Nope - you read that wrong. A triggering event is needed for a redemption NOT for conversion - conversion can happen any time while the preferreds are outstanding. Redemption is not a conversion. A redemption is the preferreds being called for cash. A triggering event is necessary if GHS wants its cash back which it wouldn't under normal circumstances as the preferreds are a super lucrative vehicle to benefit from receiving cheap discounted shares and selling them to retail investors at market.
Your quotes are all correct - your interpretations of them are not. As your quote #1 states, the preferreds are classified as equity until a triggering event as they are cheap dilutive equity.
Quote number 2 is correct but has no significance - yes if triggered it becomes preferred equity with a face value claim (which would cause a bankruptcy if SHMP couldn't come up with the cash).
Quote 3 says that IF GHS can't convert (for some technical reason) or there is another triggering event the preferreds are redeemable - i.e., SHMP has to give them their money back (which would cause a bankruptcy if SHMP could not come up with the cash).
None of these say anything about GHS not being able to do dilutive conversions while SHMP is healthy as you state. In fact it is convertible AT ANY TIME as in Exhibit 3.1 in the 10-Q for 9/30/19 filed 11/14/19 which states:
Quote:
Section 5. Conversion a) Conversion at option of Holder. Each Share of Prefered Stock shall be convertible, at any time and from time to time from and after the Original Issue Date at the option of the holder thereof
More relevant quotes include:
Quote:
Our existing stockholders may experience significant dilution from the sale of our common stock pursuant to the GHS financing agreement.
Quote:
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.
AI
