Asberry 22 Holdings (ASHI) Risk Analysis
Risk Overview Q2, 2016
Source: the company's latest filing for the period ended Jun 30, 2016, filed Oct 13, 2016
Risk Change Over Time
No filing history is available.
Risk Highlights Q2, 2016
Risk Word Cloud
Risk Factors Full Breakdown - Total Risks 42
- Share Price & Shareholder Rights - Risk 1Our Convertible Note financing may result in significant dilution to existing stockholders and could cause us to incur significant financial penalties
On December 24, 2015, we entered into a Senior Secured Credit Facility Agreement with TCA Global Credit Master Fund, LP ("TCA") and issued to TCA a Convertible Promissory Note in the principal amount of $750,000 (the "TCA Note"). The payment and performance of all our indebtedness and other obligations to TCA, including all borrowings under the loan agreement and related agreements, are secured by liens on substantially all of our assets pursuant to a Security Agreement. Upon the occurrence and during the continuance of an event of default under the transaction documents, including as a result of our failure to meet our payment obligations or to satisfy our covenants under the transaction documents, TCA may terminate its commitments to us and declare all of our obligations to TCA to be immediately due and payable. In addition, upon the occurrence and during the continuance of an event of default under the transaction documents, TCA may also exercise all of its rights as a secured creditor and obtain our assets. If we lose all or a substantial portion of our assets, our shares will likely significantly decline in value or become worthless. While the TCA Note is outstanding, but only upon the occurrence of (i) an event of default under the loan agreement with TCA or any related transaction document or (ii) our mutual agreement with TCA, TCA may convert, subject to certain beneficial ownership limitations, all or any portion of the outstanding principal, accrued and unpaid interest and any other sums due and payable under the Note or any other transaction document (such total amount, the "Conversion Amount") into a number of shares of our common stock equal to: (i) the Conversion Amount divided by (ii) eighty-five percent (85%) of the lowest of the daily volume weighted average price of our common stock during the five business days immediately prior to the conversion date (the "Conversion Shares"). Upon liquidation by TCA of Conversion Shares, if TCA realizes a net amount from such liquidation equal to less than the Conversion Amount, we are obligated to issue to TCA additional shares of our common stock equal to: (a) the Conversion Amount minus the net realized amount, divided by (b) the average volume weighted average price of our common stock during the five business days immediately prior to the date upon which TCA requests additional shares. In the event we issue Conversion Shares to pay obligations under the TCA Note, our existing stockholders will likely be significantly diluted pursuant to the terms of the TCA Note and our shares may significantly decline in value or become worthless. Similarly, in connection with the loan agreement with TCA, we agreed to pay to TCA a fee for advisory services provided to us prior to the entry into the loan agreement in the amount of $126,000 (the "Advisory Fee"). As partial payment of the Advisory Fee, we issued to TCA 3,810,000 shares of our common stock on December 24, 2015 (the "Advisory Fee Shares"). In the event that TCA receives net proceeds from the sale of such shares that are less than the Advisory Fee, TCA may require us to issue additional shares of common stock in an amount sufficient such that, when sold and the net proceeds from such sale are added to the net proceeds from the sale of any of the previously issued and sold Advisory Fee Shares, TCA shall have received total net funds equal to the Advisory Fee. Notwithstanding the foregoing, subject to certain conditions, we have the right to redeem the Advisory Fee Shares then in TCA's possession for an amount payable in cash equal to the Advisory Fee, less any net cash proceeds received by TCA from previous sales of Advisory Fee Shares. In the event TCA has not realized net proceeds from the sale of Advisory Fee Shares equal to at least the Advisory Fee by the earlier to occur of: (i) December 24, 2016; (ii) the occurrence of an event of default under the transaction documents; or (iii) the Maturity Date, then at any time thereafter, TCA has the right to require us to redeem all of the Advisory Fee Shares then in TCA's possession for cash equal to the Advisory Fee, less any cash proceeds received by TCA from any previous sales of Advisory Fee Shares. In the event TCA sells its Advisory Fee Shares in the market, our share price may significantly decline. In addition, in the event we issue additional Advisory Fee Shares to pay the Advisory Fee, our existing stockholders will likely be significantly diluted and our shares may significantly decline in value or become worthless. In addition to our agreements with TCA, we are party to a Second Exchange Note with Iliad Research & Trading, L.P. pursuant to which we may be required to issue shares of our common stock upon conversion of such note. See Note 14 for a further discussion of the Second Exchange Note. As of October 10, 2016, the outstanding balance on the Second Exchange Note was $23,264. In the event we issue shares of our common stock to pay obligations under the Second Exchange Note, our existing stockholders will likely be significantly diluted and our shares may significantly decline in value.
