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Saturday, November 05, 2005

Some "I" businesses

IAGX, 60+ HBA related products and sales support to distributors, a 31% customer and three 13% customers. 7 employees. Civil product liability lawsuit pending. 65% sales growth. 60% gross margins (and increasing). Earned 8 cents/share (vs 4 cents 2004, vs 4 cents 2003). Growth was due to selling patented Celadrin as an ingredient in some big product selling in places like Wal*Mart, GNC, etc. Should continue to grow sales. G&A increased 16%. Very high current ratio. Executives and Directors own 31% of the company. Cash flow terrible due to AR and some inventory (continued into Q1). Stock might be worth $1.50 but is selling for $2.55.
Worth following

IAIC, Information Systems company (upgrading legacy systems) going back to 1979. Impressive customer list. 33 full-time employees. 10-K reads very well. 20% gross margins (some mixed results in there). 73% across the board revenue increases. SG&A up 31% due to admins going back to full-time, recuiter fees, bonuses, sales commissions, greater depreciation. Rosenberg, 58, has been CEO since 1979. Executive salaries very reasonable. Directors and officers own 28%. Going concern auditor qualification. Weak balance sheet. Income statement shows a low margin business (reminds me of Warren Henderson's modem testing business). Earned 5 cents in 2004 (lost 2 cents in 2003, broke even 2002, earned 1 cent 2001, lost 8 cents in 2000, lost 59 cents in 1999). Free cash flow for 2004 is about half earnings. This is a hard scrabble business not worth owning. CEO probably has to live on ramen noodles every few years. Western Civilization rests on the backs of hard working, good and honest entrepreneurial people who don't win the IPO lottery and don't have names like Bill Gates or Warren Buffett. But even still, I'm...
Not interested

IAUS, Utah based retailer software: self-serve checkout, fingerprint IDer, and a better modem using digital wave modulation (good luck, pal). But here's my favorite:

The Company has a prototype of a patented turbine which uses the expansion of steam to generate a rotational force. This force can then be used to generate power. The Company feels the turbine could be used in but not limited to the production of electricity, hydrogen, or in the transportation industry. Though some testing has been done using pure steam and geothermal steam, more testing will be done. There are risks that a commercial turbine may never be developed or accepted.

The worst sort of mousetrap business: people who dive into areas with no extensive knowledge of prior art and, at the very best, re-invent the wheel (or the steam engine in this case). No revenue in 2004. No revenue in 2003. No thanks. I can tell you that the modem business is filled with some of the most brilliant people I've ever met who have focused decades of their lives on making the best possible modem and profits in that industry are very low. You might as well start a company in order to form a "rock band" and sell music and performances. This company and IAIC above are a perfect contrast between real technology and snake oil.
Not interested

IBDI, bought lots of animation cel art collectables, runs an online auction website which doesn't have much activity going on. This was all discontinued in 2005.

They recently entered the porno industry sales processing via acquisitions. Current assets are now $7.5 million and current liabilities are $27 million. They have revenues but low margins and an operating loss. They show a positive net income because of $5 million in Other Income: roughly half from reserves for the prior year's services and half from a reduction in payout liabilities. They own 34.7% of Penthouse. Why? Porno is becoming a total commodity.
Not interested

IBTGF, manufactures fire resistant building materials. Very rapid 3-year revenue growth. Made money in 2003, but lost money in 2004 (loss of efficiency with new mfg process, which has been fixed). 3 customers accounted for 82% of sales (47%, 19%, 16%). Gross margins decline with increasing COGS because Barrier has a fixed markup only on the treatment process (which starts to resemble a service, I guess). Even adjusting for COGS increases, sales went up significantly (2 year increase of 92%). R&D costs are low. Directors and executives own 32.7% of the company.

US GAAP caused doubts about going concerns. No other qualifications. Balance sheet looks fairly strong (but huge accumulated losses). Gross profits of $636K, $487K, $439K in last 3 years. R&D is about $50K. License fee $62K. Huge jump in "Sales marketing and investor relations" from $53K in 2003 to $251K in 2004. Cash flow from ops is lousy due to AR (better in 2003). $1.4 million spent buying patent technology in 2004. They issued stock to finance it. Year ended June 30, 2004.
Q2 financial report (Dec 31, 2004): continued record sales, still losing money.
Q3 financial report (March 31, 2005): continued record sales (in sq ft of product and presumably also in dollars). Still losing money... even more than prior year. Cash flow killed by capex (expansion?).
Q1 news report (Sept 30, 2005): continued record sales, still losing money. They have promises of consistently making money, but they don't say when.
What are they worth? I have no idea. I'd say dilution is probably 35 million shares. Maybe they're worth 10 cents a share? Maybe a dollar. Who knows? They're selling for 81 cents.
worth following

IDIB, website development software. Weak balance sheet. Declining revenues. Low operating margins. Good cash flow from ops. Earned 1 cent in Q2 (1 cent in Q1). Selling for 23 cents. Market cap under $5 million.
worth looking into

IECE, electronics manufacturing service for printed circuit board assemblies and electronics. That's a fairly low margin industry unless you have a niche. 164 employees (20 engineering, 131 mfg, 13 admin/marketing). Upstate NY between Rochester and Syracuse. Lawsuit by GE against IECE and Vishay, small amount. Massive decline in sales over the years continuing right up to the present. They earned a profit in most recent quarter but probably due to layoffs and such. This is a dying business.
not interested

IEHC, high performance printed circuit board connectors, including military. They got a new account with a radar system mfgr which is ready for production. Solderless pin technology. Gross margins around 28%. Net margins around 3%. Executives and Directors own 43% of the company. Unqualified auditor report. Weak balance sheet. Earned 10 cents in Q1 2005, 7 cents in all of 2004, 5 cents in 2003. No dilution. Cash flow from ops is terrible due to inventories and AR. Stock selling for $2.30. Too unpredictable.
Not interested

IFSC, biotech, strong balance sheet. Revenues mostly gone. Losing money.
Not interested

IFTH, customized IT services and products. Mostly focused on educational institutions. Customers: IBM, Mus of Modern Art, Toys R Us, St Josephs Hospital, City of NY, Centenary College, etc. Reasonable balance sheet. Revenues clobbered during 2003 but increasing over time. Barely reached the breakeven point this quarter on declining revenues due to lower COGS ($25K earnings in Q3). 5.3 million diluted shares. Maybe worth 25 cents. Selling for 41 cents.
Very low priority

IMCI, IT services. Not current with SEC filings. Can't afford auditor. Balance sheet dominated by AR and non-current note receivable, very very weak. Low margins. Earned 1 cents (4 cents including discontinued operations). Gigantic increase in share count. Cash flow stinks, all of it. Operational loss in most recent quarter. Cash flow improved in 2005. Most recent quarter's sales were $2 million. 20 million shares, at least. Stock selling for 33 cents, which is probably not cheap.
Not interested

...and for your entertainment, a baby squirrel adopted by a dog and puppies

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