Re: authorization to issue more shares.
Lifted from Raging Bull:
By: rover13
Reply To #62 by vulcancruiser Tuesday, 23 Mar 1999 at 9:18 AM EST
Post # of 64
Vulcancruiser, thanks for your support. I will add the following, with respect to the authorization to issue more shares as required. I expect they will have to issue more shares, and a good thing it is (at least the reasons for it).
In my opinion, this contingency planning by DDSI is in anticipation of the FBI approval, which will (we hope) significantly alter the make up of this company, from a research and development type to a massive (we hope) commercialization type. Such an evolution will cause a very significant increase in working capital requirements and possibly also in capital expenditures. To be more specific: the FBI approval should significantly increase demand; satisfying a significant increase in demand will/may require things such as:
- manufacture more equipment, therefore hire more manufacturing staff, order more supplies, buy more machines to manufacture equipment in bigger volume, increase factory space, increase warehousing space, pay transportation costs, etc…all these types of expenses are incurred before the customer finally pays his bill (increased receivables)…and therefore require internally generated financing .
- additional expenses may be incurred by possible strategy of boosting international marketing efforts once the FBI approval is obtained, which also require financing.
- etc…you name it…
There are, in my mind, two main types of need for additional issue of shares (talking real companies, not scams):
- the "debilitating type" e.g. the R & D phase drags on, the product is not ready, let's issue more shares to survive…
- the "success-generated type" e.g. the product is ready, FBI endorses it (we hope) and we need to finance our success (see above).
The alternative would be, when country X comes knocking with an order, to say: "dear country X, thank you for your order and your confidence in our product. We don't like issuing shares for financing purposes, therefore our production facilities are only growing up in relation with a gradual increase in revenues. There are seven order ahead of you, some of which are quite large. Based on our current facilities, we expect that satisfying your order (it is quite large too and we thank you for it) will require some two years of production time when we get around to it. We believe we will be able to ship the first units in September 2005; thank you for your understanding..."
The above is what I believe is behind the authorization to issue more shares as required, and the requirement is due to anticipation of success. Pleased to see that the board is on the ball.
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