Pink Sheets

Let's take a look at some of the companies audited by Sherb & Co. and their predecessor, Feldman Sherb. I'd like to know if these guys are crooked, or incompetant, or misunderstood, or simply wonderful.

These guys are still around. Their 10-K was filed late (because they did not obtain all information prior to the filing date and the attorney and accountant could not complete Mgmt's Discussion in time) on April 14, 2005.

Sherb actually had a pretty much unqualified opinion here. The 10-K includes financial information from Sept 1994 through Dec 2004, but they only audited 2003 and 2004.

In this 10-K, the balance sheet appears fairly strong in that about half the assets are cash (plus there's lots of marketable securities) and there are almost no liabilities. However total assets are only $5.2 million. In the income statement, revenues are $300K while expenses are... ready for this?... $28 million. In other words, at their current rate, they would burn through all of their assets in far less than a single quarter and Sherb & Co. has no doubts about them as a going concern.

Ok, so the cash flow from ops burn rate is only $13 million so it theoretically might take more than a quarter to burn up all their assets.

Here's the ProNetLink 10-K for 2000.
Feldman Sherb gave them an unqualified opinion on Sept 28, 2000. Looking at the balance sheet, ProNetLink had a current ratio of 1/6! Their revenues were $81K while their expenses were over $4 million. Yes, they were a development stage company, but there were already running a shareholder deficit (i.e. they burned through all $7.6 million of their money).

It seems insane for Sherb & Co to give them an unqualified audit opinion. However, before the 10-K came out, ProNetLink announced funding commitments of $3 million (from Collardeau himself, I don't know what the rule is for related party loans and going concern qualifications).

But later they did announce a $10 million equity line of credit with Corpfin.com (these guys must be idiots). Another announcement for $5 million from Waveland Capital.

Anyone reading the 10-Q released on May 21, 2001 would have seen that revenues were only seventy dollars (vs $24K in the prior year). Total current assets dropped to $41K. Total assets sank to $343K despite a large infusion of capital from Collardeau.

They announced bankruptcy on July 2, 2001.

ProNetLink lawsuit

The individual defendants told the public that the Company still had access to a $5 million line of credit and other capital resources at its disposal. These statements were blatantly false, as shown by the testimony of the Company’s Chief Operating Officer, David Walker, taken in connection with the Company’s bankruptcy proceeding in this District.
7. Nevertheless, the Company’s outside auditor, Feldman Sherb & Co., P.C. and its
successors named as defendants herein (collectively referred to herein as “Feldman Sherb”), together with non-defendant Philip Weiner (a partner of Feldman Sherb), issued an unqualified audit opinion, dated September 28, 2000 on ProNetLink’s financial statements that was contained in the Company’s annual report on SEC Form 10-K for fiscal year ending June 30, 2000. Feldman Sherb also authorized the Company’s use of this unqualified audit opinion in a Registration Statement the
Company filed with the SEC on May 4, 2001. Feldman Sherb, however, knew or recklessly disregarded numerous red flags showing that the Company had inadequate resources to sustain operations for 12 months, and accordingly should have at least given ProNetLink a “going concern” opinion, rather than an unqualified opinion on its financial statements. For example, according to the Collardeau Indictment, on March 16, 2000, defendant Collardeau sent instructions to American Stock Transfer to reissue 1,500,000 shares of Pro Net Link stock previously issued in the name of one individual (Eric Niger) and reissued in the name of another (Muriel Prochasson). Feldman Sherb ignored this red flag which should have alerted them to the defendants’ securities fraud scheme. Although securities fraud was rife at Pro Net Link -- as the Collardeau Indictment readily shows -- Feldman Sherb either knew of the fraud or recklessly ignored it.

and in case you think Feldman was the defendent and not Sherb...

Defendant Sherb & Co., LLP broke off from Feldman Sherb at some time at or after the Grassi merger.

According to the complaint, ProNetLink was formed by defendent Jean Pierre Collardeau in July 1997 (he eventually pled guilty to fraud worth $20 million). It did a reverse merger with Prevention Productions Inc. a Nevada corp.


Their last filing was an NT 10-K which says they'll be late filing the 10-K. The reason was "Important information needed for the filing is not yet available." That was March 31, 2003. We're still waiting. In the section where they're supposed to indicate whether or not it is anticipated that any significant change in results of operations from the corresponding peroid for the last fiscal year, they said no.

They filed an 8-K before this indicating the company would issue "23,242,200 to Dreamwind LLC". 23,242,200 what? Magic beans? Of course they mean shares of stock because later they say it will results in Dreamwind owning 34 million shares due to having acquire blah blah... there's a terribly complex ownership structure that leads back to the CEO.

They exchanged 23 million shares of stock for $1.7 million worth of Dino Babies animation cels. I'm sorry, but I don't believe such a thing could exist: finding 1.7 million people to buy 1 cel each for $1 or finding 170,000 people to buy $10 worth of cels or whatever.

In the last 10-K [2001] issued by the company, Feldman Sherb was the auditor with an unqualified opinion on the company. The current ratio is around 2. 2/3 of the assets are real estate investments. The gross profits are $337K while the costs and expenses are $3.6 million. But revenues increased from $84K in the prior year to $922K. The company lost $3.2 million which is half of the remaining assets of the business. But cash flows from ops only lost $300K of cash while they borrowed $712K.


These guys are still around. Their latest 10-K was filed on Sept 28, 2005. Sherb & Co signed Sept 27, 2005. OMG! They actually gave these guys a "going concern" qualifier. But all it says is...

The Company has incurred significant losses and has a working capital deficiency

Let's see what it takes to get one from Sherb.

Assets are $4 million. $1.6 million in cash. $2.1 million intangibles.
Current ratio is 1/3.
The shareholder deficit is almost as large as the total assets.

Revenues are $430K (down from $533K). Gross profits are $55K. Expenses are $2.8 million. There's a $3.9 million loss on debt restructure. Net loss is $7 million.

Operations ate up $1.8 million in cash. They invested $279K in "patent protection". They borrowed at net $3.6 million, pushing $1.1 million in short-term debt into long-term debt.

Sherb's wording seems a bit weak, but it's better than nothing.


10-K/Amended They just engaged Sherb & Co on June 14, 2005. I just noticed their audit fees are only $17,500. Sherb gave these guys a "going concern" qualifier, which is not surprising.

the Company had a net loss of $428,592 for the year ended July 31, 2005. This raises substantial doubt about its ability to continue as a going concern.

Total assets: $48K
Total CURRENT liabilities: $4 million
So current liabilities are nearly 100 times larger than all assets combined.
They have a gigantic shareholder deficit.
Sherb is certainly correct about the loss.
prior amended 10-K still has the going concern qualifier
The original 10-K seems to have no auditor opinion. The prior auditors also only had a going concern qualifier.

They withdrew this SB-2 statement. No explanation. Feldman Sherb & Co. was the auditor for 2000 and 2001. The principal accountants left that company to start Sherb & Co. On May 11, 2002, they dismissed Grassi (who acquired the other part of Feldman Sherb & Co) and hired Sherb & Co. for 2002 and beyond. However, in that SB-2 prospectus, Sherb invokes the "going concern" qualifier and mentions that 2003 had been restated.

During the fourth quarter of 2004, the Company re-evaluated its prior accounting treatment for the acquisition of Airport Network Solutions, Inc. with regard to the convertible note issued at closing. As a result, the Company recorded a beneficial conversion of $200,000 on this loan which resulted in a reduction to "Common stock to be issued for settlements" and a corresponding increase to "Additional paid-in capital".

The current liability about common stock to be issued for settlements shrank by $200K along with the shareholders' deficit. I can't tell if it's fishy or not.

They amended the SB-2 with updated financial info. The thing is totally different so I can't really diff it.

They acquired Wise Technologies, also from Warwick, Rhode Island, for $2 million in stock, but get this: Sherb & Co was their auditor, too. Sherb gave Wise a "going concern" qualifier. The total assets of Wise was only $236K. Revenues were only $345K and gross margins were practically zero. So why did ICOA pay 10 times book value, and nearly 6 times sales for Wise?

These guys just reached profitability in the latest quarter and gave up a bunch of stock to the participants in celebration, presumably. But cash flow from ops is terrible and burned up $1.26 million on revenues of $2.7 million in the 3rd quarter.

In the amended 10-K, Sherb's audit fees actually decreased from $36K in 2003 to $26K in 2004. Sherb gave them a "going concern" qualifier. They lost $4.3 million on $2.8 million in revenue with $5.3 million in assets and a $3.4 million deficit.

These guys also got a "going concern" qualifier in the last 10-K back in 2002. But this one has a lawsuit associated with it.

The Complaint alleges that the Independent Auditor Defendants, Slayton (auditor for fiscal 1999) and Feldman Sherb (auditor for fiscal 2000) falsely represented that year-end results had been presented in compliance with generally accepted accounting principles (“GAAP”) established from an audit that was supposedly operated pursuant to generally accepted auditing standards (“GAAS”). Moreover, it is further alleged that LMG falsely stated that it had received commitments for outside funding. Additionally, LMG deceptively represented that backlog orders for its outdoor media projection systems had increased by $20 million.

Some more detail:

(a) booking sales that later had to be reversed; (b) failing to account for escalating costs and non-salary based compensation; ( c) misclassifying inventory as capital equipment; (d) failing to account for expenses incurred by LMG which were paid by related entities in the period incurred; (e) failing to book expenses due to the settlement of debt with related parties; and (f) substantially understating interest expenses.

But the claims were dismissed with prejudice.

On May 7, 2004, all claims in plaintiffs' consolidated amended complaint were dismissed as against defendant Feldman, Sherb & Co., P.C., with prejudice, which plaintiffs moved to appeal.

Here's the actual claim. Feldman Sherb became auditors on Dec 2000.


At some point, LMG claimed backlog orders had increased by $20 million. In the next two years, revenues never even came close. LMG eventually disclosed that all that backlog was from a single company, Amplified Light Technologies which was controlled by the CEO's brother, which relationship was not disclosed.

The fiscal year 1999's net income was overstated by 500% according to restated financials. Expenses were understated by 250%. Q1 2000 sales were overstated by 49%. SG&A was understated by 295%. This continued on during 2000. Feldman Sherb was the auditor for 2000's results.

I got this from this page on Siliconinvestor.com

The second auditor, Feldman Sherb, successfully applied to have the case against it dismissed. In a December, 2003, decision, U.S. District Judge Richard Owen wrote that while Feldman Sherb could have been more thorough in its audits during the three months it acted for Light Management, the auditor's conduct was not "highly unreasonable" to the point where a class-action lawsuit was in order.

Perhaps you get what you pay for. What this tells me is what I already know: you must pay very close attention to red flags in these obscure investments.

Here's the most recent 10-K. These guys are still going. BDO Seidman were the auditors for years 2003 and 2004. Sherb was for 2002. Sherb notes that the 2002 statements have been restated. Sherb raised substantial going concern doubts in the 2001 statement.

During Q3 and Q4 of 2003, the company re-evaluated its statements for 2001 and 2002. Uh oh. Sherb was dismissed on Dec 17, 2003 and BDO Seidman was selected. It seems to me that BDO was the one who found the problems and caused the re-statements. The company had BDO look over the tax returns of 1997-2000, prepare the 2001 and 2002 tax returns, and consult with management on the tax provision for Q3 2003. I suspsect BDO found the issues and brought them forward, then the company probably decided to throw out Sherb.

The fact that they brought BDO in probably means that they already had issues with Sherb or were suspicious.

Sherb was consulted about the issues and agreed.

The proxy statement says audit fees for 2001 were $55K (page 7). But 2 months later this changed to $57K (page 6). Look at page 33 of this proxy statement for 2003. You'll see a very telling table of audit fees. While Sherb is still doing audit work of $72K in 2003 and $12K in 2004, BDO's audit fees are huge. $351K in 2003 plus $137K in audit related fees, $207K in tax fees, for a total of $695K in 2003 and $586K in 2004 (as they probably got into their groove).

The data here seems to suggest that Sherb are cheap accountants who are not particularly very good. This case doesn't seem to be at all sinister, just damn cheap-ass accountants, which is merely an opinion and not fact. This matches Judge Richard Owen's decision regarding Light Management above.


Sherb started auditing these guys in 2004, taking over from Daszkal Bolton LLP on Feb 13, 2004. This 8-K actually gives a reason for the switch: cost.

The Company engaged Sherb & Co., LLP ("Sherb") as its new independent accountants as of February 13, 2004 as the Company's Board of Directors determined that it would be more cost effective and efficient using the services of Sherb.

I swear I didn't cheat and look ahead to this before writing the stuff above. Daszkal Bolton had no disagreement.

Audit fees [page 29] for 2003 were $29K, for 2002 it was $19K (and that was too much???).

Audit fees [page 36] for 2004 were $29.6K, which is even larger than what Daszkal Bolton charged. But fees everywhere were going up even more. This would make sense since they had audited related fees in 2004 of $18K (none in 2003). As a check, Daszkal Bolton audited 99 Cent Stuff (sec) and the audit fees [page 11] were $55K for 2004, $51K for 2003. Audit related fees were $23K for 2004 and $21K for 2003.

The business is still going. In the latest 10-K, Sherb gave them a "going concern" qualifier.


Here's their most recent 10-K. Audit fees for 2005 were $32K paid to Sherb. Radin Glass & Co. audited 2004 for $27K. Tax fees for both years were $4K to each company. Both auditors gave unqualified opinions. Results improved in 2005 and the company had both profits and positive cash flow from operations after capex or depreciation. 2004 had profits but small negative cash flow from ops.

The CEO issued a very good note to shareholders type press release.

One question that Shareholders often ask is "how much sales and income growth will occur, and when?" Unfortunately, this is not easy to answer for a business like ours. We have gone beyond selling mainly smaller nozzle systems in the $5-$10K range, to selling large systems in the $40-$250k range as well, so having one or more of these large sales in a given quarter can have a large impact on the results, and the apparent quarter-to-quarter growth of our business. Shareholders have come to expect corporations to issue guidance on sales and income for upcoming quarters, with the implicit goal of seeing a smooth and constant growth forecast for each quarter. Yet this practice can lead to a short-term focus to "make the numbers", as opposed to a healthier longer-term focus on growing the business.

This was weird. They kept doing a registration, then withdrawing it (here) from 1998 to 2002. The first time didn't have any audit opinon. The second one had Feldman Sherb giving an unqualified opinion, which makes no sense. The company lost $10.8K in 1998 and $12.6K in 1997. They only had $3K in assets (pretty much all cash and all equity). They had NO REVENUES. Cash flow was only the $10K loss, nothing else was going on. They were claiming to be a development stage company, but I don't think that matters for a "going concern" qualification, no?

When CasinoBuilders attempted yet another registration, Sherb audited the results of 1998 and 1999. This time they added the "going concern" qualifier.


They just released their 10-K three days ago on Dec 28, 2005. The auditors are Rothstein, Kass, & Co. Audit fees were $48K in 2005, $21K in 2004.

They were the auditors in 2004 also, and 2003 and 2002 and 2001. The 2003 fee was $23K.

Ok, they dismissed Feldman Sherb on Aug 14, 2001. This caused them to be late in filing their 10-Q.

The Company is in the process of changing its independent certified
public accountants. As such, the Company hereby requests additional time to prepare its financial statements for the quarter ended June 30, 2001. Further, the Company hereby requests additional time for its new independent certified public accountants to review the Company's financial statements as required by Item 310 of Regulation S-B.

