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Friday, October 28, 2005

Some discarded companies

These are companies which were discarded during phase 2 of sifting. I put them here for the record.

, residential real estate home builder (in California, Florida, and Texas!) If I wanted that, I'd buy Lennar or even their spinoff LNR... oh wait, I did buy LNR, which was then acquired by someone or other and I made lots of money on it (same with Crossman Communities).

HSPR, in the pre-fab residential construction business (oh boy, wrong time for that kind of thing). And they're new. So they jumped into the housing construction business during a manic period. Those are the kind of people who go bankrupt.

Their balance sheet isn't all that strong (current ratio close to 1). They have an equity deficit.

They just started making a profit (earning 1 cent in Q2). Gross margins are ok. It's selling for 17 cents, which I guess is about the same P/E as homebuilders.

HRBGF, Harbor Global, Russian real estate management, earnings all over the map, cash distribution dividends also all over the map. Seems Ponzi-like. Selling for $8.80.

HTDS, gone.

HTLJ, steel fab, property management (resid and commercial), idle agribusiness, manufacturing. 10-K wording contains great quantities of manure language. Losing money.

HTVL, Cayman Island reinsurance business.

HVYB, bank

HMWS, home warranty (i.e. maintanence) in Arizona. No financials.

NMXS cik# 1101865, New Mexico Software, web and database
unqualified audit opinion (2 auditors), horrible balance sheet, losing money on decreasing revenues.

NNBP cik# 925894, pharm, losing money, restatement, horrible balance sheet

website - click on investor relationsions) click on SEC filings -
cik #1030065, went dark in 2003.
Once successfully accomplished, this has the potentiality for solving the world energy crisis
As Instapundit would say, "Heh".

NPDI cik# 1138659, sustainable seafood (aka fish farming)
going concern qualification, stable balance sheet perhaps, negative gross margins. SG&A greater than revenues.

NMSCA institutional food and food service
steadily declining revenues, lawsuit against customer, earned 27 cents in 2005 but it was due to non-operational stuff, would have lost money without it. Low margins for food. Balance sheet acceptable. Huge payroll and other costs.

NPFV - (perfromance improvement to industries) may be good
check annual and latest quarter
a mine with terrible balance sheet in pre-exploration.

HDRX, water filtration business, new reverse merger. Lots of weirdness with this one.

HGIIA, 12 franchised liquor licensed "half-a-car-sticking-out-of-a-wall" restaurants (up from 9 last year). 1950s 1960s themed. Only 1 full time employee (an admin). Very straight forward 10-K. Auditors quit.

Balance sheet is strong, but not much equity.
Thin margins. Results are worse than they look. They earned 1 cent in 2004, but a lot of that was from one-time stuff. More like half a cent. Some dilution. Cash flow was good in 2004, not good in 2005. 2005 is pretty much still looking like half a cent.
Figure the business is worth maybe 7 cents. Stock price hovers around 7 cents.

HICKA, electronics corporation from 1915, now they make electronic diagnostic equipment for car mechanics. Minor qualification to audit opinion.

Strong balance sheet, nearly all equity.
Widely varying revenues, $15.7 million in 2004. Gross margins about 50%. Very high marketing and admin expenses (about 25%). 4.2% net margins in 2004. Earnings are all over the map in the last 3 years. 54 cents, -60 cent loss, 20 cents.
Cash flow is a bit better. Free cash flow is about $1.4 million, $0.1 million, $1.7 million. Consistent 1.2 million shares.

2005 results are way lower. Revenues for first 9 months down to $6.9 million from $12 million with net loss and negative cash flow from ops. The cause was simply lumpiness in revenues, apparently.

Company made a tender offer for small shareholders in order to go dark.

Shares sell for $4.50. I have no idea what the business is worth.

HISC, homeland security integrated something or other.
Assets are spread out. Balance sheet is ok. $1.2 million equity. $2.1 million assets.
They just reached profitability in Q2 on $237K sales earning six thousand dollars. There are over 700 million shares. Revenues haven't been growing all that fast.
This could very well be the most worthless genuinely profitable company I've ever seen on a per-share basis.