- Share Price & Shareholder Rights - Risk 2Our lenders have rights that are senior to those of our common stockholders
Our ability to pay interest and principal on our indebtedness and to satisfy our other obligations will depend upon, among other things, our future financial and operating performance, which is affected by prevailing economic conditions and financial, business, regulatory and other factors, some of which are beyond our control. If our operating results are not sufficient to service our current or future indebtedness, we will be forced to take actions such as reducing or delaying our business activities, acquisitions, investments or capital expenditures, selling assets, restructuring or refinancing our debt, or seeking additional equity capital. We may be unable to effect any of these actions on satisfactory terms, or at all. In the event we issue common stock or other equity securities to satisfy our debt obligations, our existing stockholders may suffer significant dilution. Furthermore, any proceeds that we could realize from any financings or the disposition of assets may not be adequate to meet our debt service or other obligations then due, which would have an immediate material adverse effect on our business, results of operations and financial condition. In the event of our bankruptcy, dissolution or liquidation, the claims of our lenders (including TCA) must be satisfied before any distributions can be made on our common stock. As a result, our common stockholders would receive distributions only after priority distributions to our lenders are satisfied and may receive nothing in the event of our bankruptcy, dissolution or liquidation.
- Share Price & Shareholder Rights - Risk 3Our stock price may be volatile, which may result in losses to our shareholders.
The stock markets have experienced significant price and trading volume fluctuations, and the market prices of companies listed on the Over-the-counter Bulletin Board quotation system in which shares of our common stock are listed, have been volatile in the past and have experienced sharp share price and trading volume changes. The trading price of our common stock is likely to be volatile and could fluctuate widely in response to many factors, including the following, some of which are beyond our control: variations in our operating results;changes in expectations of our future financial performance, including financial estimates by securities analysts and investors;changes in regulations that are applicable to our industry;changes in operating and stock price performance of other companies in our industry;additions or departures of key personnel; and future sales of our common stock, including common stock issued upon the conversion of existing indebtedness. Domestic and international stock markets often experience significant price and volume fluctuations. These fluctuations, as well as general economic and political conditions unrelated to our performance, may also adversely affect the price of our common stock.
- Share Price & Shareholder Rights - Risk 4Our common shares may become thinly traded and you may be unable to sell at or near ask prices, or at all.
We cannot predict the extent to which an active public market for trading our common stock will be sustained. Our common stock has historically been sporadically or "thinly-traded," meaning that the number of persons interested in purchasing our common shares at or near bid prices at certain given time may be relatively small or non-existent. This situation is attributable to a number of factors, including the fact that we are a small company which is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community who generate or influence sales volume. Even if we came to the attention of such persons, those persons tend to be risk-averse and may be reluctant to follow, purchase, or recommend the purchase of shares of an unproven company such as ours until such time as we become more seasoned and viable. As a consequence, there may be periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. We cannot give you any assurance that a broader or more active public trading market for our common stock will develop or be sustained.
- Share Price & Shareholder Rights - Risk 5Volatility in our common share price may subject us to securities litigation.
The market for our common stock is characterized by significant price volatility as compared to seasoned issuers, and we expect that our share price will continue to be more volatile than a seasoned issuer for the indefinite future. In the past, plaintiffs have often initiated securities class action litigation against a company following periods of volatility in the market price of its securities. We may, in the future, be the target of similar litigation. Securities litigation could result in substantial costs and liabilities and could divert management's attention and resources.
- Share Price & Shareholder Rights - Risk 6Our board of directors is authorized to issue additional shares of stock which could dilute existing shareholders.
We are currently authorized to issue up to 1,010,000,000 shares of common stock, of which 90,292,443 shares are currently issued and outstanding and up to 10,000,000 shares of preferred stock, none of which are issued and outstanding. Additional shares of our common stock or preferred stock may be issued by our board of directors for such consideration as they may consider sufficient without seeking stockholder approval. The issuance of additional shares of common stock in the future will reduce the proportionate ownership and voting power of current stockholders and the issuance of preferred stock may also have a similar impact.
- Share Price & Shareholder Rights - Risk 7Provisions in our organizational documents and Nevada law will make it more difficult for someone to acquire control of us.
Our amended and restated articles of incorporation, amended and restated bylaws and Nevada law contain provisions that could discourage, delay or prevent a third party from acquiring our company, even if doing so may be beneficial to our stockholders. As an example, our restated articles of incorporation and amended and restated bylaws provide: The ability to our board of directors to issue shares of our preferred stock in one or more series without further authorization of our stockholders; A prohibition on stockholder action by written consent; and A requirement that stockholders provide advance notice of any stockholder nominations of directors or any proposal of new business to be considered at any meeting of stockholders. In addition, these provisions could limit the price investors would be willing to pay in the future for shares of our common stock.
- Share Price & Shareholder Rights - Risk 8The majority of our board does not consist of independent directors, which limits our ability to establish effective independent corporate governance procedures.
