stock issued and outstanding as a result of the reverse stock split.
This is the part that is problematic. If the # of authorized shares were also reduced proportionally to the R/S then it would be ok.
Quote:
As of February 6, 2019, we had (i) 500,000,000 shares of authorized Common Stock, par value $0.00001 per share, of which 156,897,345 shares of Common Stock were issued and outstanding, and (ii) 20,000,000 shares of authorized preferred stock, par value $0.00001 per share, of which 500 shares were designated as Series A Convertible Preferred Stock, par value $0.00001 per share, and of which 465 shares of Series A Preferred Convertible Preferred Stock were issued and outstanding. If we issue additional shares, the ownership interest of holders of Common Stock will be diluted.
So here is the picture. Right now there are still approximately 343 million share that could be issued. After a R/S of 100-1 the number of shares would be reduced to 1.57 Mil., but now the company would still have room to issue another 498.43 Mil new shares!!
Not sure if the existing loan agreement prevents this type of dilution. You would think so, but if Discovery is paid off then this would be a moot point. However, I can't imagine a new investor being thrilled with such a share structure. Quite likely any new funding would include clear restrictions and consent requirements regarding future dilution.
![](/m/images/thumb-up.png)
![](/m/images/thumb-down.png)