This was their first 10-Q. They had done a registration in June 2001. Their original prospectus had to be amended 1, 2, 3, final/4 times, the earlier ones were known to be preliminary.

Feldman Sherb audited the prospectus financial statements with an unqualified opinion. The assets were almost entirely construction in progress. Almost no liabilities. They had no revenues and costs of $20K. They only had $8.7K of cash and current assets. But the offering would be raising cash.

It looks to me like Feldman Sherb was found to be incompetant or unfit for some reason when it was time to do the first financial statement so the company replaced them, causing a delay in the financial statements.


The last thing we heard from these people in 2002 was that they'd be late in filing their 10-K.

The registrant cannot, without unreasonable effort and expense, file its 2002 Form 10-KSB within the prescribed time period because the registrant and its accountants are pending additional financial information necessary for finalizing its financial statements that will be included in the registrant's Form 10-KSB.

Additionally, the registrant currently has insufficient operating capital to fund completion of its Annual Report on Form 10-KSB. The Registrant is currently seeking additional financing. Accordingly, the registrant requires an extension for filing the Annual Report with the Commission.

We stand silently over the accident scene wondering, how did things get to this point? What happened?

The latest 10-Q shows a balance sheet with current ratio approaching 1/10, net losses consistently greater than revenues, but yet a strongly positive cash flow from ops. The estate of a former principal officers filed suit accelerating payment of a note due.

Let's go back to the most recent 10-K. Feldman Sherb gave the company a "going concern" qualifier.

..the Company incurred losses of approximately $5,712,000 and $3,195,000 for the year ended June 30, 2001 and for the six months ended June 30, 2000, respectively. Additionally, the Company had a working capital deficiency of approximately $1,125,000 at June 30, 2001. These conditions raise substantial doubt about the Company's ability to continue as a going concern....

In the prior year, for results of 2000, they gave an unqualified opinion. In that year, the current ratio was close to 1. But the net loss was $3.2 million. The comprehensive loss was $4.8 million, while remaining equity was only $4.4 million and total assets were $8 million. However, they almost had a positive cash flow from operations due to using common stock for services (ah, the glory days of the stock bubble!). They sold $3.1 million in preferred stock and overall they had a net increase in cash.

I suppose they can get away with this one.


An australian company filing 20-F statements. Feldman Sherb were the auditors up to 2002. A BDO auditor took over in 2003 and 2004. CityView switched to Sherb & Co, so you can't blame anything on Feldman here.

The 2002 20-F. BDO Chartered Accountants are the auditors for Australian results while Sherb & Co do the US obligations. Sherb gave them an unqualified opinion. They lost $9.3 million on $595K of revenues due to writedowns and provisions. They had lost $4 million in the prior year and $5.5 million in the year before that. The balance sheet had been ok, but deteriorated as nearly half the equity disappeared.

The 2003 20-F. BDO were the auditors. Their opinion said...

Without qualification to the opinion expressed above, attention is drawn to the following matter:

As disclosed in Note 10, the ultimate recovery of the loans amounting to
$7,952,187 from Medco Madura Pty Ltd and Medco Simenggaris Pty Ltd are dependent upon the future development and successful exploitation or possible sale of the underlying areas of interest.

In that year, they lost a lot less money (only $1 million) and things seem to have stabilized. Maybe Sherb's unqualified opinion wasn't so bad?


Most & Co are their auditors now, with a going concern qualifier in the latest 10-K. They had $3K in cash and $29K in somewhat depreciated PP&E. But they also had $63K in accrued liabilities and a $31K shareholder deficit while losing $66K for the year. They did have positive cash flow from ops, but had to pay back an officer $7.9K.

The most surprising thing is that this plane crash type situation was less than a year after going public (apparently not raising money but dumping shares on an unsuspecting public).

Sherb audited the prospectus. Was it Motley Fool who said "prospectus" is Latin for "open you mouth and close your eyes"? To Sherb's credit, they gave the opinion a "going concern" qualifier.

As discussed in Note 3 to the financial statements, the Company had been inactive for several years and restarted operations in early 2004. It has no significant revenue producing engagements which raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Here's something you don't see every day: Form RW-WD, Withdrawal of Registration Withdrawal Request. So they want to withdraw their request to withdraw their registration request.

Such Form RW referenced an incorrect registration statement number. A corrected Form RW is being filed with the Commission today.

Thankfully, the registration request that they incorrectly referenced in their withdrawal request which itself was withdrawn, was not audited by Sherb. No, they were the auditors who replaced Sherb a long time ago, probably because they were more competant than Sherb.

Here's the last 10-K audited by Sherb. Sherb gave them a "going concern" qualfier.

...the Company's need to generate cash from operations and obtain additional financing raises substantial doubt about its ability to continue as a going concern. Additionally, during April 2001, the Company expects to lose its major customer that accounts for approximately 80% of the Company's revenues. Management's plans as to these matters are discussed in Note 1.

Note 1: "Run awaaaayyyyyy!!!!"

...which means doing a reverse merger.

From what I see (and I didn't look that closely), Sherb seems ok.


Grassi, who acquired Feldman Sherb, audited the results for 2002. Feldman Sherb audited the results for 2001.


The last thing they filed was a late filing notice for their 10-K three days ago, saying they need more time to extract financial information from their overseas operations.

The prior 10-K (which was also late for unspecific reasons) was audited by Sherb & Co. with a "going concern" qualifier.

...the Company has an a accumulated deficit of $15,662,992 and has net losses and cash used in operations of $1,591,002 and $940,600, respectively, for the year ended September 30, 2004. This raises substantial doubt about its ability to continue as a going concern.

Their last 10-K was for 2001, audited by Feldman Sherb with a "going concern" qualifier.

the Company has a stockholder deficit and negative working capital of $4,313,064 at March 31, 2001, and has incurred significant recurring operating losses which raise substantial doubt about its ability to continue as a going concern without the raising of additional debt and/or equity financing to fund operations.

These guys were pathological serial acquirers.

There was an SEC investigation starting May 7, 1999 and they halted trading in the stock. At that time, Schnitzer & Kondub were the auditors. I don't see much at all in the 8-K statements about it, which seems very odd.

Feldman Sherb were the auditors for the last 10-K for 2001. They had a "going concern" qualifier.

The Company has incurred significant losses and as more fully described in Note 1Q, the Company anticipates that additional funding will be necessary to sustain the Company's operations through the fiscal year ending December 31, 2002. These conditions raise substantial doubt about the Company's ability to continue as a going
concern.

That last 10-K was amended later on. There was a big change in the equity statement starting with Dec 31, 1999. 1.2 million shares of preferred stock appears out of nowhere. Common shares decrease from 20 million to 237K. It's totally different.

Then there was a bizarre change of auditors. Feldman Sherb was dismissed on April 24, 2001. E&Y came on board. Jan 23, 2002 they dismiss E&Y and go back to Feldman Sherb. In May 2002, Grassi acquires Feldman and Sherb (accountants who had been doing the auditing) goes to Sherb & Co. The company switches to Sherb.

The CEO and CFO resigned as well as a director, then another director. And that was the last SEC filing, back in Dec 2002. But at that point, the latest 10-Q had shown a current ratio of close to 1/10 and a net loss of $13 million with $4 million assets and a shareholder deficit of $7 million.

Vermont Pure Holdings
Toilette and Douche were the auditors for the most recent 10-K. Before that, it was Grassi in for 2002 and Feldman Sherb for 2001. I'm not so concerned about anything that went from Feldman Sherb to Grassi, so I'll leave it at that.


Sherb & Co seem like cheap accountants that have been willing to OK situations that are truly horrifying. Call it the "Homer Simpson Safety Inspector Syndrome". I say: Don't trust these guys. Perhaps they screw up things more than usual, but it doesn't seem like they're particularly shady, perhaps just terribly negligent. You get what you pay for. However, they do seem to have gotten better over the last few years.

An important question to ask is: How much better is it to have Sherb & Co as an auditor vs having no auditor at all?

It seems dangerous to deal with obscure small public companies that are in financial trouble or even close to being in financial trouble. Objects in mirror can be worse than they appear, so I'd say Ben Graham's margin of safety is very important (always has been, always will be).

UPDATE mid-Feb 2006: I've seen two different people find this post based on searching for anything about Sherb and company. Take that for whatever it's worth.

UPDATE May 13, 2007: I'm not now, nor have I ever been a Canadian, eh? Now let me get back to running my shady hedge fund.

I had never heard of Optionable until about 10 minutes ago. I may look at it soon to see if it's all smoke and no fire (although that seems unlikely).

UPDATE May 13, 2007 later that day: I've looked through some details of Optionable and I must say I was surprised. I expect to post the results on Monday or later. If I owned the stock right now, I wouldn't panic.

USNU (sec), operates stereostatic radiosurgery centers, utilizing the Leksell Gamma Knife technology. This is for brain tumors and other brain malformations requiring surgery. Kansas City (1994), NYU (1997).

Revenues have held fairly steady at about $2.5 million, but there has been a decrease in the last two years (they were down for a month in 2003). Net income has been declining due to slowly increasing G&A offset somewhat by decreasing interest expense. This interest expense will go up again due to a big capex replacement. 2004 had a significantly higher net income.

CEO owns 14.5% of the common stock.

Balance sheet is ok. Current ratio is slightly better than 1. The big Gamma Knives equipment is very heavily depreciated ($1 million left out of $8 million).

We might expect net income to be around $90K on average with 7.7 million diluted shares (1.1 cents). Cash flow from ops is amazingly weak when backing out depreciation. For the last 3 years, they've provided no cash from operations if you set aside the depreciation. After buying the big monster machine upgrade, they've been losing money outright during 2005.

The stock is selling for 15 cents, which I guess makes sense based on earnings. But this seems far too capital intensive and not nearly profitable enough. If you give me $7 million, I can easily get more than $90K in free cash flow per year without buying some gigantic piece of machinery that could become obsolete or break.

Times have changed since the heyday of the industrial revolution. In the glory days, if you could create or buy a miracle machine, you'd get a tremendous return on your investment. Nowadays, you'd be better off with US Government bonds. Yep, times have changed, indeed.
not interested

USOO (sec), interstate trucking holding company. Normally uses independent agents arranging with independent truckers. Revenues have grown strongly over the years since 2000, but operating income peaked in 2002 and has dropped since then. They had a $1.7 million litigation judgement (car accident) in 2004 which destroyed the entire year's earnings. Normal earnings would be around $1.5 million. But net margins have decreased over the years. NOLs are running out so assume about $1 million in earnings in the future. Assume about 8.3 cents earnings per share.

Net margins with NOLs are around 1.2%, declining from 1.4% in 2003 and 2.2% in 2002.

Assets are essentially all AR. Current ratio is a bit over 1.
Assets $26 million. $3.6 million equity. $143 million revenues.
12,018,224 shares outstanding on Nov 9, 2005.

Cash flow from ops was low due to AR. Historically over 3 years it's a bit low, although capex has been lower than depreciation, so free cash flow was probably fairly close to earnings.

Q3 2005: Geez, AR just keeps climbing. PP&E is almost entirely depreciated. Equity is up by $3.5 million.

Revenues are up in 2005 by about 18%. It looks like they got that $1.7 million litigation payment back. Taxes are starting to kick in. Earnings for 9 months (without the $1.7 million) are about $2 million or about 16.5 cents per share.

Cash flow from ops ($1.2 million) in 2005 is terrible due to AR again! They had to borrow $1.1 million during 2005 because of it.

The results of 2005 make it difficult to value the stock and very unlikely to be selling cheap. I'm going to assume about 9 cents earnings and figure the stock is worth $1.35. It's selling for... drum roll... $1.35 on the ask. I swear I don't cheat when I do that.
worth following

UMCI (sec), medical billing and collecting. Revenues have increased every year since 2000. 8.2% net margins (normally around 7.5%). Net income has done well, but has scaled slower than revenues. Net income was $338K, but has been closer to $260K in past years.

58% of revenue was from 3 customers (hospitals), this percentage has been dropping over the years. The number 3 customer just dropped their relationship to do it in-house starting April 15, 2005. They lost a key customer in 2003 and another one in 2002.

CEO owns 9.9% of the stock. Mercury Asset Management owns 26.3% of the stock.

Assets are mostly AR, PP&E, and cash. Current ratio is 2. About 1/2 equity. Some of the AR is factored.

31 million shares. At least 2.3 million warrants and options. Assume about 34 million totally diluted shares (no warrants/options issued in 2004). Earned about 10 cents in 2004, but generally only about 7.6 cents in years prior.

Cash flow from ops is consistently lower than earnings due to AR, prepaid stuff, factor reserve, PEDC incentives. Real free cash flow average for the last 3 years is probably around $100K or less. So real free cash flow is perhaps 1/3 of a cent.

Looking at Q3 2005:
Share count is the same. Current assets dropped, so did current liabilities. Current ratio about the same. Equity dropped to $818K from $924K (treasury stock is unchanged). Net loss for quarter and for the year due to lower revenues (probably that big lost customer). Free cash flow actually matches earnings in 2005, which is good (had been crappy) and capex is close to depreciation.

One customer is 80% of AR! And that customer has cash flow problems! But they are supposedly improving. Another customer had 7% of AR and that was all written off.

The stock is probably worth at least 5 cents. It's selling for 4.5 cents.
worth following

UNFY (sec), process automation software for insurance and transportation. No customer concentration. Revenues have declined slightly every year since 2001. Every year the bottom line gets worse. They started losing money in 2004 and it got worse in 2005. And share count has been dramatically increasing.

Assets are mostly cash, AR, and goodwill. Current ratio slightly better than 1. Not much equity. Free cash flow is a bit worse than earnings.

Q2 ending Halloween 2005: Lost money in Q1, barely above break-even in Q2. Cash flow from ops is terrible due to deferred revenue, other accrued liabilities, and AP.

This business "doesn't have enough freeboard" to use a sailing term.
not interested

yahoo, sec, website

Ah yes, Level 3. The disappointment of many investors who wait patiently quarter after quarter for the eventual end of the fiber glut and hopefully the final death of the zombie telecoms before that. I see they've been trying to replace debt due in 2008 with notes due in 2010 to buy two more years of time. They got $690 million in early participation.

Other big news is that they bought WilTel for $370 million in cash, but a $100 million cash obligation, plus 115 million newly minted shares of Level 3, with some wiggle room to change the cash/stock ratio.

But the problem can be seen in their latest Q3 report. Communications revenue is still dropping. They lost $204 million in the quarter. They still have $893 million in cash and securities plus $408 million in long term securities (no idea what that is at this time). Cash flow from operations lost $30 million in 9 months and capex is another $241 million (9 months). Net borrowing produced $813 million.

They have about $1.3 billion in debt due in 2008. They've already pushed over half of that forward to 2010 (these guys have always been good at tap dancing to stay alive).
continue following

Share count: 7,874,539

Balance Sheet
Cash decreased almost in half
AR held steady
Inventories went up moderately
Other current assets increased

Current ratio is 0.79
Shareholder deficit is $6.5 million
Total assets are $16.9 million

Income Statement
Sales decreased to $6.6 million from $8.8 million

The decrease [in sales] resulted primarily from a sales lag on a product enhancement introduced in late 2004 and a shift of $500[K] from the first quarter to the second quarter of 2005 as the result of a particular government contract put on hold. This order was reinstated in May 2005.

