Here's what Zack's says about notification of a reverse split:
"The board of directors of a company decides on a reverse stock split and then notifies shareholders of the conditions and date of the corporate action. The Securities and Exchange Commission website notes that a reverse split is not covered by SEC rules. State corporate laws and a company's own bylaws dictate how a reverse split must be handled. Notification may be in a press release or included in required SEC filing reports."
So that statement in the 10-K was all that was needed. We did discuss the RS as a group in advance of it happening because Tom included that in the annual report. Otherwise we never would of suspected it happening, especially since he stated in an interview that there were no plans (at that time) to reverse split. So we all knew it was part of the plan in 2016. We just thought he'd wait until the stock went up to .001 or .002 before doing it.
But here's the thing that nobody is looking at. That statement about reverse splitting the stock was only part of the sentence in the 10-K. A big part of the purpose was to convert the 20 million Series C Preferred Stock into restricted common shares.
As a reminder, here was the share structure before the reverse split:
Series A Preferred: 5,000,000 issued. (Series A are not convertible but simply maintain ownership rights of the company by having super voting rights.)
Series B Preferred: 11,139 authorized and issued. (These are convertible into common shares on a basis of 1 Preferred share to 2,500,000 common shares but are non-dilutive.)
Series C Preferred: 20,000,000 authorized and issued. (These are convertible into Common Stock at $.20 per share and have preferential liquidation rights at any time the owner, Tom Coleman, wished. These definitely can dilute.)
Common Shares: 5,560,000,000 authorized and 4,254,777,485 issued.
The stock price at that time was floating between .0001 and .0002 and no bid. Remember those days?
Now, $20 million Series C at $.20 equals $4 million if Tom decided to cash out although the company was/is only worth $400,000. With the pre-reverse split stock price at .0002 that would be an equivalent of diluting by 100 billion shares. Those would have basically increased the share count 25 times. (Read the death of the company and all our money world have been gone.)
Enter the reverse split.
The 4,254,777,485 issued Common are split 1:500 and become 8.5 million. The Series C preferred are converted into restricted Common to the tune of 80 million and added to the 8.5 million issued. Another 12 million were given to Tom as compensation in lieu of cash to manage Innovativ Media Group for 3 more years. That's a total of a little over 100 million common shares isued. Somehow the issued has since crept up to 123,724,670 as of Aug 11, 2016, a 23% rise.
So what would you rather have looming over your head as a common shareholder? $4 million in debt convertible at any time into cash with no recourse but losing all your investment, or, what we have now? Your answer is probably all of the money back that I lost when the share price dropped from .05 to what it is today, right? The problem is that you would have been invested in a basically awesome company with great production ideas, but zero capital to make it happen. And no larger investor to fund the production of MoM, or anything else for that matter, because of this $4 million threat to their investment. So we would have continued at .0001 or no bid with an occasional pump and dump to .0005 once every 6 or 7 months. But no value in the company.
Now, after the restructuring, INMG is in a much better position as a company to be a lucrative investment to outside larger investors because of the new share structure and because of using the investment you lost in the short term with the reverse split as funding for MoM. Yes, your investment was given to Tom to do what he felt was best to build the company and make MoM happen because, as a Common Stock shareholder, you now own part of INMG. It just cost us our short term investment. However this will go back up to .05 with MoM's release in October and investors, if they had left their money in as a truly long term investment (remember GLTA longs?), would get their investment back and more as MoM plays out and the stock goes above .05. That's what long term investing means.
Personally, I had 150,000,000 shares before the split (3.5% of the Common issued shares.) After the split, I instantly had 300,000 (0.27% of the Common issued shares.) I have no loyalty to Tom or INMG. I invest based on potential profits and I lose sometimes in the OTC. That's why I jumped out around .02. I went from $15,000 to $6,000 for a loss of $9,000. Now I'm back in with around 600,000 bought at .004. A $2,400 investment that if or when this gets back up to .05 will result in $30,000, minus the $9,000 loss and the $2,400 investment, for a profit of $18,600. If I just left my 300,000 shares alone, without averaging down, at .05 I'd still have my original investment of $15,000. But no profit. As much potential that INMG has as a business, it's still a risk as an OTC stock. So you either play it as a short term investment or a long term investment.
Tom, for the advancement of the company and it's survival, has played this brilliantly. But I'm still down $9,000! But hopefully, not for too much longer because his business plan has not changed. It's just taken longer to develope than we had expected. And for all of us who have lost a few thousand dollars, think about what Tom has sacrificed for the company. His $4 million in Series C Preferred Stock were converted to 80 million Common Shares in the reverse split and are now only worth $240,000 (80,000,000 * .003).
Just some thoughts on numbers...