Our board is composed of four directors, none of whom are independent based on the NASDAQ listing rules. Without a majority of independent directors on our board, our ability to establish effective corporate governance procedures to oversee functions such as audit, compensation and corporate governance is limited. Furthermore, a majority of our directors are also executive officers of the Company. This structure gives our executive officers significant control over all corporate issues and decisions. In the absence of a majority of independent directors, our executive officers, most of whom are also principal stockholders and directors, could establish policies and enter into transactions without independent review and approval. This could present the potential for a conflict of interest between us and our shareholders generally and the controlling officers, shareholders or directors. Although we anticipate seeking independent directors in the future, there can be no assurance as to whether or when we will be successful in appointing any new directors.
- Share Price & Shareholder Rights - Risk 9We are an "emerging growth company" under the JOBS Act of 2012, and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.
We are an "emerging growth company," as defined in the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not "emerging growth companies" including, but not limited to, not being required to comply with the auditor attestation requirements of section 404 of the Sarbanes-Oxley Act (which may increase the risk that weaknesses or deficiencies in our internal control over financial reporting go undetected), reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile. We will remain an "emerging growth company" for up to five years, although we will lose that status sooner if our revenues exceed $1 billion, if we issue more than $1 billion in non-convertible debt in a three year period, or if the market value of our common stock that is held by non-affiliates exceeds $700 million as of any June 30.
- Share Price & Shareholder Rights - Risk 10If securities analysts do not publish research or reports about our company, or if they issue unfavorable commentary about us or our industry and markets or downgrade our common stock, the price of our common stock could decline.
The trading market for our common stock will depend in part on the research and reports that third-party securities analysts publish about our company and our industry and markets. One or more analysts could downgrade our common stock or issue other negative commentary about our company or our industry or markets. In addition, we may be unable or slow to attract sufficient research coverage. Alternatively, if one or more of these analysts cease coverage of our company, we could lose visibility in the market. As a result of one or more of these factors, the trading price and volume of our common stock could decline.
- Share Price & Shareholder Rights - Risk 11Our officers, directors and principal stockholders can exert significant influence over our business and may make decisions that are not in the best interests of all stockholders.
Our officers, directors and principal stockholders (greater than 5% stockholders) collectively own approximately 42.3% of our issued and outstanding common stock. As a result of such ownership, these stockholders will be able to affect the outcome of, or exert significant influence over, all matters requiring stockholder approval, including the election and removal of directors and any change in control. In particular, this concentration of ownership of our common stock could have the effect of delaying or preventing a change of control of our company or otherwise discouraging or preventing a potential acquirer from attempting to obtain control of our company. This, in turn, could have a negative effect on the market price of our common stock. It could also prevent our stockholders from realizing a premium over the market prices for their shares of our common stock.
- Share Price & Shareholder Rights - Risk 12The requirements of being a public company, including compliance with the reporting requirements of the Securities Exchange Act of 1934, as amended, and the requirements of the Sarbanes-Oxley Act of 2002, may strain our resources, increase our costs and distract management, and we may be unable to comply with these requirements in a timely or cost-effective manner.
As a public company, we need to comply with laws, regulations and requirements, certain corporate governance provisions of the Sarbanes-Oxley Act of 2002, related regulations of the SEC, and requirements of the principal trading market upon which our common stock may trade, with which we are not required to comply as a private company. As a result, we will incur significant legal, accounting and other expenses that a private company would not incur. Complying with these statutes, regulations and requirements will occupy a significant amount of the time of our board of directors and management, will require us to have additional finance and accounting staff, may make it more difficult to attract and retain qualified officers and members of our board of directors, particularly to serve on the audit committee (upon its formation), and may make some activities more difficult, time consuming and costly. We will need to: institute a more comprehensive compliance function;maintain internal policies, such as those relating to disclosure controls and procedures and insider trading;design, establish, evaluate and maintain a system of internal control over financial reporting in compliance with the requirements of the Sarbanes-Oxley Act of 2002 and the related rules and regulations of the SEC and the Public Company Accounting Oversight Board;prepare and distribute periodic reports in compliance with our obligations under the federal securities laws including the Securities Exchange Act of 1934, as amended (the "Exchange Act");involve and retain to a greater degree outside counsel and accountants in the above activities; and establish an investor relations function. If we are unable to accomplish these objectives in a timely and effective fashion for our business, our ability to comply with financial reporting requirements and other rules that apply to reporting companies could be impaired. If our finance and accounting personnel insufficiently support our business in fulfilling these public-company compliance obligations, or if we are unable to hire adequate finance and accounting personnel, we could face significant legal liability, which could have a material adverse effect on our financial condition and results of operations. Furthermore, if we identify any issues in complying with those requirements (for example, if our company or the independent registered public accountants identified a material weakness or significant deficiency in our company's internal control over financial reporting), we could incur additional costs rectifying those issues, and the existence of those issues could adversely affect our reputation or investor perceptions of our company.
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