Nic,
I'll try to make this one as simple as possible. I'll be making some assumptions, so other posters feel free to correct me.
First, the Oustanding Shares (O/S). The O/S is the total number of share on the open market, trading today. This differs from the Authorized Shares (A/S). Think of the A/S and the O/S as a credit card. You can charge up the card to the A/S, and everything in between. Prudent companies will never max out their credit cards. If they do, it indicates waste and bad cash flow management. Tivus's A/S is 300 million. That means they can have up to 300 million shares trading on the market before they have to file with the SEC for an increase in the A/S.
The O/S is found by calling the Transfer Agent (TA). This can be found on most companies websites under Inverstor Relations. You just call and give them the name of the company and they'll give you the O/S.
Now, convertibles. In the recent financials that were filed, we were told the dollar amount of all the convertibles is approx. $1.5 million. But the question is, how many shares is that? And what percentage of the convertibles will actually be converted? The financials provide estimates for this, but the easiest way to figure this out is take $1.5 million divided by the current share price. If we take the current PPS of .03, then that would me $1.5 million would convert to 50 million shares. But what happens if they convert at .04? Then $1.5 million would become 37.5 million shares. This isn't exact, but it's enough you get the general idea. When I started with Tivus, the O/S was at approx 15-17 million shares. None of the convertibles had come due yet which is why it ran from .04 to .22. Since then, the notes have come due and they are being converted to allow the original investors to recoop their investment. The number of shares is hard to determine since the PPS is always changing. My guess, based on when I started and the PPS, is we should be almost done with the convertibles. I'm thinking the O/S should level off around 60 million. Honestly, if it stays below 100 million, I'll be happy.
Take a look at a company like AAPL. I know, in the realm, different completely. But their O/S is close to 920 million shares. Even large companies have large O/S and A/S. It's important, but not in the grand scheme.
So what does it all mean? The end goal is to have the company/angel investors NOT selling shares on the market. This results in the shares being held by the "public" which in turn drives regular trading which is healthy. Especially when the stock is in demand. Why do objects go up in value? Because they become rare and in demand. Tivus can have demand, but won't be rare if convertibles are still being sold into the market. It's like buying rare coins directly from the US Mint. They can print as many as they want. In our case, Tivus is not printing shares. We know the issue here are loans that have to be paid back. If not, then Tivus would default on their notes and we would be in a much uglier situation.
What is critical for Tivus at this stage is to follow through and show consistent revenue generation and positive cash flow. Cash is King. It trumpts all. Most startups remain cash flow negative for the first couple of years. So right now, it's not a concern. But if Tivus can become positive within 24 months, then you'll be looking at a PPS of $5, maybe more. Positive cash shows me the company can begin to grow organically, versus acquiring outside financing or selling shares.
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