HCFB - this company passes and isn't really a bank, it's only a holding
company for a bank. Ok, let's look at HORRY COUNTY STATE BANK.
Earnings were level at around 75 cents, then went up to 92 cents in 2003 and $1.20 in 2004. They earned 62 cents [diluted! a bank with stock options?] in the first half of 2005. Now let's see how much higher than $18 the stock is selling for... $29.50.

NIMU, cik number, the business itself is still in development stage, pretty much.

NEXH, real estate (mostly commercial) in Utah and Kansas. They do a lot of leasing. There might be a foreclosure risk.

36K sq ft old building in Salt Lake City. Only the 7,816sqft ground floor was renting out [as retail] which rents out at $15/sq ft [per year]. Renovations being done on 2nd floor which will lease out at $12/sq ft, 4,700 sq ft. Total monthly receipts are $5,682. Loan payments are $8,875, interest.

One storey retail building in Salt Lake City, cost $535K. 7Ksq-ft, late 1960s building. Much is not occupied.
Another building in a suburb of SLC, $750K cost. 100% occupied. $11K monthly rents (twice the monthly loan payments). $11.45/sq-ft.
Another shopping plaza in SLC. 72K sq ft. 60% leased. One tenant. Sounds crappy. $20K/month rent payments. Loan is $12K/month.
Also a ski condo... unit. Just one condo unit. For sale. Potential fraud.
40 acres ugly industrial land in West Virginia. Unused, bad future outlook. Cost is impaired now. WV EPA looking for cleanup. Ugh. Property dumped for $1,816 in unpaid property taxes due to clerical oversight. Oh geez.
Also some undeveloped land in Kansas.

Assets mostly PP&E and land. Very weak balance sheet.
Losing money.
Big gain from disposal of assets in 2005, but still losing money all over the place.

NLEQ, industrial equipment leasing consolidators. Bankrupt, but emerged on Feb 2004. All stock was wiped out. They merged with NES Rentals which survived the merger. Audit opinion qualified by a change to how the company accounts for goodwill.

Assets are mostly rental equipment and some AR. Liabilities are nearly all debt. 15% equity to assets. About 20% gross margins. Losing money in 2004. Operational cash flow is positive due to depreciation but free cash flow negative with normal capex.

NMKT, voice over IP telecom business. Ugh. There also in other areas of telecom. It looks like there might be some interesting stuff. Let's do the numbers:

Balance sheet isn't too bad, but lots of goodwill and intangibles. They have an unconsolidated subsidiary to watch out for.

Revenues went from $2.3 million in 2003 to $14.6 million in 2004, presumably due to acquisitions (assets jumped from $9.5 million to $25 million). Gross margins are about 40%. Operating margins are thin, so the big question is capacity and market growth. They earned about half a million in 2004, 1 cent diluted. Share count went from 51 million to 82 million during 2004 (mostly stock for debt). Cash flow is kind of ugly, but probably too much stuff in flux to really know what's going on.

In Q2 05, assets had jumped again up to $44 million. Bulemia is a terrible thing. The incremental sales were much lower margin. There are all sorts of one-time things going on in 2005: bad debt expense recovery, lawsuit settlement, gain on forgiveness of debt.

I can't tell what this business is worth. There could be a pony hidden in all that manure. Or maybe not. Maybe it's worth 10 cents? Now let's look at the stock price: 38 cents.

This is one of those companies with a high degree of difficulty.

MLOG, These people have gone REALLY dark. No news, no updates, nothing.

MLTO, All their financial numbers are estimates. Their balance sheet is fairly
frightening, although they could survive without dilution if everything were
to fall into place well. They might be worth 4 dollars a share, maybe more.
But the stock is selling for 4 dollars a share. I'll put this on the list to
look at... on second thought, no. If they get audited results that will help. But I just passed on FPGR which also has unaudited results and some weirdness that made me not invest... and they are way cheap.

MOBK, they don't provide any information about their financials, so I can't invest
in them.

MODM, losing money, they're late filing quarterlies.

MCAM, In the most recent quarter, they actually started making money again, but the balance sheet is already so weak that the value of equity is doubtful. I don't see how the future of the business can be predictable.

MCET, would also pass the criteria since they didn't have declining revenues
and the cash flow statement for the most recent year is positive, especially
since they started making money in the 2005-07-15 quarter report. UPDATE: what was I looking at? They're losing money like crazy.