Gross margins at 43.0% (down from 44.8%, due to sales mix)
SG&A down (but mostly due to a $205K decrease in provision for doubtful accounts due to specific collections made)
There was a $129K increase in compensation.
R&D up by 17% due to new staff at the Atlanta location.

Small loss from operations, greater than the loss in Q1 2004.
Gain on sale of abandoned technology (no details) larger than the operational loss.
Interest payments were enough to make net earnings negative (but were down due to decrease in interest rate to Harris, the patent guys).

Net loss of ($237K) vs loss of ($67K) in Q1 2004.
Dividends to Preferred Series B and C shareholders: $159K

Net loss to common shareholders: ($363K) vs ($220K) in Q1 2004.
also small foreign currency loss of $24K

Cash Flow Statement
Cash flow from ops was ($424K) no details
Cash flow from investing was $353K (which means capex was about $142K)
Paid down $605K of [related party] debt.

Notes
1.7 million anti-dilutive options (apparently this is all of them)
1.2 million anti-dilutive warrants (apparently this is all of them)
So assume a fully diluted share count of 10.8 million shares.

All categories of inventory are up.

Credit facility amended, matures Mar 31, 2006, prime plus 2% or 3% depending on results, secured by all assets. Limit is based on formulas. Limit was now only $95K (had been $5.5 million).

Still in arrears on the preferred stock (B and C).
Still in arrears on note payable to Tri-Link of $1,080.


Share count: unchanged from Q1

Balance Sheet
Cash is way up
AR is also up
Inventories up a bit
Other current assets up a bit

Current ratio is down to 0.63
Shareholder deficit is down to ($5.4 million)
Total assets are $20 million

Income Statement
Revenues are actually slightly higher than the prior year... but this is because a lot of revenue from Q1 was pushed into Q2.

The three month increase is primarily the result of a shift in customer demands from the first quarter to the second quarter. The decrease in sales for the six months ending June 30, 2005 is primarily attributable to the ongoing downturn in the Intelligent Systems Management market as customers switch from the Time Division Multiplexing technology to the Internet Protocol technology.

The Q3 report shows more of this same thing. This is a company fighting against what is probably a long term trend. TCP/IP is not something new, it's a long term trend. I was hoping to find some business operations within this company that would benefit greatly from ongoing trends, but I don't see it. Maybe it will emerge in the future, so it's worth following. But for now, I'm stopping.
worth following

Teltronics (website, sec) is a telecom equipment maker [pause to let the horror of that sink in] whose stock price jumped but is now deflating as telecom stocks tend to do. The ask is 48 cents right now.

10-K for the period ending Dec 31, 2004
Incorporated in Delaware. Offices in Sarasota, FL.
8,636,539 shares of stock as of Nov 14, 2005. 803K options outstanding. 870K more can be issued.
Executives and Directors own 40.7% of the stock. The largest shareholder is actually Sr VP of Business Development and not the CEO.

Three reporting segments: Teltronics, Teltronics Ltd of UK ("UK"), and Mexico.

TELC has defaulted on Note Payable to Tri-Link Technologies (a composite products mfger) going back to Nov 2003! Submitted to arbitration. Tri-Link is demanding $426K and 1.35 million shares of TELC stock. Teltronics issued a $750K letter of credit to Tri-Link and postponed arbitration until Sept 2005.

A mezzanine financier sold 12,625 shares of TELC preferred B stock (with unconditional right to elect a director at any time, which Finova didn't exercize) to FGC Holdings (actually just Peter Friedmann) and Teltronics refused to register the transfer (legal complaint), arguing that TELC already has 5 members on the board of directors and can't make any changes until the shareholders' meeting. In 2004 (before TELC was informed about the transfer), TELC mailed out a proxy nominating 5 directors, but didn't mention anything about the right of Series B stockholders. Looks like Teltronics management lost.

TELC is looking for additional capital.

In the 1980s, Teltronics created "Intelligent Systems Management", which was a network management system for voice. Now it's been adapted for voice and data. ISM consists of remote agents and an MIS (this is not rocket science, it's very much like SNMP which is probably fairly mature at this point). TELC "Site Event Buffer-II" has been working for 10 years, 100,000 units installed. Q4 2002 FCS of a new update, Site Event Buffer Enterprise Agent (added SNMP). Recently added NET-PATH. The big competitor is Ion Network, Inc. which is a public company, IONN, on OTC BB (sec).

The customers are: Verizon, NextiraOne (Williams), Sprint, MCI, BellSouth. TELT maintains dedicated sales force for these major customers. About a 1 year sales cycle more or less for product integration.

Also, created a digital switching system, 20-20 Switching Systems (June 2000 acquisition). A variant is used by FAA in ground-air, ground-ground communications. Homologated in 60 countries. Supports SS7 and ISDN signalling.

Sales are strong outside the US.

VoIP softswitch switching system (Linux based, just like the computer I'm using to type this) for medium-size enterprises: both legacy PSTN interface and IP network interface. I worked in product development in this area about 15 years ago. I believe this is a bad business for these people to be in due to eventual consolidation and the inevitable driving down of margins.

Teltronics supports the usual PBX type features plus some other fancy stuff.

Here's the good stuff: Teltronics has a complete E911 solution for VoIP systems, including businesses with PBXs. Installations in over 900 PSAPs around the US. Based on the recent FCC ruling requiring E911 for VoIP, this is important, but only if they drive it aggressively in the marketplace to avoid getting overtaken by others.

They have a sufficient number of bargaining chips, I mean patents, in the digital switching area. They also have 5 US patents for Emergency 911 call station identification.

Also OmniWorks (acquired with 20-20) for telemarketers. Seems well featured, but this whole area is of dubious customer value, in my opinion. Maybe it will take-off worldwide in place like India/China? For now, it has zero value.

Manufacturing in Sarasota, FL. R&D expenses have slowly decreased from 2002 (downsizing). 245 employees.

Ewen R. Cameron: CEO since 1993. 32 years of industry experience. SRH plc (Euro telecom, can't find anything about it). Owns 9.7% of the common stock.

Russel R. Lee III: CFO since 2004. Formerly CFO of SinoFresh HealthCare, resperatory business. Also CFO of Gencor Industries (GNCI, sec). Joined Gencor in 1990. But there were accounting irregularities in 1999 in the UK subsidiary. Russel R. Lee III was treasurer at that point.

Peter G. Tuckerman, VP Product Management. Joined in 1977. Owns 1% of the common stock.

Robert B. Ramey: VP Manufacturing. Owns 2% of the common stock.

Compensation is not insanely high.

Norman R. Dobiesz owns 19.4% of the business, but has controlling voting interest via 100% of the Preferred Series A stock. Sr. VP of Business Development.

Directors and executives own 40.7% of the business.

Big customers:

• New York City Dept of Education: 14% (was 17% and 23% in prior years)
• IBM: 12% (was 14% and 17% in prior years)
• Nielsen Media Research: 10% (was 13% in prior year)

Also the NY Dept of Corrections and Federal Bureau of Prisons.

Revenue:
2001: $64 million
2002: $54 million
2003: $47 million
2004: $46 million
Based on the first 9 months, 2005 is looking to be down to $40 million. Gross profit is running about the same as 2004. Operational income in 9 months of 2005 is $919K vs $1.2 million. But non-operating gains is way up and interest costs are down. But I'm getting ahead of myself here.

The decrease in net sales for the year ended December 31, 2004 was primarily the results of; (1) the lingering slow down of the domestic telecommunications market which resulted in Teltronics net sales decreasing by $2.6 million, and (2) an increase of $1.8 million in net sales from our newly acquired UK Subsidiary. The decrease in net sales for the year ended December 31, 2003 was primarily attributable to a slowdown in the telecommunications market as evidenced by a decrease in net sales to our four largest customers of approximately $4.6 million or 16.6%.

In 2004, gross margins were about 40%, up from 39% in 2003, 36% in 2002.

Operating expenses were 37.6% of sales in 2004 vs 42.4% in 2003 and 41.5% in 2002.

Operating income:
2001: ($4.6 million)
2002: ($3.0 million)
2003: ($1.6 million)
2004: $951K
So far in 2005, it's $919K for 9 months (but it was a $226K LOSS in most recent quarter)

They would have a net loss in 2004 if not for a $1.2 million gain on sale of patents.

The gain on sale of patents of $1.2 million was related to the sale of 20-20™ patents previously acquired from Harris Corporation in 2000 that were sold back to Harris in August 2004 in exchange for past due principal and interest on the Company's debt owed to Harris.

Share count:
2001: 4.9 million
2002: 5.5 million
2003: 7.3 million
2004: 7.8 million
November 14, 2005: 8.6 million

Revenue recognition is normal, but some of the revenue is based on turnkey contracts (revenue recognized as customer accepts deliverables). For customers with only final acceptance criteria, revenue is recognized under either completed contract method or percentage-of-completion method depending on the right to progress payments and to approve services performed to-date based on contract requirements.

Maintenance revenue is recognized ratably over the maintenance period. The unrecognized part is deferred revenue. Costs are recognized on the earlier of 1) when costs are incurred, 2) when the related revenue is recognized.

Multi-deliverable revenue (product, installation, and training) is based on EITF 00-21 (also here, but this is better). The relevant determination is whether the stand-alone deliverables have value to the customer (and none are software). There must be some rational method for determining stand-alone value. Also, the [required] right of return of various parts puts a limit on how much revenue can be recognized at the intermediate milestones. Based on what I read, this doesn't seem to be a great fit for EITF 00-21 or SOP 81-1. But I'm not sure, it's fairly complicated.

The audit opinion has a going concern qualifier.

The balance sheet has a $6 million shareholder deficit on $16 million in assets (reality is probably closer to $15 million in assets and an $7 million deficit). The current ratio is less than 1.

Net income (without the gain on sale of patents) would be ($688K) loss. Plus there's a required $624K dividends on preferred stock.

Cash flow from ops is $1.6 million (with $2 million depreciation). Capex was $255K. Operations has pretty much provided cash every year back to 2002. Much of the preferred dividends were not paid ($469K in 2004, $401K in 2003).

Capitalized software is depreciated over 5 years.

Warranties are 3 months to 18 months depending on product. Payments made:
2002: $339K
2003: $137K
2004: $135K
Balance at the end of 2004 was $192K.

AR allowance was $290K (of $5.8 million) in 2004, $266K (of $3.8 million) in 2003. It's not surprising that the percentage dropped in 2004.

Costs and estimated earnings table for 2004 looks sane. The numbers are fairly low. 2003 looks ok from what I can tell.

Inventory reserves were $880K on $3.9 million of overall inventory. The writeoffs have been fairly large in prior years, but never significantly more than the reserve balance at the beginning of the year (was slightly more in 2002). Writeoffs have been in the $1 million range.

$18 million in PP&E, depreciated down to $3.7 million.

Intangibles:
customer list: $202K (5 year life)
patents: $178K (14.6 year life) (sold $42K book value of patents for a $2.1 million gain)
customer contracts and relationships: $432K (7 years)
Amortization: $329K

Maturities:
due 2005: $4.8 million
due 2006: $7.8 million
due 2007: $67K
due 2008: $8K

They've been fairly pathetic in paying off debt, swapping a lot of stuff for equity/warrants pushing stuff out into the future.

Preferred Series A stock: owned by director and Sr VP of Business Development, giving voting control of the business. Limited rights of transfer.

Preferred Series B stock: $16 per share annual dividend increasing to $18 per share in 2004 and $20 per share in 2005. The 12,625 shares can be converted to 721K shares of common. Company can redeem at face value plus accrued unpaid dividends. Total of $170K unpaid in arrears.

Preferred Series C convertable: $10 per share annual dividend, increasing to $20 in 2007. The 40K shares can be converted to 1.45 million shares of common. Total of $700K unpaid in arrears.

Common stock: 7,874,539 shares on March 28, 2005

Warrants: 1.2 million shares at $1.00.

Options: 1.6 million at 88 cents with 6.4 years left on ave.

I would assume some serious dilution in the future of about 2 million shares.

NOLs of $7.5 million remaining.

During 2004, an entity controlled by a Director loaned the company $350K (short term). Yeah, I saw that in cash flows from financing. Later on, a director loaned the company $750K at 15% interest.

Almost all of the revenues are from Teltronics, with a small amount from the "UK" subsidiary and even less from the Mexico subsidiary. Other stuff seems allocated rationally (finance, assets, capex, etc).

The UK and Mexico subsidiaries make a respectable profit.

E&Y auditors. 2003: $231K audit fees. $7.6K other fees.
Kirkland, Russ, Murphy & Tapp, P.A. were the independent public accountants for 2004. $90K fee. Clearwater, FL. Reptron Electronics (RPRN, sec) just selected them. They don't have any important legal proceedings in their 10-K.

This one deserves its own entry:

UFSM (sec), 585 franchised restaurants and 40 weight loss clinics in the US. The only one I recognize is Piccadilly Restaurants and these guys only own 1% of it.

• "Central Park" 100%
  
• "Obee's Soup & Subs" 100% (recent acquisition, see below)
  
• "New York Burrito" 59%
• "Flamers" 25%
• "Jreck Subs" 20%
• "Li'l Dino" 20%
• "Sobik's Subs" 19%
• "Mountain Mike's" 18%
• "Weight Loss Forever" 18%
• "Uncle Al's Famous Hot Dogs" 13%
• "SeaWest" 10%
• "Piccadilly's" 1%

How about this for the fastest loss of money. They bought Obee's on June 16, 2004 for $610K plus $912K of assumed liabilities resulting in $1.3 million in goodwill. I might consider buying Nathan's Hot Dogs or some other rock solid brand for that kind of goodwill ratio, but who the hell is Obee's? They're a sub shop. Not Subway, not Quizno's. Obee's own website says "No Experience Necessary" to open a franchise. Their "About Us" web page has nothing but an "under construction" animated gif. So does the store locator. What a joke. Ok anyway, so how long did it take for all that goodwill to become worthless?


That's right, fourteen days. The 10-K says, "The goodwill associated with this transaction was deemed to be impaired and was expensed during the quarter ended June 30, 2004."

How could anyone invest in a business where they pay $610,377 to buy a business for $1,319,154 more than its [negative] book value only to declare the value as worthless 14 days later?
not interested

UCPJ (sec), "hookah" diving, yacht based SCUBA air compressor and Nitrox generation systems. Brownie's Third Lung, Brownie's Tankfill (fill the SCUBA tanks right onboard the boat), Brownie's Public Safety (floatation devices, rescue stuff).

2004: Assets are mostly inventory. Very weak balance sheet. Large shareholder deficit nearly twice the size of assets. Revenues increased in 2004. 32% gross margins. Large SG&A. Very large loss. Interest expense is horrible. Cash flow is about what I'd expect.

Q3 2005: Current ratio deteriorated even more. Balance sheet still horrifying. Still losing money.
not interested

UDHI (sec), one of those companies that goes through all sorts of transformations over a short number of years trying to figure out what to do. They ended up acquiring "all of the assets (except the patient list) of George D. Green D.D.S." for $1 million promissory note over 10 years with 5% interest. Dental services for union members.

Green owns 60.6% of the company, yet grants himself huge quantities of stock options (1.7 million shares with about 30 million shares outstanding). He also holds 1 million shares of preferred stock with 10-to-1 voting rights. Salary of over $500K in 2002 and 2003 (when revenues were only $2 million), dropped down to $118K in 2004 (you just know the balance sheet is going to be crap and he had to stop bleeding the company, probably forced by a bank).

