Attached files
[Reproduction of DMS Letterhead]
Executive Offices
[DMS Logo]
2171 Monroe Avenue
Suite 204
Rochester, New York 14618
Telephone (877) 383-7396
Telecopier (585) 363-2031
December 7, 2010
LETTER TO OUR SHAREHOLDERS
Dear Shareholder,
May I thank those of you for your support and belief in DMS, especially
at this critical juncture in our continuing organization and development.
While I, and the other new senior officers, have only served DMS for a
little longer than one month in our respective capacities, I am proud to state
that, together, we have overcome many obstacles related to DMS' marked past
(including its disappointing performance), and, we are dedicated to proceed
to the next stages of DMS' ongoing development this week.
I am certain I can speak for Michael Grande, DMS' Co-President and Chief
Operating Officer, when I state that we have been challenged by our official
responsibilities to DMS and to its shareholders, by having to overcome the
skepticism over DMS' ability to effect its recently-adopted plans of
restructuring, reorganization, and future development. In years past, DMS was
incapable of implementing the former management's plan of operations due to a
significant number of issues. The principal issue was the company's inability
to secure adequate capital and/or credit accommodations in order to carry-out
its stated business plan. The next main issue was DMS' inability to develop
or sell its real estate portfolio in Poinciana, Florida, which, inadvertently,
was directly caused by the downturn in this nation's financial and real estate
markets. The remaining principal issue was the company's inability to keep
current on then its reporting obligations to the SEC, which, most of you know,
required the company's former president to file a Form 15 with the SEC on or
about January 7, 2008. The latter action caused widespread concern with DMS'
shareholders, because DMS was no longer required to disclose its activities
with the SEC, which caused the company's shareholders to remain "in-the-dark"
Letter to Shareholders, December 7, 2010, Page 1
with regard to their respective investments.
To an extent, it is true that I have succeeded to the company's problems
by virtue of the offices I hold in DMS. It is with this inheritance that I am
ever vigilant and ever-more committed to the shareholders and to the company
to be able to successfully turn DMS around. I am certain that Mike, too,
feels the enormity of our responsibilities and the tasks that we have been and
must continue to undertake to reestablish investor confidence in DMS.
Prior to my appointment as Co-President and Chief Executive Officer of
DMS on October 5, I never served in any formal senior executive management
position with DMS in the past (other than by serving as an advisor to the
former chairman of the board). (Just a note, in my position as an advisor,
please understand that advice is just that; in most cases it was not heeded.)
At best, I have been frustrated in my on-again-off-again relationship with the
former Board of Directors of DMS. It was only early this year that I, with
Mike, approached the company's former chairman of the board with a plan to
salvage DMS, so that it could be utilized for dedicated, serious investments
and business operations. However, after brief appointments in February of
this year, Mike and I were disappointed that the philosophy of the company's
then management remained unchanged from years past.
In August, Mike and I talked to the company's former chairman of the
board and managed to convince him that DMS was going nowhere, and, the board
of directors should consider a new path for the company.
I am not asserting any specific blame on the company's former board of
directors and officers. As Mike has stated before, the company never filed
bankruptcy, and the board's actions were caused by extraordinary situations
that were a sign of the times. In fact, I will credit the company's former
officers and directors for providing Mike and I with the opportunity to try to
turn around the company's ill fortunes, which now brings me to the task of
acquainting you with the multi-staged plans of restructuring, reorganizing,
and further developing DMS.
Basically, the multi-tiered plans we developed and that we are in the
process of implementing are essential to the company's well-being. While it
is no fault of our shareholders, the company has not released any information
as to the company's business and operations since October 17, 2008, and that
information was limited in nature. The last substantive information that DMS
released to the public was on its Form 10-Q for the fiscal quarter-ended
February 28, 2006, and the last year that DMS reported its statements of
financial condition under audit was in its Form 10-K for the fiscal year-
ended May 31, 2005. Clearly, the information the public has had to work with
is seriously outdated. In fact, the assumptions concluded by many of you in
your correspondence with me is based on this outdated information. Please
Letter to Shareholders, December 7, 2010, Page 2
accept my apologies for this fact.
Thus,the first matter-of-business that Mike and I had to deal with was to
locate a suitable and "clean" business combination-related shell company that
would be willing to merge with DMS. The candidate had to be subject to the
reporting requirements of Section 13 or 15(d) of the Securities Exchange Act
of 1934. Reluctantly, after an exhaustive search for such a company to no
avail, I decided to commit a non-trading shell that I control by supermajority
to merge with DMS. As many of you know, the name of that company is Montana
Acquisition Corporation. In retrospect, Montana is a good match for DMS due
to the fact that it only has three shareholders, that it has virtually no
liabilities, and that it requires very little maintenance to bring it current
on its reports and accounting. The principal reason Mike and I decided to
secure the fully-reporting company in the beginning, is in two parts. First,
we needed to know whether or not we could secure a fully-reporting company to
accommodate the needs that were specific to DMS' situations, and, secondly,
to make certain we could combine DMS with a company so that DMS' shareholders
would be able to see the progress the surviving corporation is making towards
reestablishing itself in the public's view. (For those of you that haven't
read Montana's filings pursuant to Rule 425, Montana will remain the survivor
in the merger.) The second major reason we needed to position DMS in a fully-
reporting company is so that Mike and I can attract qualified acquisitions to
the surviving corporation. Without reporting obligations, sellers of stock in
other companies (or the sellers of qualified businesses) are reluctant to
enter into one or more transactions where they would not be able to view the
company's acts, activities, and events. As of today's date, the merger and
reorganization are scheduled to occur within 25 days from December 10,
notwithstanding comments from the SEC, FINRA, NASDAQ, and OTC Markets. There
have been many of you that have clearly been confused as to the merger process
to which Montana and DMS must commit.