MRCR, might be worth $6 and they're selling for 87 cents, but cash flow is bad
(need to find out why). UPDATE: losing too much money.

MRGN, movies on demand, horrible industry, no good.

MRFD, Yum! Brands franchisee. They haven't made money since 2002, and that was only a small amount for 1 year. However, they seem to be improving during 2005. The stock has gone up quite a bit because of it. But if they were going to be consistently making about a dollar a year per share, then it would be worth $15: 3 times as much as the current price. Worth looking to see why they're improving and whether it's sustainable (probably not, I discarded it).

MSITF, They have no recent financial statements, but they're making lots of hype-ridden claims. They're based out of the Caribbean and they're in an industry that itself is somewhat of a red flag. They have very little of what I would consider normal disclosure, but lots of hype. And about 90% of their balance sheet assets are hidden in an investment in another company. This one definitely doesn't pass the smell test, as they say.

UPDATE Sept 7, 2006: I posted this stuff to the MSITF message board (Raging Bulls)
I wrote that stuff about MSITF (I run that blog). As you can see from that page, I've looked at a huge number of companies. Many of the companies I pass up will end up going up in price (for example, I knew about PTSC when it was 20 cents but passed it up because I didn't have confidence about the total size of their eventual patent infringement awards), and some of those will be companies that I could have understood if I worked hard enough at it. What I do is attempt to identify a very small number of investments that I have strong reason to believe are worth a lot more than their current price. I intentionally filter out a lot of good investments because it's a lot more important to me not to make a bad investment than to pass up a good investment.

I've learned from experience to rely heavily on red flags. I basically go through a company and collect the things that are fishy or are commonly associated with bad things. When I looked at MSITF, it was rife with them and doing a quick check now doesn't look any different.

If you look at the top of that page you linked, you'll see a lot of work I did on HQSM, but at the end of it, I still chose not to invest in it. And believe me, HQSM looked a great deal better than MSITF!

I figure you can do investing or you can do gambling. The fact that MSITF *might* be ok is not enough for me to put even a dollar into it.

FCPG, face recognition database stuff. Losing money badly but the future could be
very good. Unlikely to ever be a good investment because it's a glamorous
technology among investors.

FIND, a bible studies software maker that sells directly to customers.
They lose money in normal operations but they've sometimes been able to be
profitable by various other items. I don't see this as being a good business
to own.

FTPI, startup.

FRMO, an interesting company which does investment analysis and has some stocks.
I'm not sure I'd ever be able to know what the company is worth.

FSCR, Federal Screw Works... I didn't know the IRS was a public company.
They're barely eeking out a living, but paying way too much in a regular
dividend. Not very interesting other than the funny name.

FULO, these people are in a terrible business, eeking out a living.

MDVN, "medical mousetrap" losing money

MDTA, software, bad

DVID, These guys are headed off a cliff.

DYTM, not too interesting

DOWJB, Wow, I didn't know Dow Jones was on the pink sheets. They seem to be priced about right.

DSSI, It would be nice if they could have made money in *this* millenium.

DXXFF, composite patio decks. No financials.

DTIX, money loser

DTTO, money loser

FBGO, looking at the SEC docs, it's not a good business

FATS, revenues have gone up while earnings have gone down, but cash flow has been
going up. The stock is probably overpriced.

GBCS, Casino, might be a bit cheap, but casinos can be bad business. Prior fraud.

GBIR, Transports goods from Western Europe to Eastern Europe. Bad business.

GAXC, Overpriced ATM machine operator.

GECO, minor league hockey, overpriced

DMEC, This one's no good. They simply have too many shares (639 million) for them
to ever be worth anything. The stock is cheap at 1 cent, but not cheap
enough given their unstable situation.

DRMS, Doesn't seem very interesting

DNAG, They have essentially 841 million shares. In 6 months they did half a
million dollars in business, which cost them nearly that much to produce,
plus they had nearly another $2 million in expenses. Even at 2 cents a
share, I can't see it as an investment.

EBLC, Terra Block scares me because they seem more driven by the technology
than by solving their customers' problems/needs. Why would customers use
their product rather than bricks? The burden of proof is clearly on EBLC to
gain new customers. They would need to be far better than bricks to overcome
doubts about unforseen issues.

SEHI, manufactured homes. Crappy results over time. Overpriced.

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