Interpret the S-1 how you want.
The issuance of shares pursuant to the GHS financing agreement may have a significant dilutive effect.
Depending on the number of shares we issue pursuant to the GHS Financing Agreement, it could have a significant dilutive effect upon our existing shareholders. Although the number of shares that we may issue pursuant to the Financing Agreement will vary based on our stock price (the higher our stock price, the less shares we have to issue), there may be a potential dilutive effect to our shareholders, based on different potential future stock prices, if the full amount of the Financing Agreement is realized. Dilution is based upon common stock put to GHS and the stock price discounted to GHS’s purchase price of 80% of the lowest trading price during the pricing period.
GHS Investments LLC will pay less than the then-prevailing market price of our common stock which could cause the price of our common stock to decline.
Our common stock to be issued under the GHS Financing Agreement will be purchased at a twenty percent (20%) discount, or eighty percent (80%) of the lowest trading price for the Company’s common stock during the ten (10) consecutive trading days immediately preceding the date on which the Company delivers a put notice to GHS.
GHS has a financial incentive to sell our shares immediately upon receiving them to realize the profit between the discounted price and the market price. If GHS sells our shares, the price of our common stock may decrease. If our stock price decreases, GHS may have further incentive to sell such shares. Accordingly, the discounted sales price in the Financing Agreement may cause the price of our common stock to decline.
We may not have access to the full amount under the financing agreement.
The lowest closing price of the Company’s common stock during the ten (10) consecutive trading day period immediately preceding the filing of this Registration Statement was approximately $0.229. At that price we would be able to sell shares to GHS under the Financing Agreement at the discounted price of $0.1824. At that discounted price, the 16,876,540 shares would only represent $3,078,280.00, which is below the full amount of the Financing Agreement. We have previously registered 20,000,000 shares of common stock at a price of $0.016 per share representing $ 320 ,000 .00 under the Financing Agreement, which is far below the full amount of the Financing Agreement.
We Needed Additional Capital, and the Sale of Additional Shares, Equity and Debt Securities Resulted in Additional Dilution to Our Stockholders.
We recently required additional cash resources due to changed business conditions or other future developments. These resources were insufficient to satisfy our cash requirements, so we sold additional equity or debt securities or obtained one or more credit facilities. The sale of these securities resulted in additional dilution to our shareholders. The future sale of additional equity securities could result in additional dilution to our stockholders and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a Common Stock holder.
In order for the Company to continue its business operations and provide growth to its shareholders, the Company requires financing in the form of debt, equity, credit and other forms of financing. As of September 19, 2018, the date of effectiveness of the Company’s Form S-1 Registration Statement, the Company had 87,056,880 shares of common stock issued and outstanding. As of the date hereof, the Company has 296,807,419 shares of common stock issued and outstanding (the “Outstanding Share Increase”). A significant portion of the Outstanding Share Increase and dilution therefrom is a result of the financing transactions the Company has entered into in connection with and in furtherance of the Company’s business operations as disclosed herein and in the Management Discussion and Analysis section of this Form S-1 Registration Statement. The Company’s issuance of additional convertible promissory notes, common stock purchase warrants, or common stock will continue to increase the amount of shares of common stock issued and outstanding and thereby dilute our shareholders.
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