Saturday, December 24, 2005
Torotel Products Inc. (TTLO)
The Caloyeras Family now has voting control of the company with 51% and is replacing directors and to fire the CEO and CFO. This is the big issue with this stock.
Now on to the 10-K...
Two subsidiaries: Torotel Products and Electronika (nearly empty website). Electronika (acquired 2002) sells ballast transformers to the airline industry (activate and control the lights in airplane cockpits and passenger compartments on DC-8, DC-9, DC-10, MD-80, and MD-88). Also a 15.27% equity interest in Apex Innovations, but this has been written down to zero since they keep losing money.
The Caloyeras family owned only 7.4% of Torotel, but seem to have owned nearly all of Electronika. Torotel issued 2.3 million shares to acquire Electronika (they had only 2.8 million shares outstanding before the deal). Afterward, the Caloyeras family owned 49% of Torotel. So the fear is that the Caloyeras family got Torotel to buy their business in order to gain control of Torotel. If Torotel was a much better business than Electronika, then the deal stinks to high hell. Watch out if there is no segment reporting.
Electronika outsources a huge amount of the work for their ballast transformers to Magnetika, which unsurprisingly is owned by the Caloyeras family. Magnetika provides raw materials, labor, testing, packaging, and related services. Electronika is required to go through Magnetika. Electronika owns the IP. Magnetika receives 40% of the net sales price of all ballast transformers sold by Electronika, plus a $2,500 per month management fee (this agreement extends to 2012)!
The Caloyeras family loaned Torotel $750K to buy 15% of Apex (which is now worthless). The loan interest rate is 7%. I'd be curious to know if the Caloyeras family has any dealings with Apex.
I'm trying to get a sense for the value of Torotel proper vs Electronika (related to red flag above).
The net sales of Torotel Products increased 12% from $3,759,000 to $4,207,000. This increase was attributable to higher demand from Torotel’s military markets. The net sales of Electronika decreased nearly 23% from $261,000 to $202,000. While Electronika’s sales have been impacted by the soft conditions in the aerospace market, the bigger impact going forward will be the decline in the number of active DC-8 and DC-9 aircraft.In 2004:
Net sales decreased nearly 6%. The net sales of Torotel Products increased nearly 5% from $3,599,000 to $3,759,000. This increase was attributable to higher demand from Torotel’s military markets. The net sales of Electronika decreased 60% from $654,000 to $261,000. This decrease is attributable to the soft conditions in the aerospace market and the decline in the number of active DC-8 and DC-9 aircraft.I also found this:
On April 19, 1999, Torotel, Inc. sold substantially all of the assetsnot interested
of East Coast Holdings, Inc. ("ECH"), a wholly-owned subsidiary formerly named OPT Industries, Inc., to Shared Information Group Management Associates, LLC ("SIGMA"), an investor group led by Peter B. Caloyeras, for approximately $2.7 million....