Balance sheet is very weak. Current ratio is less than 1/2. The company has notes payable to a bank, which is probably why Green's salary dropped. Get this: $1.4 million deficit with only $447K assets, which are mostly AR.

Revenues are about $2 million. Salaries $692K, but G&A is over $1 million. Net income of $5K. Cash flow from ops is $12K and capex is $12K.

Q3 2005: Some cash and PP&E appeared on the balance sheet. Assets jumped up to $1 million. Current ratio is 1/2. Deficit is $1.3 million. Lost money in 2005. Cash flow statement looks terrible. Ok, I give up, what is the stock price? 9 cents on 31 million shares. It's way overpriced.

Dr. Green commented, "The loss is attributed to some one time costs associated with the Dental Visions acquisition and some other one time costs associated with the issuance of our convertible debentures and $5.0 million Equity Line of Credit funding which took place during the last quarter." Dr. Green added, "The funding in question will play a large part in helping us to prepare the Company for expansion on a national level. We aim to begin with the communications industry and then plan to propose our business model to other unions on a national basis."

and also...

UDHI has been providing a Dental Network for the Communications Workers of America (CWA) Local Unions in Florida since UDHI's inception and has expanded the concept and Dental Network throughout District 3

This makes no sense to me. Why have special dentists for the union? That's just asking for graft, inefficiencies, corruption, and who knows what else?
not interested

How about a $286.00 pair of jeans? or maybe a $359.00 pair of corduroys?


True Religion brand jeans, TRLG (sec, website), high fashion jeans and other apparel. They sell to upscale department stores like Neiman Marcus and Nordstrom, also lots of boutique stores. Also in Japan, UK, and Ireland.

They factored some receivables. Balance sheet is ok. 2004 revenues were 10 times more than 2003. High margins. Earned 20 cents per diluted share in 2004. Earned 33 cents per diluted share in Q3 2005, but the share count is going up fast. Only about half the earnings show up in cash flow. More factoring of receivables.

Fast forward to Q3 2005: There's now a huge amount of cash on the balance sheet. Receivables and inventories are up. Q3 revenues are 5 times prior year. Same high margins.

They moved to NASDAQ. The stock price is $16.29. The stock has wide visibility at this point. This just seems like too much of a fad for me. I invested in Hot Topic years ago because it was obvious they were cheap, because they had a durable brand, because they had a superb marketing machine, and they were faster than anyone else at getting new ideas into the stores.

Right now, as far as I can tell, this jeans business is a one-trick fashion pony. They might be more than that, I have no idea.

...and there must be something wrong with their website: the jean sizes only go up to 27. Oh wait, no, the men's sizes go all the way up to 38.

worth following, if only for the photos

UAMA (sec), Voice over IP mobile phone. 9 employees. Assets are almost entirely telecom equipment. NO CASH. Low liabilities, mostly equity. New operations in 2004, expenses are 30% higher than revenues. Issued 26 million shares of stock for equipment (total of 44 million shares afterward). Cash flow from ops is slightly less than zero. The equity is now gone, $896K deficit.

Q3 2005: $241K cash. $293K loan to some jackass director. Losing money badly, very negative cash flow.
not interested

UCIA (sec), non-medical management of extended-hour "doc-in-the-box" medical clinics in South Carolina and Knoxville TN. Revenues have increased every year since 2001 (they went bankrupt in 2001). Lost money in 2001, but have made increasing amounts of money each year since (14 cents, 25 cents, 33 cents, 76 cents in 2005 diluted). Blue Cross of SC owns 69% of the stock. Not much stock option dilution. Balance sheet is strong, lots of cash. Cash flow from ops is weak in 2005 due to AR and deferred taxes. Free cash flow tends to be around $2 million (was only $1.3 million in 2005). So about 13 cents of free cash flow fully diluted in 2005 (closer to 20 cents in prior years). So the stock might be worth between $2 and $3. It's selling for $3.40.
worth following

UCNN (sec), telecom business: call mgmt, long distance, toll-free, data. Lots of acquisitions. Balance sheet is ok. Revenues increasing each year. Operational income is negative in 2004 (positive in 2003 and 2002). Cash flow from ops is worse.

Balance sheet deteriorates during 2005. They continue to lose money. Cash flow from ops isn't quite as bad, but...
not interested

WCSTF (sec), Canadian auto industry business (exhaust manifolds, stuff like that) that I looked at years ago, but haven't looked at any details lately. They just went dark this year. Typically they earn over C$4.00 per share (actually around US$3.50), but last year they earned C$2.67 (US$2.32). They're trading for $17.

But I have a real problem with this company. They're always making acquisitions and those acquisitions don't have a good track record. The long term stock price reflects the lack of any sustained business progress. What this company should do is stick to what it does well, and pay the excess cash back to shareholders.
not interested

ALGOF (sec), Ontario steel company. Historically crappy.
not interested

AMHI (sec), recent bankruptcy. Texas health clinics (2 medical, 9 chiropractor). Losing money.
not interested

AMLH (sec), travel services, develops "luxury vacation home ownership and destination properties". Mentioned the word synergies (blech). Serial acquirer. Absolutely horrible balance sheet.
not interested

AMLJ (sec), RF and microwave power amplifiers, mostly for defense work. 45% gross margins, 10.4% operating margins, 10.8% net margins (tax benefit). Prior year was even better. Balance sheet is rock solid, but PP&E is almost entirely depreciated (fast schedule). Earned $935K ($1 million prior year). 10 million shares, 2 million options (at $1... geez, is this some finance professor's exam question?). Issued 2 million shares for acquisition (got $1 million cash along with it). Free cash flow is much less than earnings due to AR, was almost OK in prior year.

Q2 2005: Earned $507K in 6 months (half in Q1, half in Q2). Cash flow from ops is good, but capex is high (paid for with line of credit). Low taxes.

Stock might be worth 80 cents. Selling for $1.17.
worth following

AMLS (sec), Chinese reverse merger, Hubei Pharm Co., but then acquired licenses and another Chinese pharm, then sold off some part of the business.

Looking at Q1 05, we're talking about a very small business. Total assets are $364K, $220K of which are an investment in an offsheet subsidiary. Current ratio is less than 1/3... oops, they've discontinued operations.
not interested

AMRU (sec), video on demand streaming over broadband channels in Singapore (reverse merger). 7 full-time employees, all in Singapore. Balance sheet is strong, but assets are mostly licenses. $4 million revenue in 2004, but only $931K gross margin. $512K net income. 27 million shares, unknown options (doesn't seem to be much, if any). Lots of shares issued for cash and services. CEO owns 21% of the business. 1.9 cents per share earned in 2004. Cash flow is terrible and horribly suspect due to "acquisition of license in exchange for account receivable" in both 2004 and 2003 of over $1 million. Plus big capex in 2004. This all funded by shares issued for cash.

Jump ahead to Q3 2005: Lots of cash showed up on the balance sheet (I'll bet it's not from operations). PP&E jumped from $520K to $3.7 million. License assets (net) jumped from $2.4 million to $7.6 million. Revenues jumped due to "Digit and on-line games" of $8.4 million (which is now the vast majority of revenues). But gross margins are only 14%. SG&A went up... they made less in 2005 than 2004: $64K net income in 9 months (vs $334K). It was a loss in Q3 proper. Share count is now 30 million. Cash flow from ops is essentially zero. The acquisition of equipment ($3.3 million) and licenses ($5.3 million) are very large. They raised $10 million from stock, so I was right. They have 5 customers.

Licensing and content syndication revenue is recognized when the license period begins, and the contents are available for exploitation by customer, pursuant to the terms of the license agreement.

not interested

AMST (sec), rock quarries. Both dimensional stone for architecture and construction stone for road base and back fill. They produce "Berea Sandstone" which has been used in: Bill Gates' house, The Hancock Building in Boston, Parliament Building in Ottawa, Buffalo City Hall, Oberlin College campus, NHL Hall of Fame, UP, and some others (these range from 1885 to 2004). Their own headquarters building was built in 1900. Balance sheet is not far from rock solid, but it was somewhat weak in 2003, 2002, 2001. 28% gross margins. 9% operating margins (operating loss in 2003, 2002, 2001, 1999). Earned $153K in 2004 (lost a bit more in 2003). 2 million shares. 130K options. Earned 7 cents in 2004. Free cash flow is weak due to payables and accrued liability changes. For whatever reason, the stock is selling for $9.00. This is an interesting business, but unfortunately I doubt it will ever be an investment possibility.
not interested

sec website yahoo pinksheets

Toroltel makes precision magnetic components: transformers, inductors, reactors, etc. These typically go into aircraft navigation equipment, medical equipment, avionics, missle guidance, and other applications. They've focused on this one area and eliminated other ones. 36% gross margins. 3.6% net margins. Lost a huge amount of money in 2004. Lost a small amount in 2005.

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...
Fiscal year ending April 30, 2005. Incorporated in Missouri. Offices in Olathe Kansas. 5,111,590 shares of stock on July 22, 2005.

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).

In 2005:

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 assets
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....

not interested

Once again, uranium spot prices are up, hitting US$36.25. And Strathmore prices are up slightly, but not as much as Cameco. There's USEC which was the IPO of US national stockpiles of uranium, which I can't speak for, but they reported good results, of course. Denison Mines hasn't done too well.

Time for a short break. In Chapter 3 of uncopyrighted Voyage of the Beagle, we find Charles Darwin off the eastern coast of South America.

In our passage to the Plata, we saw nothing particular, excepting on one day a great shoal of porpoises, many hundreds in number. The whole sea was in places furrowed by them; and a most extraordinary spectacle was presented, as hundreds, proceeding together by jumps, in which their whole bodies were exposed, thus cut the water. When the ship was running nine knots an hour, these animals could cross and recross the bows with the greatest of ease, and then dash away right ahead. As soon as we entered the estuary of the Plata, the weather was very unsettled. One dark night we were surrounded by numerous seals and penguins, which made such strange noises, that the officer on watch reported he could hear the cattle bellowing on shore. On a second night we witnessed a splendid scene of natural fireworks; the mast-head and yard-arm-ends shone with St. Elmo's light; and the form of the vane could almost be traced, as if it had been rubbed with phosphorus. The sea was so highly luminous, that the tracks of the penguins were marked by a fiery wake, and the darkness of the sky was momentarily illuminated by the most vivid lightning.

When within the mouth of the river, I was interested by observing how slowly the waters of the sea and river mixed. The latter, muddy and discoloured, from its less specific gravity, floated on the surface of the salt water. This was curiously exhibited in the wake of the vessel, where a line of blue water was seen mingling in little eddies, with the adjoining fluid.

And I find this interesting:

In every house I was asked to show the compass, and by its aid, together with a map, to point out the direction of various places. It excited the liveliest admiration that I, a perfect stranger, should know the road (for direction and road are synonymous in this open country) to places where I had never been. At one house a young woman, who was ill in bed, sent to entreat me to come and show her the compass. If their surprise was great, mine was greater, to find such ignorance among people who possessed their thousands of cattle, and "estancias" of great extent. It can only be accounted for by the circumstance that this retired part of the country is seldom visited by foreigners. I was asked whether the earth or sun moved; whether it was hotter or colder to the north; where Spain was, and many other such questions. The greater number of the inhabitants had an indistinct idea that England, London, and North America, were different names for the same place; but the better informed well knew that London and North America were separate countries close together, and that England was a large town in London!

Keep in mind these were not indigenous people, but from European civilization. People will one day look on everyone from our era (at least those who grew up without the Internet) as amazingly ignorant in many ways.

During our stay at Maldonado I collected several quadrupeds, eighty kinds of birds, and many reptiles, including nine species of snakes. Of the indigenous mammalia, the only one now left of any size, which is common, is the Cervus campestris. This deer is exceedingly abundant, often in small herds, throughout the countries bordering the Plata and in Northern Patagonia. If a person crawling close along the ground, slowly advances towards a herd, the deer frequently, out of curiosity, approach to reconnoitre him. I have by this means, killed from one spot, three out of the same herd. Although so tame and inquisitive, yet when approached on horseback, they are exceedingly wary. In this country nobody goes on foot, and the deer knows man as its enemy only when he is mounted and armed with the bolas. At Bahia Blanca, a recent establishment in Northern Patagonia, I was surprised to find how little the deer cared for the noise of a gun: one day I fired ten times from within eighty yards at one animal; and it was much more startled at the ball cutting up the ground than at the report of the rifle. My powder being exhausted, I was obliged to get up (to my shame as a sportsman be it spoken, though well able to kill birds on the wing) and halloo till the deer ran away.

Darwin then goes on to describe a large number of Patagonian animals in amazing detail.

And then there are fulgurites:

In a broad band of sand-hillocks which separate the Laguna del Potrero from the shores of the Plata, at the distance of a few miles from Maldonado, I found a group of those vitrified, siliceous tubes, which are formed by lightning entering loose sand. These tubes resemble in every particular those from Drigg in Cumberland, described in the Geological Transactions. [10] The sand-hillocks of Maldonado not being protected by vegetation, are constantly changing their position. From this cause the tubes projected above the surface, and numerous fragments lying near, showed that they had formerly been buried to a greater depth. Four sets entered the sand perpendicularly: by working with my hands I traced one of them two feet deep.... A small fragment examined under the microscope appeared, from the number of minute entangled air or perhaps steam bubbles, like an assay fused before the blowpipe. The sand is entirely, or in greater part, siliceous; but some points are of a black colour, and from their glossy surface possess a metallic lustre. The thickness of the wall of the tube varies from a thirtieth to a twentieth of an inch, and occasionally even equals a tenth. On the outside the grains of sand are rounded, and have a slightly glazed appearance: I could not distinguish any signs of crystallization. In a similar manner to that described in the Geological Transactions, the tubes are generally compressed, and have deep longitudinal furrows, so as closely to resemble a shrivelled vegetable stalk, or the bark of the elm or cork tree. Their circumference is about two inches, but in some fragments, which are cylindrical and without any furrows, it is as much as four inches. The compression from the surrounding loose sand, acting while the tube was still softened from the effects of the intense heat, has evidently caused the creases or furrows. Judging from the uncompressed fragments, the measure or bore of the lightning (if such a term may be used) must have been about one inch and a quarter. At Paris, M. Hachette and M. Beudant [11] succeeded in making tubes, in most respects similar to these fulgurites, by passing very strong shocks of galvanism through finely-powdered glass: when salt was added, so as to increase its fusibility, the tubes were larger in every dimension....

[10] Geolog. Transact. vol. ii. p. 528. In the Philosoph. Transact. (1790, p. 294) Dr. Priestly has described some imperfect siliceous tubes and a melted pebble of quartz, found in digging into the ground, under a tree, where a man had been killed by lightning.

[11] Annals de Chimie et de Physique, tom. xxxvii. p. 319.

If Darwin was alive today, would he be able to get published in any academic journals or would his methods be considered too subjective and sentimental?

Of course you can't be a scientific pioneer without considering a lot of hypotheses that turn out to be wrong:

I am inclined to suspect that thunderstorms are very common near the mouths of great rivers. Is it not possible that the mixture of large bodies of fresh and salt water may disturb the electrical equilibrium?

The mouths of great rivers are often in regions with great rainfall and the weather of those regions often include lots of thunderstorms.

