Nope, not true. Please refer to FASB ASC 815 — Derivatives and Hedging.
What has happened here is the number of shares of STTK's common stock, that is issuable upon conversion of various promissory notes and warrants, exceeds the Company’s maximum number of authorized common shares. Since the number of shares of common stock issuable as debentures would exceed the Company’s authorized share limit, the equity financing environment is compromised, and all additional convertible debentures and warrants have to be accounted for on STTK's Balance Sheet as a derivative liability.
Pursuant to ASC 815-15 Embedded Derivatives, the fair values of the variable conversion option and warrants and shares to be issued are recorded as derivative liabilities on the issuance date. But... and here's the important part... no cash or other asset liability is implied by the Derivative Liabilities. It's really more a measure of the company's Liability Risk from the convertible debentures.
And, this certainly could be the reason why the company wants to increase the A/S to "unlimited". Once approved, at least as I understand the rule, STTK can increase the A/S when and as required to accommodate the converted notes, which would effectively eliminate the derivative liability.
This could not be done in the last 10-Q, as the company did not have the legal means to increase the A/S. That is what they are asking for now.
All in my opinion... after more than a bit of research on the applicable accounting rules.
