DILUTION UPDATE:
In response to the questions I have been receiving from fellow investors, here is my estimate of the remaining dilution facing shareholders. I will first break it down into two high-level categories:
(1)
New dilution coming off restriction and expected to hit the float
(2)
Existing dilution that has been sitting in the float as overhang but has yet to flush thru
W/regards to (1), we are in very good shape (based upon the Q3’14 10Q anyways – we will see what new dilution was issued during Q4’14 when the 10K comes out in a few months).
We only have approx 900k more shares that are on restriction that will gradually unlock between now and mid-APR-2015. Compared to the 52M shares that were staring us in the face over the past 9 months, we are in the best shape we have ever been in w/respect to plugging up the hole at the bottom of our boat and stemming the tide of new water flooding into the boat. Now we can actually make headway as existing water already in the boat gets dumped out bucket by bucket (i.e. as existing dilution already sitting in the overhang flushes out bit by bit).
So, here is how the 900k breaks down:
• 38k shares will unlock on 1/26/15 priced at .10
• 10k shares will unlock on 1/26/15 priced at .10
• 156k shares will unlock on 1/31/15 priced at .09
• 156k shares will unlock on 2/2/15 priced at .09
• 88k shares will unlock on 2/25/15 priced at .09
• 21k shares will unlock on 3/7/15 priced at .10
• 45 (yes, 45, not 45k but 45) PIPE shares will unlock on 3/17/15 priced at .05
• 439k shares will unlock during the first 2 weeks of APR-2015 priced at various levels
So long as even nominal volume continues, these should all be manageable – nothing like the nonstop periods over the past 9 months where we would be having hundreds-of-thousands to millions of shares continually unlocking within days of each other. The biggest bump in the road would be the two tranches of 156k shares unlocking 3 days apart from 1/31/15-2/2/15, but these should not take more than a couple days at the most to flush thru.
Note that all of these shares are discounted quite steeply and so, based on current price levels, are priced for immediate sale as soon as they come off restriction.
Certainly, considering that SCRC is still in a relatively early stage of its development, it would be unrealistic to expect ZERO dilution going forward on a quarterly basis, but hopefully we can keep it manageable at no more than 1-1.5M total shares per quarter. As the sp rises, the number of new shares that SCRC issues should decrease as the value of each share now is worth more, so it should take LESS shares to pay for whatever services they are being issued for.
So now let’s talk about (2), the existing dilution that is already in the overhang…
First, understand that there is no exact science behind this and there is NEVER any way to know for sure. That being said, I have found that for penny stocks, there is a statistical pattern/relationship that has historically shown to be tried and true in being a fairly reasonably accurate gauge for this. As such, here is what remains IMO:
• Priced between .06x and .11x ----- 0 shares left ----- started out w/15.0M shares (all gone, IMO)
• Priced at .12x ----- 1.0M shares left ----- started out w/4.6M shares (priced to sell at around .168)
• Priced at .13x ----- 0.5M shares left ----- started out w/1.4M shares (priced to sell at around .182)
• Priced at .14x ----- 1.5M shares left ----- started out w/3.1M shares (priced to sell at around .196)
• Priced at .15x ----- 0.8M shares left ----- started out w/0.8M shares (priced to sell at around .210)
• Priced at .16x ----- 1.0M shares left ----- started out w/1.0M shares (priced to sell at around .224)
• Priced at .17x ----- 1.9M shares left ----- started out w/1.9M shares (priced to sell at around .238)
• Priced at .18x ----- 0.2M shares left ----- started out w/0.2M shares (priced to sell at around .252)
• Priced at .19x ----- 1.0M shares left ----- started out w/1.0M shares (priced to sell at around .266)
• Priced at .20x ----- 0.9M shares left ----- started out w/0.9M shares (priced to sell at around .280)
• Priced at .27x ----- 0.6M shares left ----- started out w/0.6M shares (priced to sell at around .387)
• .05 PIPE stock ----- 8.0M shares left ----- started out w/22.0M shares (always priced to sell immediately)
Not too bad. Especially considering the gaps in the “priced to sell” levels, as the remaining estimated volume left at each price level is now small enough to be manageable once they become priced to sell (although, as I opined previously, I do believe that there will be another wall of resistance at .24x due to the sizeable 1.9M shares of .17x stock that will become priced to sell at that level – and this 1.9M isn’t even factoring in the outstanding convert notes that are priced to convert at .17).
With regards to the .05 PIPE stock, it is my opinion that now that all the shares have unlocked, whatever immediate dumping that JOEY Z and his core group of Section 17(b)-violating criminal promoters and penny-flippers-turned-amateur-financiers intended to do has now been done and that the remaining shares represent their “free lotto tickets” that they will hold the majority of for the time being. As I had opined over a year ago, it is still my belief that at every additional “bag” that they earn, they will sell incremental tranches to lock in more profits. It should be evident to anyone who has been paying attention that their efforts to minimize selling competition for themselves as they dumped their 0.00 and 0.05 PIPE stock by encouraging others to hold by proclaiming that they had no intention to sell for years because they were looking for 10-20 baggers and not simply 2-3 bags was a clear lie.
In any event, for those who asked for my estimates, here you go. You can choose to disregard my numbers and dispute my methodology, since as I stated at the onset, there is no exact science and no way for anyone to ever know for sure what lurks in the overhang – BUT, my methodology has proven reasonably accurate more often than not in the past and has proven to be a reliable surrogate that can be used to predict upcoming volatility and resistance levels that traditional TA metrics will never show. So take it and use it if you wish or disregard it if you wish. All I know is that it has enabled me to pretty much call SCRC’s price action pretty dead on for over 12 months now, most recently the call that the run would stall at .20x and hit a wall – which it most certainly has – well before any TA indicators suggested it.
The SEC filings and a dash of common sense folks. That’s all you need to make bank here w/SCRC.
