In March 2011, the Company, through outside counsel, had a conversation with the DTC during which a number of items were discussed, though no reasons were given for the DTC’s “chill” of the Company’s stock. Among the issues discussed were: whether an investor in the Company was a registered broker dealer under the Securities and Exchange Act of 1934, and if not, whether it needed to be; the details regarding the “free up” from restriction of shares issued to an investor; and whether an investor could be construed to be a “Control Person” under the 33 Act. The Company does not believe the DTC considered the Company to be in violation under any of the foregoing circumstances at the time of the conversation, only that the DTC wanted to discuss the issues with the Company. In response to and as a follow up to the discussion, the Company provided a letter, along with accompanying materials in April 2011 in an effort to alleviate any of the DTC’s potential concerns, though again, no reasons for the “chill” were actually cited by the DTC during the discussion.
Within the past 90 days, the Company has had additional discussions with the DTC and its outside counsel regarding the “chill.” The DTC requested that some additional information be added to an opinion that was submitted by the Company to the DTC in June 2011. The additional information included: an itemization of the dates share issuances were made by the Company to holders during a timeframe from January 2009 through September 2010; a statement that no “additional consideration” was paid at the time of conversion under any warrants or convertible notes during this timeframe; a statement that the share issuances at issue were made by the Company to the holders, and not to the holders from a third party; and information indicating that none of the holders has owned more than 9.99% of the Company’s outstanding stock at any given time. The Company does not believe the DTC was under the impression the Company was in violation under any of these scenarios, but merely that the DTC wanted this information stated in the aforementioned opinion. The Company had previously given much of this information to the DTC in some format or another. The Company submitted this information, in and/or along with an opinion of outside counsel provided by the Company to the DTC on August 16, 2011. Then, the DTC requested a limited number of changes to that form of the opinion through multiple correspondence between the DTC and the Company, and on October 5, 2011, the Company was informed that outside counsel to the DTC approved the form of the opinion. Currently, the Company is waiting a status update from the DTC.
AI
