This latest occurrence should come as no surprise. Over the last couple of months several of my posts outlined several scenarios of what might happen.
1. OWC could have simply repaid part of the loan with cash on hand but the problem with that scenario is that they were a bit short of cash and even if they had the cash it would have left the company with no money whatsoever to carry on.
2. They could have carried on and continued to pay the monthly redemption and conversion of the preferred shares in cash or issuance of common shares. The problem with this scenario is that by the end of the year the company would have run out of either money or room to issue common shares.
3. Discovery could have easily carried on to try and suppress the share price. The more successful, the more shares they would be issued upon conversion. The conversion formula became that much more appealing to Discovery because of the triggering event in the loan agreement. The reason Discovery did what they did could be an indication that they were becoming uneasy with potential good news that might be in the horizon.
Why accept fewer shares when there was potential for more? Consider the following:
The above shares were being converted during a time when the share price was considerably higher than the current price. The conversion of the 67 preferred shares translates to $0.01371 per share.
The conversion of the remaining 433 Preferred shares translates to $0.01681 per share.
For me the positive is that the Company no longer has to deal with the negative impact of the outstanding loan and with the uncertainty as to what Discovery might or might not do. Could the outcome have been better? Of course it could have, but what is the point of focusing on what might have been. What is done is done.
What will Discovery do now? Aside from owning the vast majority of shares, like any other shareholder they will want to capitalize and profit as much as possible from the shares that they do have. In this respect they are no different than most of us. But they do have the potential to manipulate the market. For us the task is to recognize it as such.
Concern has been expressed on the fact that Discovery will have a controlling number of shares. I personally think what will ensue is a cat and mouse situation between the Company and Discovery. The Company still has cards up its sleeve that they can play:
Maybe all this is just a "glass is half full" point of view.
GLTA
1. OWC could have simply repaid part of the loan with cash on hand but the problem with that scenario is that they were a bit short of cash and even if they had the cash it would have left the company with no money whatsoever to carry on.
2. They could have carried on and continued to pay the monthly redemption and conversion of the preferred shares in cash or issuance of common shares. The problem with this scenario is that by the end of the year the company would have run out of either money or room to issue common shares.
3. Discovery could have easily carried on to try and suppress the share price. The more successful, the more shares they would be issued upon conversion. The conversion formula became that much more appealing to Discovery because of the triggering event in the loan agreement. The reason Discovery did what they did could be an indication that they were becoming uneasy with potential good news that might be in the horizon.
Why accept fewer shares when there was potential for more? Consider the following:
Quote:As of May 17, 2019, the Investor converted an aggregate of 67 shares of Preferred Stock into an aggregate of 46,865,656 shares of the Common Stock at the conversion prices in effect on the respective conversion dates and in payment of dividends on the Preferred Stock.
The above shares were being converted during a time when the share price was considerably higher than the current price. The conversion of the 67 preferred shares translates to $0.01371 per share.
The conversion of the remaining 433 Preferred shares translates to $0.01681 per share.
For me the positive is that the Company no longer has to deal with the negative impact of the outstanding loan and with the uncertainty as to what Discovery might or might not do. Could the outcome have been better? Of course it could have, but what is the point of focusing on what might have been. What is done is done.
What will Discovery do now? Aside from owning the vast majority of shares, like any other shareholder they will want to capitalize and profit as much as possible from the shares that they do have. In this respect they are no different than most of us. But they do have the potential to manipulate the market. For us the task is to recognize it as such.
Concern has been expressed on the fact that Discovery will have a controlling number of shares. I personally think what will ensue is a cat and mouse situation between the Company and Discovery. The Company still has cards up its sleeve that they can play:
Quote:Top paragraph of page 73.
Blank check preferred stock
Our amended and restated certificate of incorporation provides for 20,000,000 authorized shares of preferred stock. The existence of authorized but unissued shares of preferred stock may enable our board of directors to render more difficult or to discourage an attempt to obtain control of us by means of a merger, tender offer, proxy contest or otherwise. For example, if in the due exercise of its fiduciary obligations, our board of directors were to determine that a takeover proposal is not in the best interests of us or our stockholders, our board of directors could cause shares of preferred stock to be issued without stockholder approval in one or more private offerings or other transactions that might dilute the voting or other rights of the proposed acquirer or insurgent stockholder or stockholder group. In this regard, our amended and restated certificate of incorporation grants our board of directors broad power to establish the rights and preferences of authorized and unissued shares of preferred stock. The issuance of shares of preferred stock could decrease the amount of earnings and assets available for distribution to holders of shares of common stock. The issuance may also adversely affect the rights and powers, including voting rights, of these holders and may have the effect of delaying, deterring or preventing a change in control of us.
Maybe all this is just a "glass is half full" point of view.
GLTA
