From the last 10Q:
To the extent that the Company raises additional capital through the sale of equity or convertible debt securities, the issuance of such securities may result in dilution to existing stockholders. If additional funds are raised through the issuance of debt securities, these securities may have rights, preferences and privileges senior to holders of common stock and the terms of such debt could impose restrictions on the Company's operations. Regardless of whether cash assets prove to be inadequate to meet operational needs, the Company may seek to compensate providers of services by issuance of stock in lieu of cash, which may also result in dilution to existing shareholders.
The Company's current cash and cash equivalents balance will be sufficient to fund operations for the next 24 months. However, the Company's continued operations, as well as the implementation of its business plan (including allocating resources to increase our library content, distribution infrastructure and technology) will depend upon the Company's ability to raise additional funds through bank borrowings and equity or debt financing. In connection with the need for funding, the Company entered into a Securities Purchase agreement with Golden Gate Investors, Inc. on November 11, 2004 for the sale of (i) $150,000 convertible debenture, and (ii) warrants to buy 15,000,000 shares of common stock.
There has been only a limited public market for the common stock of the Company. This common stock is currently traded on the Over the Counter Bulletin Board ("OTCBB"). As a result, an investor may find it difficult to dispose of, or to obtain accurate quotations of the market value of the common stock. The regulations governing penny stocks, as set forth above, sometimes limit the ability of broker-dealers to sell the Company's common stock and thus, ultimately, the ability of the investors to sell their securities in the secondary market.
This, most importantly was in the last 10K and some of the previous filings.
Potential stockholders of the Company should also be aware that, according to SEC Release No. 34-29093, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include (i) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; (ii) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; (iii) "boiler room"
practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (iv) excessive and undisclosed bid-ask differential and markups by selling broker-dealers; and (v) wholesale dumping of the same securities by promoters and broker dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse of those prices and with consequent investor losses.
Bottom line I doubt that a scam company would diclose this info in their filings.
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