Frequency Holdings Inc (FRQN)

[trader59]

You need to read it again. They owned all of Reachout before the merger, and would expect to own the vast majority of it after the merger. Their preferred shares convert into 87.5% of the fully diluted common stock of YCRM. They're getting 87.5% of the common stock of YCRM in exchange for their ownership of Reachout. The only way you get there is by wiping out the existing common stock of YCRM with a reverse split, otherwise the amount of stock it would take to reach that number would be massive. Trillium and Dickson get the other 12.5%, so there isn't going be much of an O/S after the RS.
It's perfectly legal and should be expected. They owned Reachout 100%, and you wouldn't expect them to share that ownership with a bunch of legacy shareholders who haven't invested in Reachout. You have to also expect the intent was to sell more stock to the public since a company goes public to do just that, sell stock to raise capital for their business. Here on the OTC, people like to pretend that real, legitimate companies just go public to be public, but that's pure pumping BS. No legitimate business is going to give away equity ownership of the business to the shareholders of an OTC company for nothing.