Here is some insight. Probably something not many have thought through...
November 1, 2010:
Share Count is currently 57,389,550
December 14, 2010:
Press release announcing the Institute B relationship and Christopher Ng is coming from Lululemon
March 31, 2011:
Through signing bonuses, Stephen Fane holds 4,323,598 shares and Christopher Ng owns 4,323,597 shares. These numbers include 1,000,000 options each, granted upon signing with the company. The terms of the options were not disclosed at that time.
September 28,2011:
The share count has risen up to 84,254,834 through a combination of private placements and other issuances to settle claims/debt. It’s disclosed at this time that Christopher Ng invested $100,000 of his own money in a private placement giving him an additional 666,667 shares and 333,334 warrants. The shares were purchased at $.15/share and the warrants were 2 years at $.25/share. At this time Stephen Fane continues to own 4,323,598 shares including his options. Christopher Ng now owns 5,323,598 shares including his options.
July 30, 2012:
It’s disclosed in the March 31, 2012 AIF that the share count is now 95,816,003. Stephen Fane has increased ownership to 7,750,000 shares and Christopher Ng has increased ownership to 7,250,001 shares.
March 31,2013:
The share count has again increased slightly and no changes occurred in ownership for Stephen and Christopher. However it’s revealed that their signing bonus options have a price $.15/share and are 5 years in duration. Very generous terms.
November 8,2013:
It’s announced from the company with a positive spin that creditors of the company have agreed to convert their debt to equity. Christopher reiterates that this is a strong indication of the creditors belief in the future value of the equity.
The company now has 144,827,871 shares outstanding after the conversion. The conversion was done at $.07/share. The dilution from Day 1 is massive. 152% to be exact. Upon further inspection it’s revealed that 80% of the debt that was converted to shares was done by insiders and related parties. (Stephen, Christopher, Ray, Clay, Institute B). For these parties involved, this has been an absolute windfall. For instance, after conversion of debt to equity Stephen Fane now owns 19,047,143 shares including his options. Christopher Ng now owns 19,501,601 shares including his options.
You see, by allowing their salaries to accrue on the balance sheet as liabilities, they were able to dupe their #1 supporter - Barunuuk. They hid a fairly large salary expense from the income statement and in addition to that they also gained the ability to time the eventual conversion of their own accrued debt to equity. By choosing to convert the lump sum now while the stock prices is so low,(they have done so at $.07/share)they have allowed themselves a significant increase in shares owned.
If you believe in the long term prospects of Alterrus and you are shareholder like Barunuuk - you should be pissed. Why? Because in lieu of salary today they have taken a huge piece of the companies future earning power away, instead.
The timing of the debt conversion stinks.
Here is an example to wrap your head around it:
Day 1:
Share Count = 57,389,550
Barunuuk invests $20K and buys 100,000 shares representing .175% of the company
Stephen owns 4,323,598 shares/options representing 7.53% of the company
Christopher owns 4,323,598 shares/options representing 7.53% of the company
Today:
Share Count = 144,827,871
Barunuuk raves about sales growth and discusses all things positive with what Alterrus is doing. He/She still owns his/her 100,000 shares now representing .07% of the company. You been completed diluted. You have effecctively lost 60% of the stake you once did.
Stephen on the other hand now owns 19,047,143 shares/options representing 13.15% of the company
Christopher now owns 13.46% of the company.
In laymen’s terms. Stephen and Christopher have increased their own ownership from 7.53% to north of 13% at the expense of all other shareholders in the company who have been significantly diluted. It’s true that Stephen and Christopher are due fair compensation for their work but I disagree strongly with the timing (and price)of when this debt was converted. And furthermore, the comments about creditors having strong convictions about the future earnings potential is somewhat tainted when your provided the insight that 80% of the creditors were actually the management team, themselves.
