Q&A with the CEO & SEC Counsel, 6.13.14:
Post# of 11107
Posted On: 07/02/2014 11:20:42 PM
Re: SweepsMcGee #2979
Q&A with the CEO & SEC Counsel, 6.13.14:
Q: A PR in January mentioned that the goal of the company was to bring the float down to 300 million. The A/S is now 13 B and the O/S is not far behind. How does the company plan to achieve this goal? Will there be a reverse split at some point, or a buy-back?
A: Part of the use of proceeds in management’s financing plan is for a stock buy-back. How much lowering of the float that the company can accomplish will be determined, obviously, by the size and timing of the financing as it relates to the pps. After that point, management would better be able to determine whether a reverse split were necessary, and if so what the ratio would be. Management, ideally, would like to, if it were needed, announce the reverse split in conjunction with the filing of an S-1 so that the stock could better support the higher stock price. However, an S-1 cannot be filed until we close the Reg A financing round. Time – and the size of the financing – will tell.
Q: When does the company plan to begin ferry operations?
A: A great many aspects of the company depend on financing. This is one, but only in respect to timing. The company has a deadline to make the down payment on management’s targeted ferry ship (as of writing the company has received a draft letter of credit, which it is verifying with another bank). Once the down payment is made, management estimates the timing to be 3 months until the maiden voyage. Furthermore, once the down payment is made the company can start pre-selling tickets provided the sales proceeds stay in an escrow account in accordance with maritime law. However, funds in such an escrow account can be used to secure credit.
Q: When will we hear specific details about the acquired vessel/land property?
A: Specifics will be made public upon finalization of the credit arrangements. Management’s estimate for this is 2 weeks from now.
Q: $.20 has been mentioned time and time again as being the desired PPS by September. How will this be accomplished with the ongoing A/S increases?
A: First of all, management believes the core values in the company’s business plan from which the $.20 desired pps derives are still there. The timing of achieving, alas, depends to a certain degree on the timing of the company’s current financing objectives. Management understands that it will be more financially beneficial to complete the stock buy-back, reversing equity dilution from the A/S increases, the sooner it can after achieving the company’s financing objectives. The market understands this and will react accordingly – obviously management hopes to complete the stock buy-back prior to achieving $.20 pps.
Q: As a large shareholder in the company since May of 2013 all I have seen, since August 2013, regarding the PPS is it fall and fall and fall while more and more shares have been added to the a/s. This clearly indicates the company is “producing” more shares just to keep afloat and pay some of its bills. Therefore I must ask where is the funding coming from for this new business plan then? Please don’t tell us that we can expect more stock dilution to pay for it.
A: The funding for the new business plan will be coming from credit; credit that will be secured by land and vessels. The Company cannot “produce” enough shares to finance the acquisition of the assets needed for the business plan. There is a certain amount of capital the company needs to secure the credit, which may raise through equity dilution if certain short term credit arrangements do not close sufficiently soon. Management’s objective is to limit equity diluting transactions to just financing the company’s monthly burn rate until achievement of its current financing objectives. Accordingly, management is seeking to keep operations streamlined – so please do not call the receptionist with your IR questions as she is likely busy doing the jobs of 3 other people.
Q: Given the company’s current stock price and the number of outstanding shares, though, I’d like to know if the company plans to let the stock price grow organically from the current level, or if a reverse split is being contemplated in the near future to bring the stock price and outstanding share count to a point that may be more appealing to larger investors (either those that purchase common shares through the open market or those that decide to take advantage of the Reg A offering). As a long, one of my concerns with a reverse split is that the post-split price may not be sustainable; unless the company had a strong basis to do this (i.e., revenue generating stream that is inline with the post-split price), I would hope that a reverse split would only be considered as a last resort.
A: Please see above answers for further discussion of a reverse split. First off, a reverse spit is by no means a definite thing. Second, management is also not sure it is a truism that larger investors will favor a reverse split. The company is seeking larger investors that will be long-term holders. Regardless, management understands the risks of a reverse split, and believes revenue-generating activities will be underway before a reverse split is necessary.
Q: In reviewing the settlement with IBC Funds, LLC, it appears as though just over 2.3 billion shares were given to IBC in order to satisfy a $57,680.74 claim. Is that number misstated? At a par value of .0001, that would amount to just over $230,000.
