24 Jul July 2018 Shareholder Newsletter
Dear Shareholders, Friends, and Partners,
First and foremost, I want to thank all of you for being loyal and committed to the vision that is now known as Zenergy. Many of you came in very early, and I am incredibly thankful for that. While we’ve made significant progress in building out our business platform and we are now executing in the marketplace (in reference to acquiring customers and building up revenue), it has no doubt been a turbulent past 6-7 months for us concerning our share price and what has transpired regarding our overall share structure. This ongoing issue will be the focal point of my communication to you today.
As stated above, from a business perspective, we are doing reasonably well; I am pleased with our management team and their execution of our strategy. There are many schools of thought regarding running a public company, most of which do not apply when building a new, emerging growth company on the OTC exchange; however, some do. In our case, we’ve always felt that once we start building up our assets and our revenue, the share price would at some point in time reflect more accurately our performance, value proposition, place in the industry, growth potential, etcetera. Obviously, no one has a crystal ball – but, for the most part, most executives, investors, and analysts would agree with this concept or theory being a standard approach.
For emerging growth companies, things can get incredibly difficult as there are many moving parts, shifting priorities, tweaks to the strategy, adjustments in the business model, limited access to quality sources of capital – the list goes on. Zenergy is no exception to the rule having gone through all of these growing challenges and then some. Having said all of that, I do believe that we’ve found our stride and our purpose (if you will) in becoming a fully integrated energy company, albeit modernized with offerings like our Smart Home Package and of course, our flagship offering; the Zero Cost Program™. In any event, I never envisioned that our team would have to navigate and execute our business plan while there would be a tremendous amount of downward pressure on our stock; but that is the reality of the situation. Candidly, I envisioned it being the exact opposite, once we were executing the business plan.
Before I go any further, please allow me to interject, by saying that we regularly receive emails and unsolicited “advice” from shareholders who tend to think that we are somehow enjoying or administrating this predicament, or that we are merely sitting idly by and watching our share price move downward. I understand the frustration and even believe that most of this feedback comes with good intentions, but it is just inaccurate and coming from people with an insufficient view as to the ongoings within the day-to-day operation of this company. It is evident to me that those views and opinions are shortsighted and based on limited regulatory knowledge, which governs what we can and cannot do (or say). Of course, we also get very positive feedback and great ideas from many shareholders as well, and we are grateful for all if it. Moreover, there is always a delicate balance we have to maintain concerning what we can do and say, and we do our best to abide by that framework, even when we don’t like it.
Let there be no confusion; we are not happy at all with the share price or the dilution that is occurring; it was never our plan to allow all of these convertible notes to convert. Candidly, we are heartbroken over it. Earlier in the year, we had a goal to get rid of most or all of these convertible notes; as you may or may not recall, we actually even began paying these off as was evidenced earlier this year, when we paid off just over $125,000 in convertible notes. At the time, we were confident that, by May 1st, we would’ve had the majority, if not all of those notes, well accounted for. Unfortunately, there were a lot of changes and shakeups well beyond our control that happened within the ecosystem of the OTC markets, including a broker-dealer that almost went out of business. These events spawned a host of clearing houses and other broker-dealers that no longer wanted to allow penny stock or sub-penny stock companies to deposit their shares.
As a result, while these changes effectively forced some of the bad actors referred to as “toxic lenders” to revamp their business practices and strategies, which created better habits overall, they also made more reputable investors apprehensive about investing in OTC companies like ours. We experienced two such parties, who formerly were very interested in helping us restructure our entire debt bringing in much friendlier capital for us, but then became wary and changed their minds because of the events happening; chief among these was their concerns about depositing OTC related shares. Had there not been the above circumstances affecting the OTC markets, then we believe that we would’ve indeed had the majority, if not all of those notes accounted for, per our plan at the beginning of the year and per our discussions with these friendly sources of capital. This development was utterly unanticipated; as a matter of fact, those events officially began in early April. There is even a blog that an unaffiliated law firm distributed that articulated a core element of these events and, while I don’t agree with all of its points, it is pretty accurate about the events that have plagued the OTC markets since then. You may click here to access that blog.