ADGR (sec), UK aluminum extrusions and manufactured parts, several subsidiaries. Assets are mostly AR, PP&E, and inventories. Extremely weak balance sheet, negative equity. Losing money.
not interested

ADSO (sec), no operations in the 10-K (had gone bankrupt). Acquired Tecknolaser in Jan 05.
not interested

ADY (already covered)

AEDU (sec), K-12, vocational, junior and community college educational software. Executives and directors own about 20% of the business. Assets are capitalized software and AR. PP&E almost totally depreciated. Balance sheet is ok. Losing money on increasing revenues due to even greater increasing SG&A. $700K positive free cash flow due to depreciation. 14 million shares. 3.6 million options. 0.5 million options remaining to be issued, so assume 18 million shares totally diluted. So perhaps 3 cents of real free cash flow in 2004.

Q3 2005: made a tiny profit in Q3, but a loss for the year so far. Only about $250K free cash flow so far this year. I get the sense from the numbers that this is a crappy "cigar butt" company. After looking at hundreds of companies, you start to see patterns. The stock is selling for 62 cents, so the market already knows what it's worth.
not intrested

AFPC (sec), "national health-care savings organization". They don't sell insurance. Looks like it's a collective bargaining system that tries to get group discounts. Assets are 2/3 cash, 1/3 AR. But the current ratio is terrible. Liabilities are nearly three times the assets.
not interested

AGIS (sec), customer relationship management (web, phone, help desk, multilingual). Mostly AT&T, Qwest, Trilegiant, Amex, and Cablevision. Revenues declined in 2004. They've had operating losses every year, the latest quarter, and the first 9 months of 2005.
not interested

AHOM (sec), another home respiratory business, mostly in places people move away from rather than into. Revenues have been fairly steady over the years. Operating loss in 2000, less of a loss in 2001, and profits in the next years. Huge cumulative effect of accounting principle loss in 2002 when equity fell into a black hole where it's still climbing the long way back out.

The largest asset is goodwill which is about half of all assets. The other half is PP&E and AR. The balance sheet ugly. $251 million long term debt and net income is $13 million. This seems to be a very capital intensive business. Net income is $13 million, cash flow from ops is $33 million, capex is $27 million and this pattern repeats in prior years. They paid down $11 million of the debt in 2004, but that's not much.
not interested

WMFG (sec), reverse merger, air conditioners for cars. They take engineering specs and cost reduce them, farming at least some of the business out to Chinese contractors. Assets are mostly AR. Balance sheet is ok. 37% gross margins. 11% operating margins. $521K net income. Cash flow from ops is weak for 2 years in a row. 40% of revenues are from 3 customers. 30 million shares. Potentially 4.5 million options (no idea how many are outstanding). Earned 1.7 cents per undiluted share in 2004.

Q3 2005: earned $205K in the quarter. 1 cent per undiluted share. Only earned $291K for the whole 9 months. Cash flow from ops is negative due to AR and inventories. The stock is selling for about 50 cents.

CEO Jimmy Wang owns 81% of the stock. Showstopper.
not interested

WPEC (sec), backhoes, excavators, crawlers, etc. rental. Mostly from Case manufacturer. Washington, Oregon, Northern Calif, Alaska.

Revenues have been somewhat steady over the years. 12% gross margins. Lost money in 2001 and 2002, but made money after that. 10 million shares (on Sept 23, 2005), 4.9 million options, 8.5 million warrants, 15 million convertable debentures. 38.4 million fully diluted shares. Earned 6.5 cents per fully diluted share (huge dilution). Increased substantially from 2003 which increased substantially from 2002.

Assets are mostly inventories, AR, and PP&E. Balance sheet is ok. Cash flow from ops is terrible (very negative). It has been deteriorating since 2003. As net income has gone up, cash flow has gone down even more. Proceeds from the sale of rental equipment has exceeded cost of purchasing rental equipment every year. $30 million in debt shifted from one source to another.

Quality of income seems to be deteriorating while stated net income has increased. It's unlikely for this to be a good investment unless everything openly fell apart and the market overreacted. I have no idea what it's worth because free cash flow is negative. Their stated diluted earnings are 10 cents, but I consider that overstated. I figure 5 cents of earnings (at best), so the stock might be worth 75 cents based on that. It's selling for $1.67.
worth following in case the trouble shows up in earnings

WSRT (sec), data security and compliance (DoD) services. Environmental compliance (recycling, safe disposal). Refurbished IBM mainframes and midrange frames. Data center maintenance. Nearly all in the US.

2004 had 25% gross margins. 0.5% operating margins. Tax benefit results in 0.6% net margins. However, this is an early stage business. Revenue ramped up from $7.5 million in 2003 to $22 million in 2004. 28 million shares. At least 4 million options (probably not much more). Directors and executives own 46.4% of the business.

Q3 2005: Assets are mostly AR, inventories, goodwill, and intangibles. Otherwise, balance sheet is ok. Lost money in Q3 and 9 months of 2005.
not interested

WSZZ (sec), steak house restaurants. Revenues have been declining over the years, but seem to have stabilized in 2004 (slightly higher than 2003). 5.4% operating margins. 2.6% net margins (1% in 2003, -3.7% in 2002). Closed restaurant expenses shrank to zero in 2004. Comps are up due to 7% increase in menu prices, but there was a 2% decrease in customer count. 12 million shares, about 12.2 million shares fully diluted. Earned $566K in 2004, $212K in 2003, lost $1.6 million in 2002. High depreciation charges (over $500K). Free cash flow from ops is very high due to depreciation, amortization of franchise royalty contracts and other assets, provision for deferred taxes. Free cash flow from ops was good in 2003 and 2002, also. All this cash from operations has gone into paying off debt.

Q3 2005: Balance sheet keeps improving. Debt is almost gone. Revenues dropped this year. They only earned 3 cents for 9 months vs 5 cents (a closed store expense in Q1 did much of the damage). Free cash flow pretty much matches earnings, but that involved a fire casualty gain and proceeds.

The stock might be worth around 70 cents. It's selling for $1.30
worth following

WTEC, third party administrator for auto warranties, vehicle service contracts (also for personal watercraft, RVs, light trucks). Revenues have been somewhat steady. They almost always lose money, including 2005.
not interested

WTEK, manufacture and sale of waste balers (compress and compact various waste materials into bales). Executives and directors own 47.7% of the business. Assets are mostly inventories and AR. Balance sheet is ok. 21% gross margins. No taxes paid last two years. 2.8% net margins. Cash flow is ok. Barely making money in 2005 (cash flow from ops is terrible). Lost a lot of money in 2003. Also lost money in 2002... and 2001. Made money in 2000 on much higher revenues.
not interested

ACRG (sec), distribution of HVAC and refrigeration equipment and supplies. But they acquired these businesses. Revenues have grown each year going back to 2001. Gross margins have held up. Operating income has scaled up reasonably well. Assets are nearly all inventories and AR and these have increased quite a bit. Cash flow from ops is severely negative and has deteriorated over the last 3 years as earnings have increased (to $4.2 million in 2004).

Q2 2005: Inventories and AR are even bigger. Revenues are flat from 2004. But of course SG&A has gone up. Net income for 6 months is $2 million. Cash flow from ops is still horribly negative. They've tapped the revolver to make up for it.
not interested

ACOM is now ACLI (sec), prospectus filed July 19, 2005. Large diversified marine transportation and service. Barges, manufacturing of barges (2nd largest in the US), towboats, and other vessels. Mississippi and Tombigbee waterways. 2nd largest provider of dry cargo barge transport (15.7% of the market) and liquid cargo (13.6% of the market) on the Inland Waterways. Foreign competition is restricted due to the Jones Act. Companies must be US owned, using US built, US operating, and US flagged vessels, with predominantly US crews. What a load of crap!

They lost money last year, and they present a pro forma (which really does mean "as if") statement which, even that shows them with very low margins. And this is a protected industry. Sheesh. Kill the Jones Act and get some competition in here.
not interested

ADEO now ADEP (sec, yahoo), vision-guided robots for assembly, handling, packaging, testing, and bending. They've been restructuring in the last 3 years. Revenues peaked in 2001 and then fell to half that level in 2002 where they've held steady since then. In 2005, they finally made a profit (they had even lost money in 2001). They made a profit in every quarter with results steadily improving during the year. Cash flow is weak due to inventories. Balance sheet is ok. 6.1 million shares. 762K options outstanding. 390K available for issue (better count them, these guys dilute). Assume 7.5 million shares totally diluted. Earnings in 2005 were $1.3 million, however the last 6 months alone were about $1 million. I figure the stock might be worth around 27 cents. The stock is selling for $14.35.
not interested

WDPT (sec), Y2K software contract house, obviously things deteriorated after Y2K. They acquired two companies which do essentially what these guys should have been learning to do: some other related business. Identify management and authentication, also government software work. WDPT has an impressive customer list. 76 full-time employees. 27.8 million shares, 7.2 million stock options (888K remaining to be issued). 35 million shares fully diluted.

Revenues went up sustantially from 2003 to 2004. But these guys lost money every year, even in 2000 when revenues were more than twice as high as 2004.
not interested

WEGI (sec), emergency response, disaster restoration services. Hazmat, wetlands and natural resources restoration. Going concern qualifier. Balance sheet looks weak. Gross margins are generally low: 9% in 2004 going up to 25% in 2005. Lost a ton of money in 2004, made a small amount in 2005.
not interested

WHAI (sec), healthcare staffing to hospitals etc. Temp and permanent. Mostly nurses. SEC dispute ongoing: stock options accounting.

You can see the huge change for an acquisition on the balance sheet from 2003 to 2004. It was weak before and it's even weaker after. 25% gross margins. Massive interest expense kills all profits.
not interested

WKOL (sec), "Wako Logistics". They own 2 Hong Kong non-asset freight businesses shipping from HK and PRC to the rest of the world. These formed a wholely owned business in PRC. In April 2005, they acquired a UK freight business operating in the US. 21 million shares. Tonnage increased in 2004.

Balance sheet is OK. Assets are mostly receivables. Liabilities are mostly payables. $1.1 million equity. Only earned $276K in 8 months ending Dec 31, 2004 ($884K in year ending April 2004, and $587K in year ending April 2003). Costs went up in 2004. Cash flow from ops has deteriorated since 2003 to zero. This is a very low asset business. 20.4 million shares. Dilution is small and for cash and services. Lots of related party transactions.

A telling sign is that operating income is very small in relation to SG&A, 15% for 9 months in 2005.

Q3 2005 (includes acquisition): Revenues doubled, but income only doubled (should be much more). Earned 2 cents in 9 months. Share count is increasing. Receivables keep climbing and cash flow from ops continues to get worse. They spent $1 million on the acquisition and the increase in earnings seems worth it (hard to know for sure).

They did another acquisition in Oct 2005 for 250K restricted shares, was a related party transaction.

The stock is selling for $3.05! Why? They have maybe 3 cents in earnings. Stock has been steadily increasing.
worth following

WLGC (sec), embedded software, predictive keyboard (i.e. it tries to predict what word you're going to type so that key entry is faster). One patent. Almost no revenue. Huge losses.
not interested

WLRE (sec), a REIT for commercial and industrial real estate. 97.4% leased. Chicago, DC, NJ, Minneapolis, Detroit, Dallas, NY, Boston, Atlanta, LA, Orange Co, 23% other. Business services, banks, insurance companies, legal, electronics, etc. 33% other. BP Amoco, NASA, Leo Burnett, US Bancorp, Nestle, etc. etc. 50% other.

They've expanded quite a bit every year going back to 2000, doubling every year until 2004 when assets only increased 4%.

Earnings per share have remained steady at about 42 cents each year (share count has increased quite a bit). Funds from operations have been around 75 cents. Dividends have been 70 cents in recent years (was higher in 2000, 2001, and 2002).

Stock is probably worth around $6.50. It's selling for $6.85.
worth following

WLSA (sec), wireless services in Canada. 10 retail stores, corporate sales force, rental center, service dept. Balance sheet is ok. 19% gross margins. Loss from operations in 2004 (small operating profit in 2003, but a net loss). They had to write down $1.2 million of goodwill (the wireless business was an acquisition).

Skip ahead to the most recent quarter: Balance sheet has deteriorated. Gross margins have improved. Operating profit of 4.3%. Diluted net earnings of just under 1 cent for 3 months. Cash flow is bad. Debt is increasing. Still doing more acquisitions (with stock and cash).
not interested

WBBM (sec), mortgage lender in Florida, mortgage broker in NC. Quit CA and NY.
not interested

WCAP (sec), a BDC. All sorts of securities. Privately held businesses in the worst of industries: "new economy" businesses, computer hardware/software, consumer products manufacturers and distributors.

Right off the bat, I see a gigantic red flag. The writeoffs for each year are:
2003: 1.29% of investments
2004: 0.07% of investments
2005: 31.5% of investments!!!!!
Writing off 31% of your investments in one year with prior years writing off amounts that could very well be at a bank... this looks absolutely terrible. Why 2005? Most BDCs had trouble 2-3 years earlier. Did this company hide things for all that time? And then why so much?

Going concern qualification. The huge impairment was "under SBA regulations" which seems like it wasn't the company's decision. Looking over the details, I see a lot of different investments have been written down to zero.
not interested

ABHH (sec), American Bank Note Holographics. Did they split off from American Bank Note Corp? 56% gross margins. 12.7% operating margins. Earned 10 cents in 2004, 5 cents in 2003, lost 44 cents in 2002 (impairment of goodwill). Cumulative earnings since 2000 are negative (apparently due to the all-too-common stupid acquisition).

Assets are mostly cash. Current ratio is insanely high. Lots of equity. Free cash flow is routinely great.

Q3 2005: Cash dropped, AR and inventories went up. PP&E went up. Earned 11 cents in 9 months. Cash flow from ops was slightly negative. Capex went way up, 5 times depreciation!

The Company’s operating activities used cash of $84,000 for the nine months ended September 30, 2005, compared to $2.1 million of cash provided for the nine months ended September 30, 2004. The decrease was primarily due to an increase in accounts receivable consistent with the increase in sales and increased inventory in anticipation of future sales of HoloMag™, partially offset by an increase in accounts payable for the facility consolidation and inventory build.

So this is a portent of things to come, eh?

18.6 million shares, 1.14 million options. Probably worth about $2.75. Shares are selling for $5.98.
worth following

ACMC (sec), REIT, loans to churches. No employees. Assets are loans, bonds, and some cash. 50% leveraged. 2,551,568 shares on Feb 28, 2005. Dilution is the normal sale of stock. Earned 63 cents in 2004, 55 cents in 2003.

Cash flow from ops makes sense. Cash flow from investing shows a large, continuous net outflow of cash into investments much greater than net income: in other words, it might be possible to hide a lot of bad stuff in there. Cash flow from finance shows a continuous large input greater than net income, after dividends paid (dividends would be part of the whole scam, if it was one). The finance and investing cash flows for 2003-2004 could be either legitimate or a scam. The same pattern holds for 2001-2002 and for 1999-2000.

I know from experience with ALD and ACAS that it's more or less impossible to know whether this business is totally legitimate or whether it's at least partly a smoke and mirrors Ponzi scheme. Can't bet for it, can't bet against it. Just ask David Einhorn.
not interested

ACMT (sec), went dark. website. 1) Contracting services to commercial and governmental customers. 2) Insurance underwriting. 3) Owns a commercial office building in New Britain, CT. (partly intra-company revenue). 4) Specialty insurance to general contractors. 5) Product liability insurance. 5) Surety bonds to contractors. 6) Workers compsensation bonds and related stuff.

Significant customer concentration (4 customers are most of the business). Insurance revenues grew very fast, which makes me very nervous. It's very easy to write lots of policies. They earned about $1.28 diluted in 2004. Cash flow for the last 3 years looks good at first glance (all categories).