Although DMS' former president filed a Form 15 with the SEC on or about
January 7, 2008 that, essentially, relieved the company of its reporting
obligations, the company must still provide the SEC information regarding
certain events; particularly, when it comes to the matter of effecting a
combination with a reporting company. Similarly, Montana, because it is a
fully-reporting company, must comply with U. S. Federal securities laws to
announce and exchange information on the same matter, except in more detail.
The sequence of events that have occurred and that are scheduled to occur are
as follows:
1. DMS, in its organic corporate form, must have satisfied its filing
obligations with the State of Florida. (We completed this task on or about
October 26, 2010.)
2. DMS must have satisfied its obligations in respect of administrative
Letter to Shareholders, December 7, 2010, Page 3
obligations; i.e., it must have brought current its Minute Book and corporate
records indicating the board's activities and subsequent resolutions to-date.
(We completed these tasks on or about October 28, 2010.)
3. DMS must have prepared its books-of-account and prepared its current
statements of financial condition. (These statements have not been prepared;
however, we have located the most recent unaudited financial statements of the
company for the fiscal quarter-ended November 30, 2009. To the extent of the
company's financial statements, I will speak further on this matter following
my statements as to the merger and reorganization.)
4. DMS must prepare all of the documents, contracts, and other writings
that are necessary to (a) terminate the company's existing non-performing
contracts (or those that are deemed of no value to the company), (b) to
deliver new contracts and agreements to the company's new officers, advisors,
and directors, (c) to prepare one or more current reports to disclose recent
events, (d) to prepare those documents that are necessary to transfer and
assign the company's interests in certain non-performing assets or claims-in-
litigation to those persons or entities that were named by the company's new
board of directors,(e) to prepare those documents the company must file
with the SEC in respect of the overall merger and plan of reorganization, and
(f) DMS prepare all of the documents that will be required to re-domesticate
DMS to Delaware (in order to complete the type of reorganization that Mike and
I have recommended the board of directors effect). (This action is subject to
shareholder approval and I will discuss items 4(e) and 4(f) in greater detail
below.) (We have prepared about 70% of these documents, as the documents are
costly to prepare and format to the SEC's specifications. Mike and I have
managed to try to stay ahead of the costs, as he and I have paying these
expenses on behalf of the company.)
(As to the documents required to be filed with the SEC, one document
in particular, Schedule 14A, requires a two-stage filing. Because Montana is
the proponent to the merger and subsequent reorganization, the SEC requires
that a preliminary Schedule 14C be filed 20 days prior to the effect of the
ensuing actions adopted by the written consent of shareholders (which actions
are pretty much to do with any event associated with DMS). If the SEC does
not offer its comments on the preliminary filing, then, the company must file
a definitive Schedule 14C. This document and the subject corporate actions
will become effective automatically after 10 business days from the date the
companies file the definitive Schedule 14C.)
5. Contemporaneously with the definitive Schedule 14C's 10 day-running,
the company (together with Montana) must file certain applications with NASDAQ
and must provide FINRA (formerly the NASD) with certain notifications as to
the merger, the recapitalization of the surviving corporation, the plan of
reorganization, and other matters, so that FINRA can in the 10-day period
Letter to Shareholders, December 7, 2010, Page 4
change the company's symbol, update the OTC Markets' site, and, generally, to
make certain the company has fully disclosed and complied with the requisite
matters associated with the corporate changes, the merger, the corporate re-
domestication, and the reorganization. (We expect to file the preliminary
Schedule 14C, jointly with Montana, on December 10. It is an extremely long
document - together with its exhibits - and requires both companies to provide
considerable explanations as to their respective operations and business.)
6. Immediately following the merger and reorganization, the surviving
corporation - Montana - must file all of the documents associated with the
merger and reorganization with the State of Delaware and will immediately be
required to file a current report on Form 8-K with the SEC.
7. Immediately following the close of the merger, the surviving
corporation must provide the corporation's stock transfer agent with the
corporation's new C-U-S-I-P number for each class of its stock, so the stock
transfer agent may exchange shares in DMS for those in Montana (in accordance
with the terms if the Agreement and Plan of Merger and Reorganization).
8. As soon as is practicable following the close of the merger, the
surviving corporation is expected to register the merger shares with the SEC
on a Form S-1 Registration Statement. (Presently, Montana's existing shares
are registered, as amended, under the Securities Act of 1933.)
