Some background and important questions for EPGL Investors.
What is the relationship of PWC to NIR?
PWC is the liquidator of the NIR funds and is currently the trustee of NIR. That means PWC is making the decisions for NIR. It should also be known that NIR owes PWC over 1.5 million for services rendered to NIR by PWC. Finally, as the Trustee, PWC has an obligation to NIR investors to recover as much of their investments as they possibly can.
Why did PWC decide to convert a company stock?
PWC is not a Corey Ribotsky, and too many investors watching NIR and its funded companies knew that. PWC was left with a lot of toxic Notes to deal with, and very little likelihood of selling the notes off to other investment firms, without a super deep discount. So to show the investment world that PWC was willing to do Note convesions, they decided to actually do one, sending a message to all the other NIR funded companies.
Why did PWC choose EPGL?
Of the funded companies remaining, PWC looked at the useability of EPGL, and noted that it had been dark for about 2 years, so there was little current information to have to deal with. There was also an angle for creating interest in the company, the "Medical Device".
What other options did PWC have?
PWC, through NIR, could have forced EPGL into an involutary bankruptcy, but there was no value in that as EPGL has no real assets to satisfy the $10 Million worth of Notes. NIR could have foreclosed on EPGL, but had the same result, insufficient assets to cover the debt. They could have asked the EPGL management and BOD to do a R/S, convert the notes to equity, and pump the stock. It is speculation, but most likely PWC did and the management refused. That may be what led to the announced change in management.
Why is the R/S necessary?
The current PPS, A/S and O/S will not allow for the conversion of notes into stock for NIR. The options here were to increase the A/S, but since NIR takes a discount on the Price per share in the conversion, there was not enough A/S to cover the full amount of the conversion of the notes as it would have taken a 15 to 20 Billion increase in the A/S to accomplish the conversion objective. Such a large amount could never be unloaded on the market, so the other alternative was a R/S. There has been ratios speculated on that include a 10:1, 20:1, 50:1, 100:1, 250:1, 500:1 and even a 1000:1 Reverse Splits, but the most likely scenario would be around the 50:1 to a 250:1 range. Too large a R/S kills the volume (See ECPL for an example) and causes a trading collapse.
What is the effect of the conversion on the Accounts?
The conversion simply results in a move of the debt balance to the Equity balance, so there is a zero change effect on the books, and there is no cash infusion. However, the stock is diluted. For example, if there is 1000 shares of stock, at a $1.00 a share, and you issue another 1000 shares for the retirement of the debt, then the shares increase to 2000 shares, and the Market Makers reprice the stock to $.50 per share. So original share holders just lost half of their investment.
What is the effect of the R/S on the PPS?
Lets say that there is 5 Billion in the O/S, and that there is a 100 to 1 R/S. The 5 Billion then become 50 Million, and the Market Makers reprice the stock at $.01. If a shareholder had a million shares before the R/S, at $.0001 (a $100 investment), then afterwards they have 10,000 shares at $.01 (still a $100 investment.)
What happens to the PPS after the R/S in completed?
If a company is really viable, the PPS could rise, but for the vast majority, the PPS falls (See ECMH for example, a NIR funded company).
Who makes money off the R/S?
After the R/S takes effect, it takes several days, and sometimes as much as a week for the share certificates to be exchanged. This typically means that current shareholders can't access their shares to immediately sell them, so if the PPS falls, they miss out on the opportunity to sell them right after the R/S. On the other hand, NIR can be quickly issued new certificates, which by the terms of the Notes conversion, are unrestricted and immediately tradeable. Since NIR got the notes at a discount, they can absorb a drop in the PPS as they dump shares. But they aren't the only ones who can make money. Because of the high probability of the PPS to fall, R/S splitting companies are a target for short interests. As they know with almost an absolute certainty that the PPS is going to fall, they can and do take advantage of the R/S. As for the regular shareholder, they continue to see their holdings diminish. The short interests and NIR are competing for buyers as they both are selling, and the PPS can often drop very quickly. When regular shareholders are able to trade and put shares up for sale, this increases the volatility on the down side, causing the PPS to fall even faster.
What should Investors watch out for?
Investors should be vary wary of PR's, especially attractive but forward looking statements. For example, the Potential of the Medical Device is estimated to be $3.5 Billion, but that is in the total aggregate, and doesn't really give investors any idea as to what EPGL's market share will be, and what the sales revenue will be and in what time context. Also, there is mention of a letter of intent, which should be thoroughly reviewed so that as an investor, you know what is really going on, and whether on not in the future the company adhers to it. Investors should do as much due diligence as they can, and share that with other investors, to make it less possible to be taken advantage of.
Good luck with your investment!
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