I don't ever remember him saying no dilution. It was obvious there would be dilution because it was a startup company with no product when they started. If you are here thinking that the company would have no dilution, then you really need to find a different hobby.
Further, the company made a strategic decision to eliminate debt at the end of last year. To get the right balance between debt and equity financing is very tricky. It is a main topic of conversation in Advanced Finance classes. Even in mergers/acquisitions, there is a debate on the benefits of using cash or stock (or even a combination) to pay shareholders of the acquired firm. Since you probably have not had any finance classes, one of the advantages of using shares to pay debt is that profitability is often easier to achieve (no long term debt to pay down), though the bigger profit is split between more owners (dilution). There are also things like tax implications and cost of capital. When involved in the OTC, equity financing is brutal in the beginning because people such as yourself freak out when the number of shares starts going crazy.
The alternative was $50mil in debt. What's wrong with that kind of debt? When on the OTC, most states have no problem with usury financing - aka death spiral toxic debt(New Jersey is a notable exception when they ruled that toxic financing, if found to be usurious, the contract would be void). HMBL took on some pretty crappy toxic debt with Brighton (was an equity line of credit - meaning that they could take out a loan that was immediately converted to shares) and they had a few other lenders demanding 70% lowest market price from the previous 20 days - allowing the lender to short (and use the certificates as collateral - don't tell me they had to borrow shares at $100k a share crap - they don't). The outrage was intense with Brighton, so the company cancelled that contract before they used it. The other lenders however, took full advantage of shorting the stock in order to get more shares - a regular business practice on the OTC. Once Foote realized that if he couldn't get rid of the debt, he wouldn't be in business, he managed to eliminate the $50mil in debt. Considering they only have made less than 10% of that amount, their only alternative was to convert to equity.
Like it or not Pacific Lion was their only lifeline. If they do what they say they would do, PL will buy up a huge portion of shares sold onto the market. That will keep the price from going to .0001 and causing the OS to reach in excess of 50 billion. It could also provide a huge opportunity once the selling ends. So... who still owns shares that are being sold? Contractors and consultants holding Preferred B's can sell 5mil shares a month. They should run out soon enough. And then there is BRU. What they do, I have no clue. But their minimum price for conversion is .003. If the stock price is .001, they are awarded 3x the number of shares and they were owed a lot. Even though they are working with the company, I believe they are the ones mainly on the ask and selling into the bid because a .0001 drop means a ton more shares.
My guess:
Look for the stock price to stay where it is for a little while until BRU's shares deplete, then expect the price to jump to .003 while they sell the remaining. The stock price will likely fight to go lower than .003 or at best, stay there until the middle of April. Pacific Lion in a conference call 2 months ago, said they expect the price to move to about .003 and hang out there for a couple months. I don't believe that the .003 number was a random guess. I believe they expected they could hold the price at that level while BRU dumped. I believe they lost that fight due to the sheer number of shares they dumped onto the bid, but PL looks like they are still able to keep the price from dropping to .0001. Once BRU (and PL) are done, we will see what the market actually thinks about the real valuation of HMBL. At that point, expect news about AFL and a RS... then after the OTC cries about a RS, the stock price will jump about 30%.
If they get the OS to between 500mil and 800bil with little or no debt, the stock price should react very favorably to any net profit we see (think 2nd Q).
AI
