The following is a response to shareholders that have expressed concern on the impact that the dumping of shares by Discovery is having and might continue to have on the share price.
I really wouldn't categorize it as dumping. Rather, I think it's more like strategic selling. The 26+ million shares that Discovery was issued for converting 30 preferred shares worked out to be less than $.012 per share. So anything they get above this price is gravy for them. Also the volume is relatively speaking very low, meaning that even if they were the only ones selling it would easily take over a month for them to dispose of all their shares.
In one of my earlier posts I made reference to the fact that the Company has to do something sooner rather than later. Reason being that if they don't, the number of common shares they will have to issue to Discovery will reach a point where they just won't have any more shares to issue. As you know the number of authorized common shares the Company has is only 500 million. At the current rate of conversion we could conceivably reach the limit of 500 million in 6 months or so.
There are a few ways that the number of shares needed to be issued to Discovery could be addressed and therefore soften the damage:
1. Another investor stepping in. I doubt this will happen and even if it did, I doubt it will be a charitable organization. They will be just as toxic under the current circumstances.
2. The Company could buy some time by choosing to repay the conversion of preferred shares in cash rather than shares. But they will only do this if they can be certain that they will soon be able to replenish their cash reserves.
3. Announce some sort of licensing and/or over the counter product sales, or some other positive news such as a patent grant, etc. This will not give the Company a sudden infusion of cash, but it will drive the share price up high enough not only to make shareholders happier, but also to soften the toxic impact of the Discovery loan.
4. The loan agreement with Discovery has a maximum 4.99% limit as to the number of shares it can own. I remember reading that Discovery has the option to increase this % without the need for them to dispose shares in excess of 4.99%. What I don't know is if there is a maximum or other limits imposed within the agreement. I noted somewhere that if Discovery exercises warrants (won't happen in this case because the price would have to be about 10 times higher than it is right now) they can exceed the 4.99% limit up to 9.99% by giving 60 days notice....I'm not clear if this applies to just the warrants or Discovery's overall % holdings. If somebody can read the loan agreement again and comment on this, it would be much appreciated.
Thanks!
I really wouldn't categorize it as dumping. Rather, I think it's more like strategic selling. The 26+ million shares that Discovery was issued for converting 30 preferred shares worked out to be less than $.012 per share. So anything they get above this price is gravy for them. Also the volume is relatively speaking very low, meaning that even if they were the only ones selling it would easily take over a month for them to dispose of all their shares.
In one of my earlier posts I made reference to the fact that the Company has to do something sooner rather than later. Reason being that if they don't, the number of common shares they will have to issue to Discovery will reach a point where they just won't have any more shares to issue. As you know the number of authorized common shares the Company has is only 500 million. At the current rate of conversion we could conceivably reach the limit of 500 million in 6 months or so.
There are a few ways that the number of shares needed to be issued to Discovery could be addressed and therefore soften the damage:
1. Another investor stepping in. I doubt this will happen and even if it did, I doubt it will be a charitable organization. They will be just as toxic under the current circumstances.
2. The Company could buy some time by choosing to repay the conversion of preferred shares in cash rather than shares. But they will only do this if they can be certain that they will soon be able to replenish their cash reserves.
3. Announce some sort of licensing and/or over the counter product sales, or some other positive news such as a patent grant, etc. This will not give the Company a sudden infusion of cash, but it will drive the share price up high enough not only to make shareholders happier, but also to soften the toxic impact of the Discovery loan.
4. The loan agreement with Discovery has a maximum 4.99% limit as to the number of shares it can own. I remember reading that Discovery has the option to increase this % without the need for them to dispose shares in excess of 4.99%. What I don't know is if there is a maximum or other limits imposed within the agreement. I noted somewhere that if Discovery exercises warrants (won't happen in this case because the price would have to be about 10 times higher than it is right now) they can exceed the 4.99% limit up to 9.99% by giving 60 days notice....I'm not clear if this applies to just the warrants or Discovery's overall % holdings. If somebody can read the loan agreement again and comment on this, it would be much appreciated.
Thanks!
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