RE:2.8M Management Options Expire Today & a Conspiracy?I need to take a day or two to absorb the press release from today. I also need to ask the critical question to management of "when did you know what"? Something about the release isn't lining up for me from a date perspective. Ordinances need two readings (without comment) to be passed, a first and second reading.
Here are quotes from the release (I've inserted some additional text in square brackets for this to make more sense): - ORDINANCE NO. 572 was proposed in early June 2017 and all previously issued permits and CUP’s for manufacturing and extraction were precluded from receiving Certificates of Occupancy until the Ordinance could be amended and new more stringent safety measures could be included into the Ordinance
- The reading of the new amendment on July 21, 2017 was the first step to the enactment of the amended safety measures to the Ordinance 572
- The second step will come on July 26, 2017 [second reading]
- the newly amended Ordinance and its additional safety measures would go into effect in 30 days [after passing the second reading], making August 25, 2017, the [earliest] effective date for Certificates of Occupancy to be issued
So the immediate questions that come to my mind are: - The PR says that previously issued permits and CUP’s for manufacturing and extraction were precluded from receiving Certificates of Occupancy until the Ordinance could be amended and new more stringent safety measures could be included into the Ordinance. If so, when was this preclusion put into effect? If it was any time prior to today (seems it would have been known early June 2017 based on the above), it was management's responsibility to disclose that the COO timing was dependent on the City passing an amended Ordinance No. 572 (this is a material fact that warrants disclosure as it delays start of production). It appears to me that the timing had nothing to do with dust on floors, explosion room walls or HVAC because the entire time the timing was limited by the City's timeline on Ordinance No. 572 plus an extra 30 calendar days for good measure. Shareholders speaking with the company please ask management when they knew about the preclusion and why they did not disclose this to shareholders at the time.
- What is the current state of the facility? Is there any work being done on floors, HVAC or explosion room walls? Please ask management and if the answer is yes, ask when this will be done.
- Assuming that the facility is now complete (or will be next week) and we must wait until August 25 to receive the COO, can we ask city inspector to schedule a final inspection now and hold the issuance of the COO until August 25 so that if any other issues come up they can be dealt with during the waiting period? Someone please ask and post the answer for ALL to see.
- If the answer to the above question is no, can the company call the city inspector to schedule the inspection for August 25 to avoid a logjam of inspections waiting to be done starting that date? Someone please ask and post the answer for ALL to see.
- Please read my post below and ask yourselves - why if we are going to wait until August 25 to receive the COO, why don't we just wait until September 1 to avoid a 6M share dilution to existing common shareholders. Someone please ask and post the answer for ALL to see.
~S
Stranius wrote: One year ago today, management received 3.4M options with a C$0.12/sh strike price and a one year expiry. There were 2,845,595 warrants remaining from this batch as of June 30, 2017.
Here is a quote from the Q3/2016 financials (
link).
On July 13, 2016, the Company granted options to purchase up to 3,405,595 common shares to its executive officers and directors. The options granted vested immediately and may be exercised at a price of $0.12 per share expiring on July 13, 2017.
Given the above, there should be some elevated activity on SEDI. But assuming management is aligned with shareholders, I would expect few of those options to result in the outright sale of shares. Otherwise, this may raise eyebrows. I can only assume that a new batch of options will be issued as "long term" compensation to management to replace the ones expiring today. I put "long term" in quotes because a one year grant is not truly a long term incentive in my books. I have written previously about my belief that the governance (Board of Directors) needs to be strengthened in order to separate management from the Board to hopefully put a stop to some of this questionable behaviour. With some luck, this will happen in due course.
If I wanted to be cynical, I could make a case for management intentionally delaying good news until they had a chance to issue another batch of options at current (low) prices.
This brings me to another interesting dynamic management is facing. You may recall in the May 4 press release (link), the company stated: LDS has agreed to purchase the sole membership interest of each of NHMC and CSPA in exchange for 3,000,000 common shares of LDS and US$1,400,000 in cash, each (6,000,000 LDS common shares and US$2,800,000 in cash total). If the Certificates of Occupancy are not granted on or prior to August 31, 2017, the members of NHMC and CSPA will forfeit their rights to the share consideration, and the purchase price for each will consist solely of the cash consideration.
This presents an odd incentive for LDS to delay its effort to receive the COO until after August 31 to minimize shareholder dilution. I'm not clear why NHMC and CSPA would have agreed to such a clause. Normally you would argue to have the clause work backwards whereby you receive more compensation if a delay occurs.
So here we are today, exactly 7 weeks from August 31. Is management dragging it's heels on the COO to avoid diluting current shareholders by 6M LDS shares? I'm sure that is nothing than a far out conspiracy theory.
~S