Hold your horses everyone. I just went through the 10-K. The cash and cash equivalents portion of the business looks exceptionally good meaning that as a business producing revenue, things look good. However, under Note 6 on page F-10 there is, what could be, an ominous signal on the horizon that will occur this year.
If you look at the share structure, there are 20,000,000 shares of Series C Preferred Stock. These were issued to a corporation controlled by our CEO, Tom Coleman. So they're his shares. These shares are convertible into Common Stock at the election of Tom at a rate of $.20 (20 cents) per share. That's 4 million dollars. Here is the statement in Note 6: Stockholders Equity on page F-10 that may or may not be a problem for us common share holders:
"As part of a capital restructuring the Company intends to convert its Series C Preferred Stock into restricted common shares and to reverse split its common shares in 2016.
We need some clarification from Tom on this. An RS is only valuable to shareholders if the company is growing and wants to increase its share price to make it more respectable to investors. Sometimes companies will do this to qualify for inclusion into the NYSE or the Nasdaq. The bad rs is when the pps continually goes down to a trip level and then an rs occurs at those levels. That's the death spiral of the company and the investors lose most all of their investment.
I do not put INMG into this death spiral scenario due to it showing obvious success as a business generating revenue and producing new product.
So a couple questions for Tom would be:
1.) What is the conversion rate from Series C to Common shares? Is it one for one, 100 Common shares for one Series C Preferred, or what?
2.) They become 20 million restricted shares. What is the restriction? Is it a time restriction relative to how long before he could sell them? Does it depend upon the pps being at a certain level?
3.) What is the purpose of the RS? When will it occur?
4.) What dillutive effect, if any, will these 20 million shares have on the common share structure.
It's obvious from the report that funds are going into production and marketing costs. that's good for us and it's good for INMG.
If the share structure is not impacted too severely by these Series C Preferred shares being converted, the RS will be good for us.
We just need a little clarification.
