What's worrisome to me is the lack of incentive for the Rotmans to do right to their shareholders.
See below excerpt from the 10K, Note 10 - RELATED PARTY TRANSACTIONS. Based on the per monthly payment plans, the Rotmans will receive more shares the lower the price per share goes. It's a win-win. Share price decreases, Rotmans get more shares. Share price then increases (say based on a PR), Rotmans have significantly more $$, even if the share price does not necessarily recover to previous highs.
An example to illustrate my point for the "long-term" shareholder. - Rotmans have 1,000,000 shares for simplicity sake. - Shareholder buys 1,000,000 shares at 0.1 = $100,000 invested. - Share price increases to 0.15. Rotmans now have $150,000, and shareholder also has $150,000. - 10K is released which outlines per month payment plan. - Due to dilution, share price drops to an average of 0.05 for 6 months. - Rotmans receive 7,203,960 more shares over that 6 month time frame, based on the per monthly payments in the 10K (see below). - Rotmans now have 8,203,960 shares in total. - Shareholder averaged down and bought another 1,000,000 shares at an average of 0.05. Shareholder now has 2,000,000 shares in total. Invested $150,000. - VYST releases PR and share price increases to 0.1. - Rotmans 8,203,960 shares are now worth $820,396 after only 6 months. - Shareholder's 2,000,000 shares are now worth $200,000. The investor is "long-term" as mentioned above, and doesn't sell any shares. - However, after the price spike, the price begins to decline after poor financials, never fully recovering to its previous highs. - Share price sinks back down to 0.05. Shareholder's 2,000,000 shares are now worth $100,000. Overall, down $50,000. - During this price decline, Rotmans accumulate even more shares and wealth. - Rinse, repeat.
Keep in mind that the above calculations are conservative as they don't include any of the bonuses (quarterly, etc.) mentioned below in the 10K, for simplicity sake.
**Now, lets imagine that the share price never declined from 0.15 to 0.05 (a 3x decrease) for 6 months, and instead increased to an average of 0.45 (or a 3x increase) for 6 months. The shareholder is happy that his 1,000,000 shares are now worth $450,000, so he sells. On the other hand, the Rotmans acquire only 800,430 additional shares at the 0.45 conversion rate over 6 months, and thus have a total of 1,800,430 shares, which is worth $810,193. This is less than the $820,396 that they would have if the share price declined to 0.05 for 6 months, and subsequently increased to 0.1.**
The above example illustrates that the share price never needs to reach new highs or maintain an upward trend for the Rotmans to profit greatly. In fact, one can argue the opposite. And this example is only over a 6 month time frame and uses share prices that we are familiar with (excluding the increase to 0.45c). Imagine using more extreme share prices over a 1-2 year time frame in the above calculations. So, again, where is the incentive to do right to their shareholders?