A:Those numbers appear to be correct. Management is unable to issue any further public statement about IBC Funds at this time. Management can say that it was the discussions and negotiations with IBC were adversarial, management’s first legal objective was to stop the issuance of any further shares to IBC, and that the company has since revamped its procedures for using third party investors to help settle company claims.
Q: There is a reference in the filing to “shares retired during period” and “shares voided during period”. Would this be alluding to the company’s ongoing efforts to void and retire shares of the company stock that were fraudulently processed by third parties? If so, does this indicate that no void/retire actions took place in the third quarter?
A: Yes, that is what it alludes to. Correct no shares were retired in that quarter. See next question for further discussion on retiring of shares.
Q: In the “Share Based Compensation” section, there is a reference to the GCM merger on January 13th. The company PR’d on May 1st that the merger with GCM was dissolved. That being said, should a reference to that effect be included in these third quarter filings, or would the reference be added to the annual filing due on September 28 since the dissolution took place in the fourth quarter?
A: That will be reported in the report for the period ending June 30, 2014. The quarterly report is a meant to be a snapshot of the company at a given point in time – in this case March 30, 2014.
Q: From what I read on the SEC page with regard to Reg A, it’s capped at $5 million over a 12 month period. Is $5 million enough to support the endeavors that the company is looking to achieve (i.e., ship acquisition, etc.)? I’m assuming that the company wouldn’t pursue Reg A+ at this time in order to qualify for a higher amount, as it requires audited financials. This dovetails into my next question…. I have also read that there may be proposals in the offing to create two tiers for Reg A: tier 1 for $5 million and under, and tier 2 for $5 million and over. Also, the blue sky review required by some states may be exempted in these proposals. As an SEC attorney, could Mr. Saha comment as to where these proposals currently stand (if they are indeed in the pipeline) and if the company is looking into this?
A: The company is not looking into this. The management’s financing objective for the company is less than $1 Million so this limit is not an issue for the company business plan. Furthermore, management does not believe it prudent to hinge key aspects of the business plan on Washington getting something accomplished.
—–Given the great number of tasks that have required our attention, we are deferring the next set of questions and the statement by the CEO until next week. Once I am confident the present technical issues are resolved, and require no further attention from members of the staff, Mr. Saha and I will worked steadfast in getting the remainder of the Q&A and the statement to shareholders.
Have a wonderful weekend.
Regards,
Kerry
Q: A PR in January mentioned that the goal of the company was to bring the float down to 300 million. The A/S is now 13 B and the O/S is not far behind. How does the company plan to achieve this goal? Will there be a reverse split at some point, or a buy-back?
A: Part of the use of proceeds in management’s financing plan is for a stock buy-back. How much lowering of the float that the company can accomplish will be determined, obviously, by the size and timing of the financing as it relates to the pps. After that point, management would better be able to determine whether a reverse split were necessary, and if so what the ratio would be. Management, ideally, would like to, if it were needed, announce the reverse split in conjunction with the filing of an S-1 so that the stock could better support the higher stock price. However, an S-1 cannot be filed until we close the Reg A financing round. Time – and the size of the financing – will tell.
Q: When does the company plan to begin ferry operations?
A: A great many aspects of the company depend on financing. This is one, but only in respect to timing. The company has a deadline to make the down payment on management’s targeted ferry ship (as of writing the company has received a draft letter of credit, which it is verifying with another bank). Once the down payment is made, management estimates the timing to be 3 months until the maiden voyage. Furthermore, once the down payment is made the company can start pre-selling tickets provided the sales proceeds stay in an escrow account in accordance with maritime law. However, funds in such an escrow account can be used to secure credit.
Q: When will we hear specific details about the acquired vessel/land property?
A: Specifics will be made public upon finalization of the credit arrangements. Management’s estimate for this is 2 weeks from now.
Q: $.20 has been mentioned time and time again as being the desired PPS by September. How will this be accomplished with the ongoing A/S increases?
A: First of all, management believes the core values in the company’s business plan from which the $.20 desired pps derives are still there. The timing of achieving, alas, depends to a certain degree on the timing of the company’s current financing objectives. Management understands that it will be more financially beneficial to complete the stock buy-back, reversing equity dilution from the A/S increases, the sooner it can after achieving the company’s financing objectives. The market understands this and will react accordingly – obviously management hopes to complete the stock buy-back prior to achieving $.20 pps.
