Folks, I just spent about 25 minutes on the phone with the company. IMO, the information is very valuable for this board. Sorry for the long post, but please do take a moment to read it. It might answer some of your questions. And please remember, I am only the messenger...I do not have to share this information, but I think it's valuable for shareholders.
I asked how many shares have been diluted. They are 100% sure. But they did provide a very good explanation about why the dilution has been taking place. 3 reasons:
1. If you take a look at DTSL's history, you know that up until this point, they have been in the "test" phase. They have finally arrived at the implementation/revenue phase (or the "starting line" as they called it). But to get to this point, they had to dilute. DTSL and every other startup company on the planet (even the IBM's in the world) have to raise capital to put things in motion. And in today's economy, it's very hard to get a substantial loan from a bank unless your company has hundreds of millions of dollars in profit (or you have an angel investor). Since DTSL has neither of those, they MUST dilute to raise capital. Ryan said this in today’s PR.
2. As most of you know, the company did use MiniMar. They paid for that service with shares. MiniMar was given millions of shares, and they have likely been dumping those at 5/6. The company did confirm they are no longer using MiniMar.
3. About a month ago, DTSL was able to obtain some bank financing. The company believes the bank that did the financing has probably been hedging their bet by shorting the stock, which has also led to the dilution.
As we all know, A/S is 3 billion. 1.3 billion of that is held by insiders (friends, family, employees, etc). This 1.3 billion is restricted until Jan/Feb 2012. And even then, they have are restricted on how many shares can be sold. Affiliate "dribble out" provisions state that only 1% of the issuer's outstanding shares can be sold in any 90-day period. So the only number left to validate is O/S. I asked if 600 million was their best estimate. The response was they feel it's probably a little higher than 600M, but not much more. When I asked why O/S wasn't included in the updated, the response was this: they just spent lots of money updating to Pink Sheets about 3 weeks ago. Share structure was updated at that time. It just doesn't make financial sense for them to spend the money on legal, accounting, submission, and documents fees to provide a new share structure only 3 weeks later. They said that in order to publicly provide this update would cost thousands of dollars. At this point, because they are now fully-reporting Pink Sheets, we'll see updated #'s again in 3-4 weeks.
As much as anyone, they want to see the share price higher. No company enjoys diluting their stock. It is a necessary evil. But IMHO, it sounds like the 3 factors that were contributing to the recent dilution are either over or near over. My conversation with the company makes me feel better than ever about being a long-term shareholder.
Hope this helps.
gmoneypenny
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