Loss and loss reserves went down and seemed low to start with. Balance sheet is about 1/3 equity. I accidently deleted some stuff I had written (not much), but essentially, this also falls into the "I don't know" pile because I don't know if their underwriting discipline is good, especially with the rapid increase in business. The stock is trading at $20.00, so it's probably not all that cheap anyway.
not interested

Right now, you can expect to continue to see large numbers of not-so-interesting companies dumped here as I sift through a seemingly endless list of stocks to look at. It could be 2 weeks before anything interesting is posted here.

TROLB (sec), this is just Tootsie Roll Industries class B common stock. The class A stock is TR, which I've been loosely following for many years (a favorite among Berkshire followers).

Class B Common Stock is not traded on any exchange [well, it's on the pink sheets!], is restricted as to transfer or other disposition, but is convertible into Common Stock on a share-for-share basis. Upon such conversion, the resulting shares of Common Stock are freely transferable and publicly traded. Assuming all 17,510,379 shares of outstanding Class B Common Stock were converted into Common Stock, the aggregate market value of Common Stock held by non-affiliates on June 30, 2004 (based upon the closing price of the stock on the New York Stock Exchange on such date) would have been approximately $661,779,690.

not interested

TRTI (sec), supervises landfill monitoring and closure procedures, manages methane gas recovery, generates methane based electricity. Losing money consistently.
not interested

TSSW (sec), BIOS upgrade and PC diagnostic software. Oldest and largest BIOS upgrade company. Exclusive authorized BIOS update company and support center for Phoenix's "Award" BIOS (very popular).

Gross margins are 85% (down from 88%). But SG&A is 90% (up from 88%). Looking at the 2001 and 2002, the results are even worse. And 1999 and 2000 were even worse still. So the business has been improving, but it's a crappy industry. And this is the industry leader!
not interested!

TTLG (sec), aerospace and defense industrial business, mostly helicopter hoists. Most sales are to the US government. They've lost money in every year except 2004. They made money during the 1990s.
not interested

TTMC (sec), digital distribution of music, music-on-demand: digital juke-boxes. Revenues have steadily gone up each year by a healthy percent. Gross margins were 35% in 2000, 41% in 2003, 46% in 2004. Losses decreased each year nicely. They made a profit in 2004. They hit cash-flow-from-ops breakeven in 2002, and it has steadily gone up.

Assets are mostly AR (which decreased during 2004). and inventory (which increased). Balance sheet is not bad. Share count has exploded every year. Depreciation is somewhat large. Directors and execs own 35% of the business. Capital structure is a bit complicated, but SEEMS to have a net diluted share count of 93 million shares. Net income for 2004 was 2 cents per diluted share.

2005: took a bigger loss than 2004 in Q1 due to higher jukebox sales costs and other sales costs. It got worse in Q2 and it stayed that bad in Q3.

The [61%] increase in cost of jukebox sales revenues is due to an increase in the number of Digital Jukeboxes and Tune Centrals sold in the period as compared to the third quarter 2004.

which is total crap. The real answer is here:

For competitive purposes the Company has significantly reduced the retail selling price of its Digital Jukeboxes, including Tune Central, to an average of $4,995 as compared to the comparative 2004 retail selling price of $7,990 for a Rhapsody model and $7,685 for a Maestro model, including Tune Central. As a result of this, the Company has incurred negative margins of the sales of Digital Jukeboxes. The Company shipped 1,450 Digital Jukeboxes in the third quarter of 2005 as compared to 846 for the third quarter of 2004. The increase in revenues from the sale of Digital Jukeboxes is attributable to the increased unit sales offset by the impact of the aforementioned retail price reduction.

This is why I look so closely at margins. Extremely high margins can be good (moat) or bad (temporary gouging), so can extremely low margins (Wal*Mart vs this company here). But without knowing the margins, you can't know what to look for as to whether they're good or bad.

The stock is selling for 42 cents, making a market cap of about $39 million. Amazingly, the stock has not dropped since 2005. They're going private.
not interested

TTVL (sec), Chinese reverse merger. High end hotel management in PRC. Also Chinese real estate. CEO owns 58% of the business. Losing money. The balance sheet had been dominated by a loan from affiliate for essentially more than the assets, making the current ratio less than 1/10. They had a gain from forgiveness of debt. Otherwise, this is a serious money loser.
not interested

TWOC, oil company
not interested

ROHI (sec), bankrupt in 2002. Large rental/sale provider of home medical equipment, also some related services. Mostly breathing equipment. 3.2 million options. 25 million shares. 74% gross margins (probably meaningless). 7.2% net margins.

Assets are mostly goodwill. Current ratio good. Not a bad balance sheet. Earned $37.8 million, which is about $1.34 per share fully diluted (they claim $1.48 diluted).

Q3 2005: Revenues up slightly over prior year. Costs are up a lot more. Earnings are way down for Q3 and almost zero for 9 months. Very high depreciation.
not interested

RUSS (sec), "post-secondary educational and training courses". Real estate investing, business strategies, cash management, etc. 75% repeat business. $1,600 to $32,000 per course. Training is done in the usual meeting and conference centers.

Our students are primarily recruited by attending a free informational training session related to a specific educational subject which is hosted by one of our trainers or others and held at a local hotel or other rented auditorium facility. The subject, date and location of the training session are generally advertised in local newspapers, on our Web site, www.russwhitney.com, in television advertisements and through direct mailings and telemarketing.

Revenues have been growing substantially every year, yet they've been losing increasing amounts of money. Assets are mostly PP&E, deferred seminar expenses, cash. Liabilities are deferred revenue. Negative equity. Terrible balance sheet.

Q3 2005: cash has greatly increased. They've been making money in 2005. But this company just doesn't pass the smell test.
not interested

RYFL (sec), 17 family buffet restaurants in Florida. They always lose money, every year. The only time they make money is when the sell an asset.
not interested

RZPK (no sec, website), this is the pachinko strategy guide business I looked at before.
not interested

TMED (sec), surgical lasers. Revenues decreased in 2004 due to fewer lasers sold. They're working on new products. 19 patents. CEO owns 18.5% of the company.

Assets are mostly cash and inventories, some goodwill. Nearly all equity. Current ratio is greater than 4. 54% gross margins. 12% operational margins. Low tax. About 4.8 cents of net income per diluted share, excluding creditor settlement/recovery. They earned 7 cents in 2003. Cash flow from ops is pretty crappy due to non-cash assets/liabilities. Capex less than depreciation. 14.6 million shares. 1.32 million options.

Q3 2005: Revenues for the year are a bit higher. SG&A is up (lost rental income from tenant) and they have a loss from operations. However, it looks like they're working on expanding the business (R&D is much higher, discussion mentions it). Cash flow is still bad: inventories. However, they have lots of cash and the burn rate is very low.

The business is probably only worth 60 cents. It's selling for 60 cents.
worth following

TMFZ, holding mortgage loans.
not interested

TMOL (sec), They own the rights to a technology used by the government of Moldovia to issue IDs. 100 million shares. Very weak and unstable balance sheet. Very low margins.
not interested

TMSS (sec), software for document management and viewing. Liquidating.
not interested

TNEX (sec), car engine diagnostic test equipment. Arizona, Colorado, Idaho, Nevada, Utah, Puerto Rico. Lots of experience back to 1981, but expanded too fast in the mid-1980s which broke up the franchise system. Now they say they've gotten the religion. 12 employees. They've had to take back some franchises, including a bankruptcy: bad sign. The company-owned centers have losses.

Balance sheet doesn't look bad. The "Results of Operations" talked about operating income of $719 in 2005 and for some reason, I thought they meant something like $719K, but no, they earned seven-hundred-and-nineteen dollars in 2005. Over the years, gross margins are high, but SG&A is killing them. This just looks like a bad business, regardless of management.
not interested

TNRK (sec, website, yahoo), industrial batteries: design/mfg and also authorized distributor for all the majors. Earnings have been fairly regular in the $1.70 range diluted. Great balance sheet. Margins are OK and consistent. Depreciation is routinely about 10% of net income and matches capex. Cash flow from ops is skewed by lumping purchase of investments into it, but otherwise it looks ok. Investments are mostly US government notes. They should really be paying dividends instead. No customer concentration. Otherwise, looks like a great business. Latest quarter is just more of the same. Stock is probably worth $26. Currently selling for $22.50.
worth following

TOTG (sec), remote tracking of physical assets (pipelines, wells, vehicles, ships, containers). Based out of the UK. RFID with low-earth satellite relay.

Balance sheet looks "unused". Income statement shows it's really a development stage company. Latest quarter shows increase in revenues, but not nearly enough
worth following to see where it goes

TPFS (sec), no business activities, was doing a reverse merger with Toolbuilders, but now they're doing a reverse merger with Command Staffing. Too difficult to see what might happen.
not interested

TPOP (sec), real estate business in non-bubble areas like Kansas and Missouri. Apartments (largest category), office buildings, warehouses, parking lots, garages. High leverage. Took a loss in 2004 not due to any one factor, just higher across the board expenses (made money in earlier years). Cash flow from ops is good due to high depreciation. It's difficult to tell free cash flow.

Q3: still losing money. For the 9 months, they'd be losing money except for a gain-on-sale.
not interested

TRDY (sec), children's books and audiobooks, stuffed animals. Holds publishing license from Disney for Winnie the Pooh etc. (73% of revenues). Also gained Smithsonian license for educational kits. Had a memorandum of understanding with Chart Studio, which TRDY says was breached.

Assets are all inventories and AR, with some pre-publication pre-paid costs. Total liabilities is greater than total assets. However, sales have ramped up in the year ending Mar 2005. Gross margins are more than 50%. They were pretty much at break-even in 2004. 442 million shares.

In the most recent quarter, they're making a profit of about $300K (no taxes paid). If we assume taxes and earnings of $210K, this would annualize to about 1/5 of a cent per share and the stock might be worth 3 cents. It's selling for about 7 cents.
not interested

TENF (sec), Enterprise software, 46 million shares, 21 million stock options. Serious dilution now and probably in the future. Balance sheet was reasonably strong at the end of 2004, but deteriorated in 2005. Subscription revenues disappeared in 2004 causing large drop in revenues. 16% operating revenues. No taxes. With taxes would have earned about 3.5 cents a share in 2004 fully diluted. Cash flow is severely negative for 3 years in a row. Operational loss in 2005. Revenues declining.
not interested

TGFN (sec), Discontinuing business. No revenues.
not interested

TGIS (sec), Processtitute company "focusing on improving operations, competitiveness and financial performance of major corporate clients through process improvement and strategically aligning operations with technology". High margin business, high return on assets obviously (23% operating margins, revenues for most recent quarter is equal to the entire assets). 10.6 million shares, roughly 11.5 million fully diluted.

One 62% customer and one 34% customer in most recent quarter! Revenues jump around a lot and are pretty high lately. Despite this, the customer list is extremely impressive and covers just about everybody. So I'd call it "lumpy" in the Buffett sense.

49 cents per fully diluted share earned in 9 months of 2005. About 7 cents during the same period of 2004. Cash flow is pretty good as expected.

They really screwed up somehow in 2001 and 2002, losing lots of money. 2000 was good. I'd say they earn maybe 20 cents per share per year on average (very rough guess), which would say the stock is worth $3. It's selling for $7.20.
worth following

TGLC (now EMGL) (sec), serial failing businesses. Now trying to be like a BDC.
not interested

TKCRF (sec), an Israeli ASIC semiconductor business which sold all of its assets to STM. They file 20-F statements, so they're officially a foreign business. In Q3 2005 they had $9.845 million in cash with $31K in receivables, $193K of total liabilities for a resulting $9.683 million in cash equity. Their cash generates more income than G&A expenses, so there's no burn. There are 24.17 million diluted weighted average shares outstanding. Oddly, they held a rights offering in Sept: each share had the right to buy 1/2 additional share at $2.50 all the way out to 2015. The stated intent was to prevent takeover at an unfair price.

So each share of stock represents ownership of 40.7 cents in cash. The stock is selling for about 36 cents, which is about 88.5% of the cash value. In addition, the value of the shell company is probably worth something, maybe a quarter million dollars.
worth following just to see what happens

TLDN (sec), auto repair center franchises (original business goes back to 1923). Western Long Island, NY. 11.4 million shares, 4.8 million stock options (13.4 million authorized for future issue). Massive options granted to CEO (600K per year for 3 years) and he already owns 49.3% of the business.

Strong balance sheet, but heavy with 1/3 assets are AR and 1/3 are intangibles (they've been buying out businesses). Very high current ratio and mostly equity. Very high margins, but there's some weird stuff in the income statement. Earned $215K in 2004, but only $10K in 2003. Cash flow from ops is weak due to AR. Again, weird stuff thrown in there (like "Loans to Oilmatic" in adjustments in operating cash flow).

In my book, they earned about 1 cent per totally diluted share in 2004.

Looking at Q3 results, AR keeps increasing. Q3 itself is a pretty good measure of the business since there's no "Sale of Company owned locations" in revenues. So in Q3, they earned $33.6K, which annualizes to about 0.6 cent per share, making the business worth about 9.5 cents. However, I have a negative impression of the business based on 1) options, 2) acquisitions and selling parts of the business, 3) accounting stuff. The stock is selling for 8 cents on the ask.
not interested

TLST (sec), a niche (specialized rectifiers and diodes) aerospace and defense contractor with only 3 operating years, moving into other niches. The defense work is growing and will continue to grow. 65% of business was the US DoD. During 2004, they were acquiring new customers at about 10 customers per quarter (4 per quarter in 2003). 17 employees. CEO is only 32, CFO is 30.

33% gross profit (up from prior year). 7.2% operating profit (down from 12%). 5% net profit (down from 11%). Revenues in 2004 were $1.5 million (up 114% from $721K).

They had to restate 2003 and 2004 to correctly reflect income tax expense. Single individual auditor (might be a good thing, I don't know). Assets are mostly inventory. Very new PP&E (heavy investment in 2004 paid largely with debt). Increasing AR. Otherwise, solid balance sheet. Only $1.4 million net assets (good).

$76K net income ($79K in 2003). Cash flow ok. 13.4+6 million shares.

In Q3 2005, inventories grew enormously to $1 million. Revenues are way up, but expenses are also climbing fast. 9 month net income is $163K, about 1 cent per share. Amazingly, cash flow from ops is very good, due to large increase in AP along with inventories and huge jump in AR. Capex is down to something normal now and free cash flow matches income. However, they also sold $165K in PP&E. Big increase overall in cash.

This is difficult to value. 30 cents? 50 cents? I don't really know. The stock price is 70 cents on the ask. So it's not cheap.
worth following

TMAV (sec), another airplane MRO (maintenance, repair, overhaul) business.
Greensboro: UAL 757, 767, 777. Delta 777. Fedex DC-10, 727.
Lake City, LF: UAL A318, A319, A320, 737, 757, DC-9.
Macon, Goodyear/Phoenix, Winston-Salem.
3,700 employees. Revenues over the years track the airline business. Usually less than 10% gross margins. They've lost money almost every year since 2000.
not interested

PUBSF (sec), US and Canadian "English" pubs and restaurants. 5.6 million shares. 557K options outstanding (616K more can be issued). Lost money in 2004 and 2002. Made some money in 2003 (far outweighed by losses).
not interested

PUFF (sec), private membership cigar clubs in very upscale areas (Beverly Hills, NYC, DC). Crappy restaurant business discontinued in 1996. 71 employees. 225K options. 14.6 million shares.

