A case against conspiracy - Substantial Dilution
I took a week or two off the bullboard hoping for some news before I posted again...but no luck. I can see the calls against "the conspiracy" are still running strong here, so I wanted to lay out how I see this happening.
I recommend everyone read the "management information circular" from May 24th.
Executive compensation: For the last 3 years : Mazen Alnaimi has a base compensation of $350, $400, and $500k (which does not seem crazy to me for what he's doing). Here is a key line from page 10:
The Board of Directors agreed that Mr. Alnaimi’s base compensation as Chief Executive Officer for the twelve-month period from August 1, 2016 to July 31, 2017 would be $350,000, with a possible bonus of up to $350,000 based upon the achievement by the Corporation of certain milestones. In an effort to conserve its cash resources, the Corporation and Mr. Alnaimi agreed that the Corporation would issue common share purchase warrants (the “CEO Compensation Warrants”) to Mr. Alnaimi in payment of his compensation. Applying a Black-Scholes calculation at such time, the Corporation determined that in payment of Mr. Alnaimi’s base compensation of $350,000, the Corporation would issue 11,666,666 CEO Compensation Warrants to Mr. Alnaimi and that the Corporation would issue an additional 11,666,666 “bonus” CEO Compensation Warrants (the “Bonus Warrants”) to Mr. Alnaimi, with the exercise of such Bonus Warrants to be conditional upon the achievement by the Corporation of certain milestones relating to the progress of the Corporation’s titanium dioxide project, as confirmed by the GNCC. Each of the CEO Compensation Warrants and Bonus Warrants entitled Mr. Alnaimi to acquire one common share of the Corporation at a price of $0.08 per share for a period of five years. The CEO Compensation Warrant and Bonus Warrants were approved by the Corporation’s shareholders at an annual and special meeting of shareholders held on September 15, 2016, as required by the TSX. Of these, the Corporation issued an aggregate of 11,666,666 CEO Compensation Warrants and 8,749,998 Bonus Warrants to Mr. Alnaimi.
So...the CEO who has been busting his butt moving this company forward is payed $0, and his only compensation is a warrant that allows him to buy shares of the company for $0.08 (this does change in subsequent years as the share price decreases). He does not get any shares directly as compensation. So the only way he makes ANY money for all his work is if the share price goes above the strike price of the warrant.
So for the past 3 years of work, he has been payed the option to buy 46M shares at an average price of about $0.08 (this doesn't count the next options to be issue with an exercise price of 0.03). He has also funded the company to keep it going (he owns about 16M shares and has another set of warrants from funding). And people think he wants the share price to go to 0 for some nefarious scheme?
Also read the following from page 23:
The 20,000,000 CEO Compensation Warrants represent 4.47% of the Corporation’s 447,548,978 issued and outstandingcommon shares as at May 1, 2019. As set out above under “Election of Directors”, Mazen Alnaimi currently holds 16,249,849 common shares of the Corporation, representing 3.63% of the Corporation’s issued and outstanding common shares as at May 1, 2019, and also holds, directly or indirectly, secured convertible notes, a stock option and common share purchase warrants of the Corporation. In the event that Mr. Alnaimi converted or exercised, as the case may be, all such secured convertible notes, stock option and common share purchase warrants in full, and converted unpaid and/or accrued interest on his secured convertible notes into additional common shares of the Corporation, he would hold, directly or indirectly, an aggregate of 161,302,390 common shares of the Corporation, representing 27.22% of the 592,601,519 common shares of the Corporation that would then be issued and outstanding. If Mr. Alnaimi then exercised the 20,000,000 CEO Compensation Warrants in full, he would hold, directly or indirectly, an aggregate of 181,302,390 common shares of the Corporation, representing 29.60% of the 612,601,519 common shares of the Corporation that would then be issued and outstanding. In the event that Mazen Alnaimi exercised only the 20,000,000 CEO Compensation Warrants and not the other convertible securities of the Corporation referred to above, he would hold 36,249,849 common shares of the Corporation, representing 7.75% of the 467,548,978 common shares of the Corporation that would then be issued and outstanding. The conversion or exercise, as the case may be, by Mr. Alnaimi of these convertible securities, including the CEO Compensation Warrants, may have a material effect on control of the Corporation.
I cannot fathom how people think this guy wants the share price to go down or to 0.
He is extremely motivated to move the price up. IF we hit $0.10 (which I would be very happy with), he'll have been payed $300k per year over the last 3 years. I would consider that money extremely well spent. Guys with his amount of wealth don't waste their time for such small amounts.
The rest of the board is also payed in warrants. There is no system I am aware of that is more aligned with shareholder interests: they only get payed if the share price goes up and we do well. However if someone is aware of such a system, I would love to hear about it.
My prediction is still that we will see a substantial recapitalization. A big dilution but a cash injection to move forward with the tech center). In the past they have put little injections of cash into the company via private placement, but they are going to need 10's of millions of dollars of new capital (ie we are talking billions of new shares being added, thus the propsal for the reverse split). I'm not sure they can add so many shares outside of propsal under the bankrupcy and insolvency act (or at least this makes it easier to do).
Remember that the board starts getting payed at about 10 cents. I'm pretty sure they want to be payed. I'd much rather (and had been counting on) get diluted and own 1% of a watermelon than 10% of a grape (or more accurately, a dust spec).
This is all speculation of course, we shall see what happens. I suggest everyone sit tight and wait for the news. There will be plenty of time to grab pitchforks if the news is truely as bad as some are predicting.
GLTA