Q: As a large shareholder in the company since May of 2013 all I have seen, since August 2013, regarding the PPS is it fall and fall and fall while more and more shares have been added to the a/s. This clearly indicates the company is “producing” more shares just to keep afloat and pay some of its bills. Therefore I must ask where is the funding coming from for this new business plan then? Please don’t tell us that we can expect more stock dilution to pay for it.
A: The funding for the new business plan will be coming from credit; credit that will be secured by land and vessels. The Company cannot “produce” enough shares to finance the acquisition of the assets needed for the business plan. There is a certain amount of capital the company needs to secure the credit, which may raise through equity dilution if certain short term credit arrangements do not close sufficiently soon. Management’s objective is to limit equity diluting transactions to just financing the company’s monthly burn rate until achievement of its current financing objectives. Accordingly, management is seeking to keep operations streamlined – so please do not call the receptionist with your IR questions as she is likely busy doing the jobs of 3 other people.
Q: Given the company’s current stock price and the number of outstanding shares, though, I’d like to know if the company plans to let the stock price grow organically from the current level, or if a reverse split is being contemplated in the near future to bring the stock price and outstanding share count to a point that may be more appealing to larger investors (either those that purchase common shares through the open market or those that decide to take advantage of the Reg A offering). As a long, one of my concerns with a reverse split is that the post-split price may not be sustainable; unless the company had a strong basis to do this (i.e., revenue generating stream that is inline with the post-split price), I would hope that a reverse split would only be considered as a last resort.
A: Please see above answers for further discussion of a reverse split. First off, a reverse spit is by no means a definite thing. Second, management is also not sure it is a truism that larger investors will favor a reverse split. The company is seeking larger investors that will be long-term holders. Regardless, management understands the risks of a reverse split, and believes revenue-generating activities will be underway before a reverse split is necessary.
Q: In reviewing the settlement with IBC Funds, LLC, it appears as though just over 2.3 billion shares were given to IBC in order to satisfy a $57,680.74 claim. Is that number misstated? At a par value of .0001, that would amount to just over $230,000.
A:Those numbers appear to be correct. Management is unable to issue any further public statement about IBC Funds at this time. Management can say that it was the discussions and negotiations with IBC were adversarial, management’s first legal objective was to stop the issuance of any further shares to IBC, and that the company has since revamped its procedures for using third party investors to help settle company claims.
Q: There is a reference in the filing to “shares retired during period” and “shares voided during period”. Would this be alluding to the company’s ongoing efforts to void and retire shares of the company stock that were fraudulently processed by third parties? If so, does this indicate that no void/retire actions took place in the third quarter?
A: Yes, that is what it alludes to. Correct no shares were retired in that quarter. See next question for further discussion on retiring of shares.
Q: In the “Share Based Compensation” section, there is a reference to the GCM merger on January 13th. The company PR’d on May 1st that the merger with GCM was dissolved. That being said, should a reference to that effect be included in these third quarter filings, or would the reference be added to the annual filing due on September 28 since the dissolution took place in the fourth quarter?
A: That will be reported in the report for the period ending June 30, 2014. The quarterly report is a meant to be a snapshot of the company at a given point in time – in this case March 30, 2014.
Q: From what I read on the SEC page with regard to Reg A, it’s capped at $5 million over a 12 month period. Is $5 million enough to support the endeavors that the company is looking to achieve (i.e., ship acquisition, etc.)? I’m assuming that the company wouldn’t pursue Reg A+ at this time in order to qualify for a higher amount, as it requires audited financials. This dovetails into my next question…. I have also read that there may be proposals in the offing to create two tiers for Reg A: tier 1 for $5 million and under, and tier 2 for $5 million and over. Also, the blue sky review required by some states may be exempted in these proposals. As an SEC attorney, could Mr. Saha comment as to where these proposals currently stand (if they are indeed in the pipeline) and if the company is looking into this?
A: The company is not looking into this. The management’s financing objective for the company is less than $1 Million so this limit is not an issue for the company business plan. Furthermore, management does not believe it prudent to hinge key aspects of the business plan on Washington getting something accomplished.
—–Given the great number of tasks that have required our attention, we are deferring the next set of questions and the statement by the CEO until next week. Once I am confident the present technical issues are resolved, and require no further attention from members of the staff, Mr. Saha and I will worked steadfast in getting the remainder of the Q&A and the statement to shareholders.
Have a wonderful weekend.
Regards,
Kerry
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