Terrible balance sheet. Current ratio is less than 1/2. Long term liabilities are greater than total assets. Surprisingly low margin business (not bad, but I expected far better). Earned 6 cents in 2004 (lost 6 cents in 2003). Cash flow from ops is pretty crappy. The stock is selling for 33 cents.
not interested

PVCC (sec), manufactures plastic bottles. It's a regional business market. They've lost money in each of the last 5 years and in the recent quarter.
not interested

PVIS (sec), High precision motion picture camera systems, industry leader. Used in all sorts of blockbuster movies like Spiderman II, Aviator, also TV like CSI, 24, Desperate Housewives.

37% gross margins. Losing money every year.
not interested

PXHB (sec), Titanic salvage. Most revenue comes from Titanic exhibits. They also got the rights to the Carpathia wreck (sunk in WW1 off Ireland) nothing planned yet. They have lots of artifacts from several expiditions (1987, 1993, 1994, 1996, 1998, 2000, 2004). The US and UK have signed a treaty that is likely to impair their salvage rights. It looks like they could actually lose the artifacts they currently have, which would destroy the business.

Revenues were in the $2.5 million range in 2002-2004, but jumped to $6.2 million in 2005 the first 6 months of 2005. G&A costs are suspiciously high. $2 million income for first 6 months. 23 million shares.
not interested

PYBS now PBHG (sec), HR and payrool/admin outsourcing business. 86 million shares. 38% gross margins. Operational losses. Executives and directors own 91%. Going concern qualification. Extremely weak balance sheet.
not interested

PYNGF (yahoo, website), info on yahoo headlines and
website click on investors and then stock exchange

QMRK (sec), Manufactures "shake and bake" testing equipment. Wide range of customers. 12 patents. Competes with Thermotron Industries, Envirotronics, Screening Systems, Reliant Labs, Sypris Test and Measurement, Trace Labs. Lots of pricing pressure during the latest downturn.

46% gross margins. 8.7% operating margins. They have a benefit from taxes which inflates earnings. 4.1 million shares. 7.3 diluted shares. 10.8 totally diluted shares!!

Revenues increased to $12 million from $7.9 million in 2003. Realistic net income would be about $700K, or 6.5 cents per totally diluted share (they show 20 cents per diluted share). Assets are mostly AR and goodwill. Otherwise a somewhat weak balance sheet.

For Q3 2005, income for 9 months is about $900K, which annualizes to about 11 cents per totally diluted share. Cash flow from ops for both years is crappy due to AR and inventories. So the business might be worth $1.65. Selling for $1.98.
not interested

QRSM (sec), electronic musical equipment, player piano rolls, Story & Clark piano import and sale, Gulbransen Digital Hymnal which seems kind of aspiritual.

Balance sheet is dominated by inventories: 2/3 of all assets.. Otherwise, balance sheet is OK. 30% gross margins. 8.4% operating margins. Preferred stock dividends are in arrears. 9.5 million shares. 646K options total. About 10 million fully diluted shares. Earned about 10 cents per fully diluted share in 2005 (14 cents in 2004). Cash flow is terrible mostly due to very large $2.5 million increase in inventories (15% of sales). Capex is much higher than depreciation for 2 years. Stock is selling for $1.55, which is about what I'd expect.

Chairman owns 58% of the company.
worth following

RGBL (sec), Asian nutraceuticals reverse merger. One full-time officer, 5 other employees, some part-time. 80% of sales were to one customer: LifePharm (Singapore). Doing some new stuff that may not make any business sense, such as onlinesurgery.com. 25 million shares. No warrants or options, but they routinely issues shares to employees in lieu of cash.

Revenues increased to $5.5 million from $3.7 million in 2004. High gross margins. About 18% operating margins. $502K income or about 2 cents per share in 2004. Cash flow from ops is weak due to AR and AP.

Assets are mostly AR and intangibles. Balance sheet is fair.

In 2005, revenues drop quite a bit. Earnings are only $100K for 6 months. Cash flow is still terrible due to AR. Stock is selling for $1.80. Why?
not interested

RIMS (sec), warehouse management software. They sold all of their assets for $3,170,000 with adjustments. $1,043,530 in liabilities. They were losing money on operations, but making it back in benefits from taxes, and they're generating cash overall, not burning it. Without looking too carefully, my guess is $2,126,470 net cash after the sale. At least 4.7 million diluted shares. Probably around 45 cents in net cash per share. Shares selling for 70 cents.
not interested

ROBE (sec), Nutraceuticals. Somewhat declining sales spotty earnings (lost money overall).
not interested

Ok, so YaSheng didn't work out. I still made a profit: a low purchase price can turn a loss into a gain. YaSheng is looking more and more suspicious to me with every press release. It's either incompetance or fraud, and either way, I want nothing to do with it. I'll still follow them just to see what happens, but I'm out until it's clear that they've cleaned up their act. There's no way they could pass an audit.

I'd like to go back and take a better look at CXTI and see if I can get a better resolution on what they're worth. When it seemed like cheap stocks were growing on trees, it was easy to throw that one away. I own the stock again as I mentioned here, but I also bought more later on.

The continuing climb in uranium spot prices is good for Strathmore, but probably not as good as having the price staying lower for longer while they continue their work. But no matter, the long term demand is way above the mining supply, reserves are running low, and demand is going to continue increasing. The Pilgrim nuclear power plant is petitioning for a 20 year extension (they'll probably get it, from what I've read). China hit a snag with disagreements on who will build 4 nuclear reactors which will add delay. India is adding 2000 mega Watts, the US is cooperating.

I need to look at Level 3 again. The Great Pumpkin. Eventually that whole supply/demand imbalance will have to reach an equalibrium and I need to see if there are any signs of it being near. If not, perhaps the market will become depressed about it again and drive the price back to $1.50. Either way works for me: preferably both.

I haven't seen much going on with LiveWorld. They managed to get this business. And Tulane.

Right now I have about one full investment sized block in cash. The mistake I'll probably make is not being patient enough. If I wait 6 months and get something for half the price of what I'd get otherwise, it's so definitely worth it. As Buffett said, so much of it is temperment.

And I have a ton of companies to sift through.

This is just one person's notes about CXTI, and some comments from myself and others in the comments sections.

pink sheets, yahoo, sec, website

Beginning Look
2004 10-K
8-K Filings
Q1 2005 Results
Q2 2005 Results Assessment
Private Placement
Nov 11, 2005: Closed out investment but I bought back in not long after that
stop and think in December
what can go wrong
Q3 2005 Results - diff'ing the amended Q3 2005 Results
March 8, 2006 announcement
CXTI wins a small contract
Shishi City Contract for $41 million
phase 3 and 4 of Dehua
2005 10-K
CXTI Convertibles
Q1 2006
Misc thoughts on ETLT, CXTI, and Strathmore
New SEC filings on June 16, 2006
Amended 2004 10-K
Phase 2 of Fujian
amended consultant contract, July 17, 2006 no useful information here
Nan'an contract, July 19, 2006
134,281 shares shorted
Q2 2006
debenture agreement, Nov 2, 2006
Q3 2006
another contract, Dec 4, 2006
two more big wins, Dec 14, 2006
contracts for Quangang in Quanzhou and Pingtang in Fuzhou, Dec 18, 2006
two more big wins: Mawei and Yongtai in Fuzhou, Fujian, Dec 20, 2006
some thoughts on Dec 22, 2006
Q4 partial results, March 30, 2007, sold the last of my stock
CFO resigns, July 20, 2007, bought back in
10-K 2006, Aug 1, 2007
Q1 2007, Aug 1, 2007
conference call, Aug 3, 2007
bought some more, Sept 10, 2007
then sold it all on Sept 13 at a big loss
trading suspended, Oct 2, 2007

External links: pink sheets, yahoo, sec, website


2004 10-K, Sept 24, 2005
Recent 8-K filings as of Sept 24, 2005
2004 Proxy, Sept 25, 2005
Comments Sept 25, 2005
Q2 2005 results, Sept 25, 2005
Q3 2005 results, Nov 15, 2005
2004 auditors Thomas Leger, Jan 2, 2006
E-Sea update, Jan 24, 2006
additional E-Sea info from website, Jan 29, 2006
More about the Chinese legal system for business, July 18, 2005
Another quick look at ETLT, Nov 12, 2005
What can go wrong, Jan 25, 2006
Valuation estimate of ETLT, Feb 1, 2006
Chinese R&D, March 13, 2006
amended Q3 2005 results, March 25, 2006
2005 10-K is late, Apr 1, 2006
Q1 10-Q is late, May 17, 2006
Misc thoughts on ETLT, CXTI, and Strathmore, May 19, 2006
2005 10-K is here, May 19, 2006
2005 10-K, May 22, 2006: sold all my stock
Q1 2006 results, May 26, 2006: bought my stock back for 7 cents more
Only 1,374 shares shorted, July 26, 2006
Heron finally picks up the phone, Aug 1, 2006
about those ETLT cash restrictions, Aug 3, 2006
Q2 2006 Results, Aug 22, 2006
Only 3,916 shares shorted, Aug 25, 2006
The big thing I missed in the Q2 report, Aug 26, 2006
Crouching Tortoise, Hidden Mango, Aug 28, 2006
auditors didn't skip town, Sept 1, 2006
ETLT Q3 projection and other stuff, Sept 6, 2006
primary business shrinking, Oct 17, 2006
Q3 2006 Results, Nov 15, 2006
Thoughts on ETLT, Dec 9, 2006
Sold the rest, Dec 14, 2006
2006 10-K, April 14, 2007

TBTC, chart, website, sec

Posts
10-K
Q1 to Q3 2005
more stuff
google checking
competitors

So here we have a future battle between a small company with a basic product in local casinos that has grown organically over a long time vs a big company large project with lots of intellectual property and resources and credibility and connections. TBTC has an enormous head start, but they aren't making progress very fast (one casino per quarter). We also have a wild card with VCAT, which seems very well positioned, but they've had to give up a huge percentage of profits to what is essentially their laboratory casino.

The real showstopper with TBTC was covered here: Recurring revenue is too small. They seem to make about $3,500 per month per casino on recurring revenue. You'd need to subtract a fair amount from this for costs of supporting the casino. Let's say the gross profit is $2,500. This means they probably need 40 casinos just to break even. At 70 cents on the ask, I just don't think it's a good investment.

So that was a lot of work for nothing...

Worth following

In my google checking post here, I came across this:

In other news: June 14, 2005, IGT (IGT, website, sec) and Shuffle Master (SHFL, website, sec) and Progressive Gaming International Corp (PGIC, website, sec) announced they would work on table management automation, "Intelligent Table System". Done in three phases: 1) Table manager doing much of what Table Trac does (IGT), 2) RFID chips (PGIC), 3) Card manager (SHFL).

First, let's look at the three companies.

IGT
market cap: $10,000,000,000
P/E: 25
Hardly anything in SEC documents about the joint venture.

PGIC
market cap: $400,000,000
P/E: 92

In June 2005, we also entered into initial strategic agreements with IGT and Shuffle Master to create a comprehensive ITS. This system is expected to combine our TableLink [CT] software module which provides RFID bet recognition capability, with IGT’s table management systems, including TableTouch^tm, and Shuffle Master’s automatic shufflers, IBR optical card reading shoes and other accessories. IGT will be responsible for selling and distributing our portion of the ITS suite of products and any other products developed by us under the definitive agreements. Shuffle Master will become our preferred vendor for automatic card shufflers, IBR optical card shoes and other key accessory products. We are working towards definitive agreements relating to the development and sale of the ITS, but can provide no assurances as to when such agreements will be entered into or if such agreements will be entered into at all.

and...

In June 2005, we also entered into initial strategic agreements with IGT and Shuffle Master to create a comprehensive ITS. In addition, we agreed to issue to IGT up to $40 million of our 6% senior subordinated convertible notes. We expect that we will modify the terms of the 6% senior subordinated convertible notes to reduce the conversion price of the notes. We have not yet reached an agreement with IGT regarding the modified price, but for illustration purposes only, in this prospectus we assume a conversion price of $9.25, which would cause our 6% senior subordinated convertible notes to be convertible into up to a maximum of approximately 4.3 million shares of our common stock.

and...

For example, as part of our joint development arrangement with IGT and Shuffle Master, we agreed not to manufacture or sell our intelligent shoe products for a three-year period.

SHFL
market cap: $100,000,000
P/E: 37
agreement to sell RFID IP to IGT. Patents #5,735,742 and #5,651,548. Also some optical bet recognition and chip tracking patents #6,313,871 and #5,781,647 and #6,532,297. The price is $10.5 million now, $4.9 million in 2007. Both companies will share in royalties.

...we will be the provider of automatic card shufflers, card reading intelligent shoes, card and chip sorters and verifiers. IGT will be the provider of back-end table gaming management systems, including player tracking, patron loyalty and rewards, as well as bonusing applications. PGIC will be the provider of RFID bet recognition, automated gaming chip tracking and payoff recognition.

In their Sept 6, 2005 8-K announcing quarterly results, they mention this same stuff.


Venture Catalyst (website, sec) has a very strong balance sheet. Assets are mostly cash. Acid ratio is nearly 2 (cash/current liabilities). Revenues for Q3 2005 are $2.1 million which is 19% above the prior year. Gross margins are 52%. They're running at an operating loss. Cash flow for 2005 is very high so far. 7.2 million shares, no dilution.

They have 2 customers: Barona Tribe (since 1991) and Buena Vista Tribe (since Feb 2005). They have a multi-faceted system called Mariposa. They had to give away some profit sharing rights to Barona to keep their business in 2004: 25% scaling up to 35% of profits (wow!) and exclusivity within 65 miles of the casino. But Barona has been a testing ground and the agreement with VCAT is essentially a fixed monthy fee ($597K) plus cost of living adjustments (not to exceed 5%). Barona has a $200 million loan that causes VCAT to get no payments when the loan is in default.

This could be a viable investment, but the profit sharing with Barona is brutal.

Google search for casino table automation

bizjournals Nov 2001 news article: Enterprise Information Solutions of Tukwila, Washington got the rights to distribute Table Trac systems in Washington state. More here. Ok, so my question is why did nothing happen with this? This is bad news because it means TBTC made some inroads into Washington state and nothing came of it.

GamingFloor.com article from 1999 written by Andrew MacDonald: This is a good article that looks at successes and failures over the years. What I want to see is lots of failures because TBTC has been seen fairly good adoption. I want that to be the exception rather than the rule.

The article mentions Safe Jack was developed as a fully automated Blackjack game but with a dealer (uses RFID chips). In Dec 2001, there was a licensing dispute where Mikohn Gaming Corp believed it has exclusive rights to distribute. "In an Oct. 10 letter to Mikohn, the defendants wrote: 'It should be sufficient evidence, that more than six years after we initially transferred the intellectual property, Mikohn is not in the position to deliver a single piece of the device and has lost our updates and source codes. This behavior has shortened our royalties and the value of the device significantly.'" I don't see anything recent about Safe Jack.

According to the article:

Field trials of "Safe Jack" commenced at Bally's Las Vegas and were monitored with great expectation by Table Games Managers world wide. In late 1998 the field trial was ceased and the "Safe Jack" tables were withdrawn. Mikohn have, however, announced that Harrahs will be utilising a "cut down" version of the "Safe Games" technology which merely tracks players turnover on the various Table Games using their chip in chip technology.

