DTC and SFIO
As a result of the publication by the S.E.C. of criminal and civil charges against the former CEO of the Company, and of a civil complaint against the Company, (the related facts of which are set forth in Item XI. Paragraph B hereinabove), extraordinary trading of Company’s shares on the OTC Market took place, with almost 84 million shares involved in a sell-off on June 30, 2011, followed on the next day by a buy-in excess of 182 million shares by those seeking to cover their short positions. IN accordance with what has been published about the practices of the DTC, it felt the need imposed a global lock (“DTC Global Lock imposed on ‘All Participants, Depository Facilities and Pledgee Banks’ (Notice# B1017-11 Dated: July 1, 2011”), on brokers trading SFIO shares after the market closed on July 1, 2011. We believe the DTC action was based on irregular trading and a disorderly market, and their suspicion that naked shorting had taken place, jeopardizing the sufficiency and integrity of the pool of shares of SFIO they held on deposit to support clearing legitimate trades. The Company presented these and other facts in its press release of July 27, 2011. Brokers with a relationship with the DTC through their clearing firms are restricted in how they trade (i.e. sells locked to buy orders already in place; they must have shares made available for any transaction immediately, no naked shorting) and they are restricted in submitting new certificates for deposit into the DTC.
Although the trading of SFIO shares has stabilized in the market, the DTC Global Lock remains, hampering normal execution of transactions by our shareholders. There is no assurance that after all these matters are resolved in a timely manner, the DTC will lift the Global Lock, since they are not regulated by the SEC or FINRA or any of the federal securities regulators. These and other regulators have been attempting to deal with the DTC problem, as evidenced in its recent discussion during a “ROUNDTABLE ON THE EXECUTION, CLEARANCE AND SETTLEMENT OF MICROCAP SECURITIES” on October 17, 2011, (http://www.sec.gov/news/otherwebcasts/2011/microcaproundtable101711.shtml), during which Brian Lebrecht Esq. outlined the problem best in his remarks, including the fact that there is no set guidelines by the DTC as to who, what ,when, where and how to proceed in removing a restriction placed on a security by the DTC. Also in that roundtable, Steve Nelson, President of Continental Stock Transfer stated “What our issuers have seen over the past two years is they apply, they get an answer back after a protracted period of time which says, "You've been denied fast eligibility." "What's the reason?" "We can't give you the reason. Our risk assessment says you're out." There is no right of review and there is no right of appeal, and they don't have a reason.” Nevertheless, the Company has been researching and investigating every available avenue to instigate the lifting of the Global Lock by the DTC.
Meanwhile, the Company is conducting business as usual in extending its distribution network and creating new websites. Besides the appointment of Mr. Joseph Goyette, new nominees to the new Board of Advisors are now considering their possible acceptance as this information statement is being made public.