OWC Pharmaceutical Research Corp (OWCP)

[BruceLake]

As long as DGF has preferred shares, they can convert them. The only limitation is the 4.99% rule, meaning that the number they convert cannot result in the issuance of common shares that exceeds 4.99% of the number of shares outstanding at the time.

Right now they can't convert anything because the current number of the AS is only 500M. As per the loan agreement OWC has an obligation to make the common shares available. OWC does not need shareholder approval to increase the number of AS. However the pickle that OWC finds itself at the moment is that they cannot AS or RS themselves out of the fact that at the current share price the only thing preventing DGF from acquiring an unlimited # of common shares is the 4.99% rule. I say this because of the triggering conversion formula in the agreement:

Triggering Event Conversion Price” means, as of any Triggering Event Conversion Date, an amount equal to (A) 75% of the quotient determined by dividing (x) the sum of the three (3) lowest Closing Prices of the Common Stock during the period beginning ten (10) Trading Days prior to such Triggering Event Conversion Date and ending three (3) Trading Days after the shares of Common Stock are received into Holder’s brokerage account and fully cleared for trading, by (y) three (3), minus (B) $0.01.

By the way, if someone has the bright idea that a RS will solve the above formula, think again, it will not! For example if there is a RS of 1/10 or 1/100, that equation would have to be adjusted to minus $0.10 or minus $1.00.

So what is the solution?
1) Negotiate with DGF
2) Increase the share price by restoring shareholder confidence with timely communication and an effective business plan that makes sense.
3) Attract potential investor(s) to inject enough money to buy out DGF and to allow OWC to continue with its business plan.
4) All of the above.

One could probably make a good argument for 3 & 4, but I personally think that for the immediate future, #1 and #2 are a must! #1 is easily achievable by nominally increasing the AS. #2 is also achievable, but it will very much depend on the business plan, but with the prospect of a R/S looming, any enthusiasm will be dampened.

The problem with #3 is the potential investor(s) will want in at the current low share prices. After all, why jump in at a much higher evaluation? So you might say that we have opposing interests. Where they might see a 500% increase in their investment as phenomenal, the existing common shareholder will probably just groan or shrug their shoulder at such a dismal prospect.

Anyway, let's see what Ziv comes up with, but my preference is for #4) All of the above, as long as it's done properly and in the order that I suggested.