I would like to clarify a number of items that I stated hereinabove. One
matter that is of principal concern to the company's shareholders is that of
the company's disclosure of its current assets and liabilities. I am pleased
to announce the company will release unaudited statements of financial
condition in a Form 8-K report on or before December 9. This report will also
provide detailed explanations as to other specific aspects of the company's
existing operations, plan of operations, and matters of concern to the
company's shareholders, including, but not limited to:
(i) the company's entry or termination of material definitive
agreements;
(ii) a full and complete description of the disposition of
the company's assets;
(iii) results of the company's operations and financial
condition;
(iv) an explanation as to the creation of any direct financial
obligation or an obligation under an off-balance sheet
arrangement;
Letter to Shareholders, December 7, 2010, Page 5
(v) an explanation as to triggering events that will increase
a direct financial obligation of the company;
(vi) an detailed explanation as to costs associated with exit
or disposal activities;
(vii) an explanation as to material impairments and resultant
charges against the company's assets;
(viii) a detailed schedule of recent unregistered sales of the
company's securities;
(ix) an explanation as to material modifications to rights of
security holders (principally related to the merger);
(x) changes in the company's principal certifying accountant;
(xi) the company's detailed explanation as to non-reliance on
previously issued financial statements;
(xii) information as to changes in the company's control;
(xiii) an explanation as to the departure of certain directors
and officers and information as to the newly-appointed
officers and recently elected directors;
(xiv) a detailed explanation as to the submission of matters
subject to a vote or action by written consent of the
company's shareholders; and
(xv) detailed explanations as to any other matters of material
concern to the company and its shareholders.
In conclusion of the merger topic, therefore, the schedule and timing of
these filings and events is the reason the merger and reorganization have not
yet been concluded. Consequently, no shares in Montana have been issued to
DMS' existing shareholders.
The second matter-of-business following the merger is to settle existing
litigation with shareholders and creditors. We propose accomplishing this
objective by issuing shares in a newly created non-voting Common Class B
stock in the surviving corporation, which we propose to register and have
quoted as soon as is practicable following the merger and reorganization. In
this manner of settlement, existing shareholders holding shares of voting
Common Class A stock. Moreover, the acquisition of new corporations and/or
assets will be accomplished by the issuance of various classes of common stock
Letter to Shareholders, December 7, 2010, Page 6
that will be junior (in terms of the payment or distribution of dividends) or
by the issuance of preferred stock, all of which will be registered with the
SEC as soon as is practicable following the merger. By our utilizing these
methods, we will not dilute the percentage positions of the current holders
of the surviving corporation's Common Class A stock.
As of the date of this notice, following the company's issuance of shares
to Mike and I, and an increase of 600,000 shares to Chancellor Development
Properties, Inc. (to settle Leo's accrued but unpaid wages), the company has
31,804,136 shares of its common stock issued and outstanding, of which
3,728,036 are float shares held in street name by Cede & Co. As an additional
note, the company has no intention of directly selling additional shares of
the company in the near future so as to dilute the public float.
The third matter-of-business following the completion of the merger will
be to qualify a number of pre-selected acquisitions of privately and publicly
held companies and assets, and to complete the acquisition of certain assets
that were previously, yet very briefly, described in prior filings or notices.
Notwithstanding the enormous volume of filings and other writings that are in
various stages of completion and/or filing, the bottom line is to introduce
quality, income producing assets to the surviving corporation.
In closing, I suspect that some shareholders may be disappointed by some
of the disclosures the company will be making this week. However, while I
acknowledge my responsibility to the company and its shareholders from the
date I took office, I can honestly state that my job, and that of Mike's, is
to resolve all prior controversies between the company and its current and
former shareholders, creditors, and litigants, to proceed with the merger and
reorganization to establish a level of transparency of the company to its
shareholders, and to proceed in a calculated manner to acquire qualified and
select assets in the surviving corporation in the hope of benefiting the
company and its shareholders.
I am required by U. S. Federal securities laws to inform you that this
letter is for your information only and has been reported to the SEC in a Form
8-K filing. Please remember that any investment in our securities represents
a high degree of risk. You should not invest in our securities unless you are
prepared to lose your entire investment. DMS is seeking "safe-harbor" for
certain statements that may be considered "forward-looking." The italicized
terms are defined in Section 27A of the Securities Act of 1933 and in Section
21E of the Securities Exchange Act of 1934.
Once again, thank you for your continued interest in DMS and its future.
I hope this information addressed some of your major concerns or answered your
immediate questions. I welcome any comments you may have; please address your
comments in writing and deliver them to the address first written above.
Letter to Shareholders, December 7, 2010, Page 7
Respectfully,
DISTRIBUTION MANAGEMENT SERVICES, INC.
/s/ Randolph S. Hudson
Randolph S. Hudson
Acting Chairman of the Board
Co-President
Chief Executive Officer
Acting Treasurer
Acting Chief Financial Officer
RSH:wes
cc: As required per DMS Matrix 2010-1206-001
The SEC via The EDGAR System
Montana Acquisition Corporation
Letter to Shareholders, December 7, 2010, Page 8
