25 Jan The Deal with Increasing the Authorized Shares

A few weeks ago, I wrote a blog entitled “OTC Musings…” wherein I addressed the topic of convertible debt notes as a viable funding option for emerging growth companies, however, with lots of caveats of course. If you missed that, you can find it by clicking here. While this blog article was generic and informative in nature, I did take the time to convey the positive and negative impacts of convertible debt note obligations. One of the items I elaborated on is the requirement in some cases to provide incredibly high amounts of coverage for these noteholders; this is done by holding five times (sometimes even more) the number of shares required to satisfy the note in “reserve” at any given time.


As you can surmise, this certainly runs the potential of creating a conflict of interest for these noteholders while (1) concomitantly increasing their number of shares and, of course, while (2) also simultaneously increasing their respective number of shares in reserve. In any event, that would be a topic for another blog article but is part of the reason I’d like to see the OTC implement some type of report card wherein emerging growth companies can openly rate these various investor groups in the landscape. Moreover, and as it pertains to my reason for this specific blog, this dynamic is the primary reason we had to recently increase our authorized shares.


I wanted to take the time to explain this recent decision to our shareholders, who, of course, have rightful concerns and questions about our recent substantial increase in our authorized shares. I felt it imperative to go on record and state that we are not interested in simply authorizing these new shares for no good or strategic reason, especially one that would fail to increase the enterprise value of our company. The exclusive reason behind this increase was to satisfy the aforementioned “reserve” dynamic associated with our convertible debt notes. As per our recent S1 registration, some of these financiers had shares that were registered and, have the ability to become sellers and other notes are still waiting to mature. Per my End-of-Year Shareholder Newsletter a few weeks back, one of our top three objectives this quarter is to clean up our balance sheet (click here to read the Newsletter).


Furthermore, I believe that we are showing improvement and can now attract better and friendlier sources of capital, while at the same time, finally start building our revenue base. This was evidenced by our announcement two weeks ago when we paid down $107,000 and then a week thereafter, wherein we paid down another $25,800 of this convertible debt before it converts into common stock. Here’s my point behind laying all of this out for you, our valued shareholders: while I am not at all happy about having to increase our number of authorized shares for what I deem an unnecessary reason, the silver lining is that as we pay these financiers back and/or as they convert out of their positions, these reserve obligations go away, therefore allowing us to decrease, and ultimately, entirely remove the share reserve. As stated in our last Shareholder Newsletter, we plan to clean up the balance sheet this quarter and then, the moment we are able to remove the significant share reserve, my plan is to demonstrate to our shareholders our true motives and reasoning behind the same.   Having said all of that, I must remind everyone that we are an emerging growth company, we continue to manage and attempt to grow our business and develop new clients, all of which requires ongoing capital and resources and so it is in the face of this constant need, that we are balancing the aforementioned task of cleaning up the balance sheet.


In conclusion, I felt strongly that our shareholders, especially our long-term supporters and believers, needed to hear from us about the logic that informed this course of action and the plan that accompanies its execution. We’ve always strived to be transparent and my hope in sharing this communique is that you can appreciate the candid spirit of this blog post. To the best of my ability, I will continue to keep you all apprised of this subject as it develops. Thank you.


I remain yours sincerely,


Alex Rodriguez

CEO & President

Forward Looking Statements: This communication may contain statements that involve expectations, plans or intentions (such as those relating to future business or financial results) and other factors discussed from time to time in our Securities and Exchange Commission filings. These statements are forward-looking and are subject to risks and uncertainties, so actual results may vary materially. You can identify these forward-looking statements by words such as “may,” “should,” “expect,” “anticipate,” “believe,” “estimate,” “intend,” “plan” and other similar expressions. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors not within the control of the Company. The Company cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The Company disclaims any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.



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