Tuesday, November 15, 2005
again more companies
Balance sheet is ok. They have lots of cash, but also a deficit. It's the services part of their revenues that are growing the most. 32.5 million effective diluted shares including convertable pfd. Maybe they're worth $1. Stock is selling for $1.60.
Everything continued into Q1 and Q2 of this year, except that operating expenses went up too much and earnings dropped this year, especially in Q2. Cash flow from ops is terrible due to AR, prepaid, and deferred revenue.
PACI, franchised auto service centers. Unqualified audit opinion. Strong balance sheet with almost totally depreciated PP&E and lots of goodwill, also a deferred tax asset. Increasing franchise revenues, except during 2005. 16% operating margins. Massive benefit from income taxes. Lots of share dilution. Earned about 5.2 cents a share totally diluted. Free cash flow matches this. (they claim to earn 16 cents diluted, but it contains lots of stuff I don't like to include).
Q1: they earned about $0.008 totally diluted with taxes paid and no one-time benefits. Great free cash flow. The market seemed somewhat shocked by the results (they shouldn't; it was all there to see well beforehand). Stock is selling for 75 cents and it's worth about 75 cents.
PASW, Internet and web software and development tools (yuck), shifting to some other business in 2000, etc. etc. Probably sharp people in search of something useful to do. They repriced their warrants. Going concern qualification. They earned 1 cent royalty income in 2004, but had no operations. All revenues are from one former customer of NRCJ subsidiary (customer is in Japan). The licensing fee has decreased, but the increases in their sales have more than offset it. Zero cost of revenues. They also have substantial NOLs.
Looking at Q3 2005, they still have a fairly strong balance sheet. Royalty revenues are higher: $57K vs $34K in Q3 2004. They earned half a cent in Q3 diluted, 1.5 cents during the 9 months. They do have foreign currency translation gains/losses (with gains and losses when you'd expect them). Cash flow is good.
This is a great example for someone to do a DCF analysis. $250K of cash. $18.8K of AR (no allowance). Almost exactly 5 million shares. They have about 5 cents cash right now and they earned 1.5 cents during the first 9 months of this year. Maybe it's worth 8 cents or so (maybe more, but that's gravy), but it all depends on what they do with the cash. They should just pay it out as in dividends or liquidate in the future. Without knowing the answer, it's worth zero. Unfortunately, the stock is selling for 11 cents. Maybe it would make a good shell company.
PCLP, document management software (yuck). Directors and executives own 73% of the company (bad). 3.4 million options. Going concern qualifier. Very weak balance sheet. Insanely low operating margins (negative for 2004 and 2005).
OPTO, business software. Revenues are stable and not growing. Gross margins are increasing every year, currently 77% (up from 75% and 70%). SG&A are killing them, leaving only 5% operating margins (3% in 2003, -19% in 2002). Net income is 6% (5%, -17%). Unqualified audit opinion. Fairly strong balance sheet. Earned 7 cents diluted in 2004. Some dilution from options. Also recent acquisition. Cash flow from ops is about right, but free cash flow is low at perhaps 5 cents in 2004 (not really sure, could be more). The first half of 2005 has been much worse, earning about 1 cent and very little cash flow from ops. I really can't tell what the business is worth, but it's selling for $1.07 which seems way too much.
OPCO, pet supply maker of all sorts of stuff, sells to Wal*Mart (10%'er), Kmart, Petsmart (10%'er), Petco, Sam's Club, Safeway, Friskies, Ralston Purina, and others. NOT DIRECTLY, but through distributors. No real selling power. They have some patents, most after 2000, some are design patents. 13 employees. Several non-frightening lawsuits (including one which has the name "Boneybone" in the title). Unqualified audit opinion. Strong balance sheet. 27% gross margins (obviously these aren't particularly strong brands). 1.2% operating margins. Negligible net earnings. Debt for equity swap in 2003. About $100K free cash flow on 12 million shares.
Inventories (and to a lesser extent AR) climbed during 2005 which killed cash flow, apparently due to the sales promotion. Tooling PP&E also increased. Earned about $170K during the first 9 months on higher revenues (again, sales promotion). Capex matched depreciation. Maybe they're worth 10 cents? Selling for 42 cents.