During our last annual shareholder meeting, we felt confident, based on the representations we received from some strategic lenders, that we would be able to retire the majority of these convertible debt notes successfully. As most of you know and thanks to you loyal shareholders, we’ve had the privilege of maintaining a healthy market cap ranging from $10 million to as high as $45 million over the past two years. However, in December 2017, these toxic noteholders began to convert and, although the unfortunate practice would cease for a time, it would again resurface in April 2018, of course right after our one-year Form 10 filing anniversary, devaluing our stock once again.
Now you might be asking yourself why these convertible note holders would dilute so fast and furiously with complete disregard for the company’s bigger picture or overall well-being. Well, from what I have experienced and gathered going through this process, I have concluded that the majority of these players couldn’t care less about our price, the negative impact of their actions on the company, and have zero interest in any long-term growth proposition that our company may present. If I didn’t know better, I would be tempted to think that they might’ve adopted a mantra of “Dump it at any cost,” but I digress. Unfortunately, we were in a position in 2017 as an emerging growth company where we needed the funds to develop our platform, and we made what we felt was the best decision for the company was at that time.
Since that time, the commotion has begun to settle a bit, and we now have a couple of parties back on the table, and some of these things are working themselves out in the OTC ecosystem concerning depositing shares. In the middle of this excruciating circumstance, we’ve continued to execute our business plan, increasing our revenue and our assets. As a result of our success in the middle of this rugged environment, some of these parties have come back. Just this week, I executed a term sheet for $7M in equity financing, and we continue to work on and explore supplemental plans to this financing that would enable us to ramp up our business plan and also get rid of these various convertible debt holders who would arguably rather see our demise than our success.
Naturally, I am excited about these developments and happy to see that tide beginning to turn. However, it is imperative that I do relay to you all that this downward pressure on the stock does affect our ability to access friendly capital. It also affects our ability to take advantage of the equity line we’ve worked so hard to put in place, which in turn makes it difficult for us to access general working capital to take care of every day needs as we embark on continuing to acquire customers. So, by no means do we endorse or take pleasure in our current stock situation, nor have some secret internal conspiracy to allow this to keep happening. On the contrary, our current predicament makes me sick to my stomach, and the very writing about it in this newsletter irks me to the core. Honestly, were it not for our management team, the business plan, and the real asset value that we are putting in place, I believe that a lesser team may not have navigated these debilitating trials that have transpired as we have.
It doesn’t escape me that many of you are frustrated, upset or angry, but I assure you that no one’s disappointment is more profound than my own or that of Byron’s. Please don’t misinterpret that to mean your voice doesn’t count because it does—we have managed this company according to what’s best for the shareholders and, to be candid with you, what’s best for the little guys so to speak. After experiencing the audacity of some of these fund groups, I am especially more resolute than ever about being a company that is for the people by the people. I want to remind you that we have a unique offering and viable business platform, and all of our business units are growing, all of this in spite of the myriad trials and tribulations we’ve had to endure. This season will pass.
In conclusion, I wanted to use this correspondence to dispel any misconceptions or conspiracy theories out there and instead present to you guys the cold hard facts. So, here we are, always eager and willing to speak with you, to listen to your concerns or ideas or suggestions. Otherwise, we will continue to fight the good fight and continue to envision the day when we no longer have to deal with the nuances of toxic noteholders and diluters galore. Having said much ado about these convertible note holders, I would be remiss if I failed to acknowledge that a few of them have been phenomenal, sincere business partners who have maintained an overall healthy relationship with us and demonstrated a genuine appreciation for our long-term business plan and model. For these individuals, we are thankful. I also want to thank each of you and reassure you that we appreciate you, remain dutifully bound to you, and utterly dedicated to building a world-class company, together. Thank you so very much.
President & CEO
Zenergy Brands, Inc.