Be careful! Discovered there's massive dilution with this acquisition. Found the terms buried in the EX-10.9 filed with the 10Q yesterday. And it's not good. 1 share of Series A Convertible Preferred Stock converts to 100 shares of common stock. So the 288,588 shares of Series A Convertible Preferred Stock issued to GeoTraq convert to 28,858,800 common shares. Yikes! ARCI only had 6,687,000 shares as of yesterday's 10Q. So the share count is going to more than QUADRUPLE!?? Maybe the stock still gets a pump higher, but not sure what management is thinking here. Awesome turnaround quarter announced this week...then dilute the hell out of stockholders to make a dinky acquisition. Makes no sense! Maybe stock gets a pump higher...but I sold out on the premarket pop.
Section 5. CONVERSION. The Series A Convertible Preferred Stock shall not be convertible into Common Stock and have no other conversion rights except as specifically set forth below:
(a) Conversion. The “Conversion Ratio” per share of the Series A Convertible Preferred Stock in connection with any Conversion shall be at a ratio of 1:100, meaning every (1) one share of Series A Convertible Preferred Stock, if and when converted into Common Stock, shall convert into 100 shares of Common Stock (the “Conversion”). Each Holder shall have the right, exercisable at any time and from time to time (unless otherwise prohibited by law, rule or regulation, or as restricted below), to convert any or all of such Holder’s shares of Series A Convertible Preferred Stock into shares of Common Stock at the Conversion Ratio. Notwithstanding anything to the contrary herein, the Holders may not effectuate any Conversion and the Company may not issue any shares of Common Stock in connection therewith that would trigger any NASDAQ requirement to obtain shareholder approval prior to a Conversion or any issuance of shares of Common Stock in connection therewith that would be in excess of that number of shares of Common Stock equivalent to 19.9% of the number of shares of Common Stock as of the date hereof; provided, however, that the Holders may effectuate any Conversion and the Company shall be obligated to issue shares of Common Stock in connection therewith that would not trigger such a requirement. This restriction shall be of no further force or effect upon the approval of the shareholders in compliance with NASDAQ’s shareholder voting requirements. Notwithstanding anything to the contrary contained herein, the Holders may not effectuate any Conversion and the Company shall not issue any shares of Common Stock in connection therewith until the later of (x) February 28, 2019, or (y) sixty-one (61) days following the date on which the shareholders of the Company shall have approved the voting, Conversion, and other potential rights of the holders of Series A Convertible Preferred Stock otherwise set forth in this Certificate of Designation in accordance with the relevant NASDAQ requirements.
