The Dilution Rumor - PLEASE READ IF YOU WERE WONDERING
I normally don't post, but couldn't resist...
The Myth: Shares outstanding went from appx. 11 million in September to 22.1 million in December = therefore the value of the company's shares are diluted which will drive down the PPS because the company hasn't created additional value.
My Two Cents:
According the NOTES in their quarterly financial statements ended September 30, 2011...
"Total shares outstanding as of November 21, 2011 was 15,699,908." - The company issued approximately 4 million additional shares of common stock to cover debts after the statements were finalized, and listed them in the notes (Note 13). Dilution? ehhhh, a slight amount, but ultimately doing this reduces liabities/bad debt expenses and increases shareholders' equity. Any previous amount of dilution is also accounted for in their Consoldiated Statement of Operations as "Basic and diluted income (loss) per share", which for the quarter ended September 30th, 2011, was -.14.
So what about the other 7 million (or so) shares? IT MUST MEAN DILUTION!?!? Honestly, until we see the quarterly financial statements for the quarter ended December 31st, 2011, we can't say 100%.
Here's what I think... according to the notes on the financial statements for the quarter ended September 30th, 2011...
"On November 7, 2011, the Company signed a letter of intent to acquire the music assets of David Michery for 10,000,000 shares of preferred stock subject to due diligence and Board approval." (Which we know has already happened).
For all we know, the additional "Shares Outstanding" in the 8K (notice they don't specify COMMON STOCK vs. PREFERRED STOCK, yes, preferred stock can be outstanding) listed as of December 31st, 2011 may be the result of this exchange, which certainly would not dilute shares of common stock issued and outstanding UNLESS they were converted to common stock, which probably is not the case (why would you convert preferred stock when it pays GAURANTEED dividends AND may give right to assets in the case of liquidation?).
Let's wait for the next quarter's financials before we jump to conclusions of dilution... PLEASE. And if you don't understand financial statements, there's plenty of resources out there to learn, if you didn't go to school for accounting. IMHO!!
