Innovation Pharmaceuticals Inc (IPIX)

[loanranger]

As an aside to the "same boat" issue, I was rooting around trying to make sure I wasn't giving anyone a bum steer when I made the following statement and found a few things that I thought were interesting (and that indeed I was providing that bum steer):
"Some of his shares are Class A shares, the same kind of shares that you own. However, he and KM hold options that can be exercised for 18,000,000 Class B common shares each which could be converted into Class A shares on a 1 for 1 basis. I haven't checked the filings, but if they could exercise their options for Class B shares and then sell them, it would generate a significant amount of cash for them and none for Class A holders, while transferring a great deal of control to the buyers."

I've never been able to find the Certificate of Designation of the Class B shares that should have been attached to an SEC filing but as far as I can tell never was, so I have to rely on the description provided as part of the text of various filings. Back when the Class B was created there was a serious of questions and responses that lasted several months between the company and the SEC....they can be seen on the company Edgar list.
Anyway, the descriptions per the filings said these things:
1. Options were to be issued to THREE individuals (the third was only described as a consultant who was never identified and received 1,680,000 options versus 18M each to LE and KM) that could be exercised in order to acquire an equal amount of Class B shares.
2. The options were originally priced at a dime but the SEC pointed out that they were required to be a minimum of 110% of the then current market price so they were increased to $.11 in the final Information Statement.
3. Any Class B shares received as the result of the exercise of those options would be entitled to voting rights equal to ten times that of a Class A share.
4. The Class B shares could be converted to Class A shares on a one for one basis at any time.
5. What struck me as the most important term of the Class B shares (in terms of the "same boat") is that, should they be transferred from any of the three recipients to another party the Class B shares would automatically be converted to Class A shares.

As a result no one can buy the Class B shares for their voting power because it disappears immediately upon transfer. This pokes a giant whole in my posted statement in terms of this: "while transferring a great deal of control to the buyers".
No Class B shares are outstanding. The only reason for KM and LE to lay out that $.11/share would be to assure their voting control in the event that they felt it was in jeopardy. They don't have a majority of the Class A shares but they have more than enough to assure that they will hold sway over any election given the impact of non-voters and the shares held by related parties (although the issuances to Aruda may give them something to think about).

That led me to wonder about the unnamed consultant. Theoretically that person could "buy" 16,800,000 votes by exercising his option to buy 1,680,000 Class B shares. Here's what I found in the latest 10-K (I'm guessing that it appeared in the last one, too):
"On December 21, 2012 the Company issued 1,680,000 Class A common shares to a consultant upon exercise of Stock Options granted on December 29, 2010 under the Company’s 2010 Equity Incentive Plan and exercisable at $0.10 per share. The Company received $168,000."

So for some unstated reason a step was skipped. Instead of the options being exercised for Class B share and then converted to Class A shares (as the filings describe the process), a step was skipped/omitted and they were exercised for Class A shares. Why? Oh, and in spite of the option price being updated as described above (per the CTIX DEF14C..."Options Group A granted to each, which options are exercisable at $0.11 per share, 110% of the closing bid price of December 29, 2010."), they were let go for a dime (as originally proposed and rejected).
I'd still like to know who that consultant was and why it was so important to keep their identity a secret even after the SEC asked them 2-3 times about it and whether they still have a connection to the company. Selling the Class A shares would have made him a millionaire (maybe multi, depending on when and if sold) and the fact that they were originally willing to risk giving up significant voting power to him/her suggests that they were at one time considered a very important part of CTIX's beginnings.


There. Now you have a headache to go with your upset stomach :o)