It is true Gary that the company has, as of now, e
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Posted On: 04/04/2019 9:59:16 AM
It is true Gary that the company has, as of now, enough money to fund their ongoing studies until March 31, 2020. This is the good news. However, the 10-K also points to some potential financial potholes that the company may have to get past. It should be no surprise that they have to do with Discovery.
Here are two scenarios:
1. Right now there are still 440 Preferred Shares that have yet to be redeemed. @ $10,000 each this equals $4.4 Mil. As of Dec. 31, 2018 the company was not in compliance with the Equity Conditions (read... Dr, Baruch assault charge = "triggering" event) therefore Discovery has the unilateral right to request redemption in cash at the rate of 1/12 per month after 270 days (not sure if the redemption is 1/12 of the original 500 shares or the remaining 440 shares). If it's the latter, that equals to 36.66 shares = $366K per month. In other words the company would quickly run out of money before the end of the year.
2. The other possibility is that Discovery may just keep on converting their remaining preferred shares to VERY CHEAP common shares. Think about this for a moment. Between the beginning of the year to the date of the issuance of the current financial statements, Discovery converted 50 Preferred shares ($500K) and in return they were issued 24,871,345 common shares. This works out to an average of about $.02/share!! The next conversion could be at a much lower average price. Even at an average of $.02, $4.4 Mil would require issuance of an additional 220 Million more shares. Add this to the current outstanding shares and all of a sudden we are perilously close to the 500 million authorized shares.
Both of the above scenarios spell the need for some sort of influx of money. Obviously the sooner they do it the better. In a way I agree with you that if the idea of a R/S was abandoned it would't be long before the S/P went up again. The company could then sell the higher valued shares to raise the needed funds. If the company sits on its heels, and Discovery converts its preferred shares, we would get to a situation where the shares required reaches the maximum authorized limit of 500 million shares. Then What? The company would have no choice but to implement a R/S just so they can continue with their work.
All of the above points to the need for the company to act swiftly to mitigate the damage. My hope is that they already have a financial plan in place, one that they will soon be announcing.
Here are two scenarios:
1. Right now there are still 440 Preferred Shares that have yet to be redeemed. @ $10,000 each this equals $4.4 Mil. As of Dec. 31, 2018 the company was not in compliance with the Equity Conditions (read... Dr, Baruch assault charge = "triggering" event) therefore Discovery has the unilateral right to request redemption in cash at the rate of 1/12 per month after 270 days (not sure if the redemption is 1/12 of the original 500 shares or the remaining 440 shares). If it's the latter, that equals to 36.66 shares = $366K per month. In other words the company would quickly run out of money before the end of the year.
2. The other possibility is that Discovery may just keep on converting their remaining preferred shares to VERY CHEAP common shares. Think about this for a moment. Between the beginning of the year to the date of the issuance of the current financial statements, Discovery converted 50 Preferred shares ($500K) and in return they were issued 24,871,345 common shares. This works out to an average of about $.02/share!! The next conversion could be at a much lower average price. Even at an average of $.02, $4.4 Mil would require issuance of an additional 220 Million more shares. Add this to the current outstanding shares and all of a sudden we are perilously close to the 500 million authorized shares.
Both of the above scenarios spell the need for some sort of influx of money. Obviously the sooner they do it the better. In a way I agree with you that if the idea of a R/S was abandoned it would't be long before the S/P went up again. The company could then sell the higher valued shares to raise the needed funds. If the company sits on its heels, and Discovery converts its preferred shares, we would get to a situation where the shares required reaches the maximum authorized limit of 500 million shares. Then What? The company would have no choice but to implement a R/S just so they can continue with their work.
All of the above points to the need for the company to act swiftly to mitigate the damage. My hope is that they already have a financial plan in place, one that they will soon be announcing.
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