Here is new managements answer to question #2 that explains how they got there. If you don't believe it you have a right not to buy in the company. That is your choice.
Question 2:
What was the reasoning behind the share increase and how did it get there?
The share increase was due to issuances to affiliates/insiders. This means that the majority of the issued and outstanding shares are restricted, held by persons deemed to be affiliates. These shares will not be eligible for resale (cannot come to market) until mid 2013. Even then, at that time, so long as those persons holding these shares continue to be greater than 10% holders of the company, there will be limitations on their ability to liquidate into our market.
The fact that we have enacted a plan to reduce the Issued and Outstanding would indicate that not only would some of these persons end up with many less shares, but by way of the share reduction ratio, many of these same persons would likely continue to hold in excess of 10% of the company.