Replies to post #87425 on Fuse Science Inc (DROP)

[itlogic]

This is true, you may be able to catch a pump before the split. My only unsolicited advice to you or anyone who cares is that once you are in the green, get out! Don't get greedy. Protect any profits you will hopefully obtain before the split. The split WILL happen. I guess I'm supposed to say in my opinion, but I guarantee it will happen at some point after the date. It has to.

The problem is, there are PLENTY warrant holders out there that will be able to convert those warrants to common shares. To do that, the company takes from their authorized shares and turns them in to common outstanding shares in exchange for the warrants. The problem is, their current outstanding shares is the same as, or close to, the same as their authorized share count.

That means all their authorized shares are used. If the warrant holders decide to convert, the company will have no bank of available authorized shares to create common shares from. If that happens, the company will owe those holders the value of the shares. In other words cash or assets that equal the value of the would be common stock.

That would severely hurt this company and likely bankrupt it. So, by reverse splitting they effectively reduce the amount of outstanding shares. Without also reducing the authorized shares in proportion to the split, that would give the company the available unused authorized shares to create common shares for the conversion.

for instance, now O/S = 1000 and A/S = 1000. You are authorized to create 1000 shares, but the outstanding shares is already 1000 so you have no available authorized shares left to create more stock

So, you do a reverse split 100:1. So for every 100 shares you have, you are given 1 in return. After the reverse split, the O/S will become 10, but the A/S remains 1000. Now you have some breathing room and you can create another 990 shares.

That whole scenario also implies that the company is expecting to have to convert warrants in the near term. When all those new common shares are converted, it will cause big dilution.

The only thing I don't know is when those warrant holders are able to convert. That will be an important date. I say the reverse split will happen because that is how they will fix their problem.