About this time, Digital Biometrics (formerly DBII, here's their S-3 from 1999 they merged into Visionics in 2000) started promoting "Trak 21", with pattern recognition to determine cards and bets. As of mid-2001, they hadn't gone anywhere. Nothing else found. According to the article:

"Trak 21" never appeared on a casino floor as a live trial and has virtually disappeared from the market. In its wake however, a group from Israel, called Gaming Management Ltd, are now promoting a similar system called "BJ-Guardian". They will be looking for a Beta-site in mid 1999 to test their visual pattern recognition system.

Nothing found for these guys.

The article then goes on about technology advances with slot machines (mainly customer focused) and with table games (mainly operating efficiency issues):

• player rating systems
• dynamic reporting systems
• chipper champs
• winning result displays
• "CS", "LIR", and Super Bucks jackpots
• E.S.S.
• "Madness 21" interactivity
• automatic shufflers (I've seen this in another public company)

My own opinion is that table games are social whereas slot machines are personal. It's like console video games vs computer video games, foosball vs pinball (for those who remember such things), twister vs DDR, etc. The thing is, casino table games are about players and the dealer interacting. The automation should remove as much of the non-social aspects as possible without interfering with the social parts. In a sense, putting RFIDs in the chips takes something away from the social interaction with the dealer. People want their bets to be recognized. The risks and rewards should be controlled by the dealer. At first, I thought that Table Trac should have something like a paper money machine instead of having the dealer recognize and enter the amount. But that would be wrong. The dealer needs to fully acknowledge the risk taken by the player and anything that stops the dealer from counting is bad.

The article goes on to say that table game revenues have been flat while machine revenues have grown. This is a long term trend worldwide. And...

The total experience and "value" derived [from slot machines and earning "points"], allows players to rationalise their gambling experiences where ultimately, over time, they must lose.

This is an important issue in customer retention rather than attraction. If regular Table Game players, over time, do not feel they receive "value" then it becomes more and more difficult for them to rationalise their continued behaviour. Purchasing an intangible product with associated tangible benefits is important for gaming's survival and growth. This fact has been recognised for many years by all successful casino operators.

The article talks about what table games need (jackpots, reduced price entry, accurately tracking turnover and player results, full accountability in transactions). Table Trac addresses the last 2 of these.

The article says requirements are:

• table jackpots (nope)
  
• player rating (yes)
  
• real time statistics (yes)
  
• game supervision and management (yes)
  
• dealer productivity (yes)
  
• security (yes)
  

By reducing the skills needed for a dealer, the key attribute becomes personality and not dealer skills [and trustworthiness]. (yes) This reduces the cost of running a table which allows the casino to lower minimum bets.

The author of that article also worked on developing Rapid Roulette in Australia to solve some of the issues he mentioned.

In other news: June 14, 2005, IGT (IGT, website, sec) and Shuffle Master (SHFL, website, sec) and Progressive Gaming International Corp (PGIC, website, sec) announced they would work on table management automation, "Intelligent Table System". Done in three phases: 1) Table manager doing much of what Table Trac does, 2) RFID chips, 3) Card manager.

Shuffle Master will be the provider of automatic card shufflers, card reading intelligent shoes, card and chip sorters and verifiers. IGT will be the provider of back-end table gaming management systems, including player tracking, patron loyalty and rewards, as well as bonusing applications. Progressive Gaming will be the provider of RFID bet recognition, automated gaming chip tracking and payoff recognition. Each company will cooperatively interface their respective products into a combined product offering to be known as the Intelligent Table System (“ITS”).

This is very big.

There's also a wireless system by Venture Catalyst Incorporated (VCAT). The system is currently in use at the Barona Valley Ranch Resort & Casino in San Diego, California; the Hard Rock Hotel and Casino in Las Vegas, Nevada; the Greektown Casino in Detroit, Michigan; Stratosphere Casino Hotel & Tower and Arizona Charlie's Boulder and Arizona Charlie's Decatur in Las Vegas, Nevada; and Don Laughlin's Riverside Resort Hotel & Casino in Laughlin, Nevada.

While Table Trac doesn't show the percent of revenues from one-time installations vs recurring maintanence revenue, you can get an idea of the continuous revenue stream by looking at the numbers in Q1 through Q3 of 2004. In the Q3 2005 results, they say:

Revenues for the three months ended June 30 increased to $462,299 in 2005 from $117,971 in 2004. One new system installation in the third quarter accounted for the increase in revenues. Cost of sales for the three months ended September 30 increased in 2005 to $114,492 from $9,644 in 2004 as a result of new systems installations in 2005.

That $118K of revenue in 2004 in the statement above included upgrades from existing customers according to the Q3 2004 statement. The Q2 2004 results show revenues solely from recurring streams: $48K for 7 casinos at 88% gross margins. SG&A was at $110K. With 10 casinos, we would only expect to see about $68K recurring revenue per quarter and they'd be losing money.
They make a lot of money from installations, but not from recurring revenue. So unless this business captures a lot of casinos, it's not worth much. And even if they do capture a lot of casinos, they will have a lot more costly support infrastructure.

Table Trac doesn't release any more info than they have to. Directors and executives own 33% of the business. I consider that to be an optimum percentage. Unfortunately, it's nearly all in the hands of Chad and Sally Hoehne (Chad is CEO/Founder).

Chad develops the software, according to the 10-K for 2003. He also installs the systems, according to the securities registration.

Offices at 15612 Hwy 7 #250, Minnetonka, MN 55345

The new auditors are Carver Moquist & Associates. They rendered opinons in 2005 and 2004. They are accountants for BDC Capital (BDCI) which I looked at but not posted about (I don't think). Neither these, nor the next auditors are on the list of large auditors.

Callahan, Johnston & Associates did the audit in 2003. These people also audited Ballistic Recovery Systems (covered here earlier) but quit. They also quit here (see below).

The CFO resigned in 2003.

At the end of the 2003, they had contracts with 7 casinos (MN and WS). They had 3 employees (no change).

The first trial system (installed Dec 2003) had zero downtime and customer was pleased as of April of the next year.

They misspelled deferred as "deffered".

In Q4 2003, they secured $280,000 of contracts. Secured contracts and received deposits for 5 new systems, completed installation of one in December 2003. They anticipate the other 4 would be installed and recognized by Q1 2004. In Q1 2004, they had $274K revenue and they did install the 4 systems. Also existing customers purchased upgrades.

In our current report dated October 31, 2003, we reported that our independent auditors, Callahan, Johnston & Associates, LLC. choose not to stand for election in 2004, due to their choice to leave public company audits.

Between the two 10-K statements, no insiders sold or bought any stock.

Private placement of stock in April 2003. 150K shares raising $12K dollars (8 cents a share). It was actually a convertable.

The only cash flow from investing was purchase of $5,637 of certificates of deposit.

Four customers were 98% of revenue in both 2002 and 2003.

They had a joint venture with Global Payment Technologies (GPTX) in July 2001. I couldn't find it in GPTX's financial statements, but it might have been too small.

Most departments in the casino industry are already computerized. The
missing link is the table games. Casinos are still using methods for the
confirmation of table game activity that were used over 50 years ago, methods which only loosely tie manager's estimates to the actual table cash count.

MY OPINION: The real intent of Table Trac is 1) the same as the purpose of steamships over sailing ships: get rid of the high expertise needed to do operations (I think I read that in a Peter Drucker book), 2) give management better visibility into what's going on at the table, 3) use database methods of measuring and tracking what's going on with each dealer, player, table, etc.

In the Table Trac system, the dealers needs to use their own personal magnetic strip cards to be able to use the system.

The first beta test was actually in 1995, in a 12 table casino in Kenora, Ontario (not sure if this is it). It ran successfully from installation onward. Not sure if it's still in place, probably not. The first customer installation was June 1996, in a 10 table casino in northern MN. It has been running this whole time and the casino upgraded to additional features/services.

The next customer was the same operator, but in another casino in northern MN in July 1997. The two were linked in Sept 1997. This added the "first of its kind" player tracking. Players could use a single club member's card to earn and redeem points at either casino.

Another install (not sure if it was next) was in L.C.O. Casino in Hayward, Wisc completed on May 26, 1999. They mention the Table Trac system.

Our new TABLE TRAC® system lets you earn points at the tables, as well as the slots.We are pleased to announce that our 3-Card Poker, Let It Ride, Craps & Roulette are up and running. Craps & Roulette are open Wednesdays thru Sundays 6 p.m. to closing.

Table Trac used Micro Dynamics Inc. of Eden Prairie, MN as the manufacturer, which is the same company where the CEO had worked. Founded in 1981 by Glen Shiflet and Mike Brown as an engineering services company, then became a manufacturer. I didn't see anything about Table Trac in their newsletters, but that's to be expected.

Tom Kozlowski joined the company (he is now gone, without any mention?), he had lots of casino management experience.

Mr. Kozlowski is Vice President of Sales and Marketing. Mr. Kozolowski held various table games management positions at Resorts International, Sands, cruise liner "Galileo," and the six ship fleet of High Seas Entertainment in Athens, Greece from 1978 to 1987 when he formed Worldwide Gaming, a consulting firm for several casinos, specializing in marketing and security control. He continued in this position until November, 1998 when he joined Table Trac.

Sally Hoehne owned 47% of the company at this time, but she was already married to Chad.

Joeseph A. Nielsen owned 13% (348K shares).

Joseph A. Nielsen, Mr. Nielsen is the Secretary. Mr. Nielsen was a
securities broker for many years. Mr. Nielsen was self employed as a financial consultant in 1993 until he joined with Mr. Hoehne to form the Company in 1994. During 1996-1997 he was also a financial consultant to Equisure, Inc.

Finally, a related party transaction:

Chad Hoehne, President of the Company, is the principle [sic] of CJSS
Investors, LLC. There have been consulting fees generated by Mr. Hoehne that have been billed through CJSS Investors, LLC. Most of the revenue from the consulting has been remitted to the Company from CJSS Investors, LLC. There is no formal agreement between the Company and CJSS Investors, LLC for the President to perform these services, or to remit proceeds to the Company.

They list all the equity transactions which include a surprising number of people. Here are some notables:

John Priscilla                5/99           10,450         Settlement
Virgil Miller                 5/99            7,950         Settlement
Peter Eckhoff                 5/97              250           Services
Donald McKush                 5/97           12,500           Services
Jeffrey Phelan                5/97           12,500           Services
Chad Hoehne                   5/97           12,500           Services
Robert Siqveland              5/97           12,500           Services
Dan Kaufman                   5/97           20,000           Services
Charles Clayton               5/97           51,250           Services

Dennis Miller                 6/95           51,250           Services
Sally Hoehne                  6/95        1,229,100            $570.00

That last one listed was a good deal for Sally. It's listed as a related party transaction in Note 3.

All the services in 1995 were "legal services and organizational costs". The 1997 services aren't spelled out. The equity statement only shows 91,500 shares issued for services in 1997 which doesn't match the number above. There were also 25K shares issued in lieu of interest in 1997. There was a 1999 circular offering of 273K shares.

5 million shares authorized, no par value. One share, one vote.

Depreciation expenses were $4,888 in 1999, $5,674 in 1998, etc.

Organization costs are amortized over 60 months, straight-line.

AR was 100% due from one customer.

At the time, the Company received office space and furniture from the CEO at no cost.

3,831,534 shares, 4,112,377 diluted.
AR skyrocketed to $128K from $26K.
Deferred revenue liability of $100K appeared.
Equity increased to $98K from $51K

Revenue actually down to $166K from $274K (I wish I knew the split between installation revenue and continuing revenue).
61% of revenue went to AR.
COGS decreased only slightly in comparison.
Operating expense nearly doubled to $114K. This was needed for additional support.
Net income: $33.6K (a bit less than 1 cent per share)

Cash flow from ops was about zero.
No financing, investing was trivial.

8 casinos are 98% of revenues.
Two systems sold in Q1 (four were sold in Q1 2004).

share count unchanged.
Cash jumped up to $107K from $30K.
AR doubled again to $265K
Inventory dropped.
AP dropped to about zero.
Deferred revenue liability jumped another $57K to $157K.
Equity doubled to $236K

Massive increase in revenue to $454K due to new system installations. (again, need split between one-time install revenue and continuing revenue)
COGS jumped to $118K
Gross profit: $336K
Operating expense went up about what I'd expect.
Net profit: $139K (3.4 cents per share diluted)
remember there's no taxes here
Still 30% of revenues went to AR (better than Q1)

Cash flow from ops was $74K (not good, but better)
No finance activity.
Same minor investing activity with warrant conversion (no additional dilution, it's old stuff).
No capex all this time?

Nine customers are 100% of revenues for the 6 months.
Total of 3 system installations for the year.

share count increased to 3,959,034
Cash drops back down to $88K.
AR is up only slightly to $285K, but deferred revenue is gone, so it's worse than it looks.

Equity up to $374K
Revenues increased slightly from Q2 to $462K
COGS remained about the same
Gross profit: $348K
remember, no tax here
Net profit: $138K (3.3 cents per diluted share)
Dilution still remains unchanged.

Negative cash flow from ops during Q3, mostly due to deferred revenue disappearing. So in reality, they're still selling stuff largely on credit.

No financing.
Same investing warrant conversion.

Ten customers (10 casinos total) are 100% of revenues for the 9 months. One new system installed.

Continued efforts to expand the Company's sales through marketing are ongoing. Development to expand the products offered, and expand the functionality of existing products have been ongoing. Predicted revenues from the development efforts in 2004 on new product offerings have been realized in 2005.

So they're saying they made whatever money they're going to make with the current product set?

TBTC, chart, website, sec, make information systems for casinos that sit right on the casino tables. They rely on a patent #5,957,776 which was filed in 1996 (and so would normally expire in 2016) and approved in 2000. Table Trac is the assignee. They just started installing live systems in Q4 2003 and revenues have been ramping up very fast. However, cash flow has been terrible as the casinos have been apparently buying on extremely bad credit terms for TBTC.

2004 10-K incorporated in Nevada. Formed in 1995. Offices in Minnetonka, MN. 3,831,534 shares of stock.

This device sits on the table. It automatically detects the chip inventory in the chip tray and sends a signal if the tray gets too empty or full. It has a "demonination input device for recording cash amounts deposited into a lock box coupled to a gaming table". A remote computer monitors multiple tables. A player's seat position is recorded. The dealer can send a signal to security if a particular player is suspicious for any reason.

This seems like a fairly broad patent and perhaps it could be challenged, I don't know. But generally, the faster this company ramps up revenue, the better the future would be. But most important for defending the business's moat is this:

The Company has also developed related systems for casino management, including promotions administration and delivery systems, self service customer kiosks, marketing analysis, and vault operations module for chip banks, all of which are in use at its customer's facilities.

The systems run on Linux servers with graphical user interfaces (like KDE or GNOME). It has a SQL database server, which makes sense.

The company has 9 years of experience in the industry. As of the 10-K, there were 8 casinos in Minnesota and Wisconsin that had these installed and with contracts.

Table Trac is available for an installation and monthly license fee from the Company for casinos with a minimum number of tables. System sales includes installation, custom system configuration, and training. License and technical support are provided under annual service contract. Custom screens and reports will be designed, if requested by the casino, at additional cost.

The company does its own manufacturing, but could outsource (they should do so eventually). Only 3 full-time employees on Dec 31, 2004. Some possible competition, but nothing equivalent. Three original company customers from back to 1996 upgraded to the new product.

The Company is aware of two companies pursuing a technology which automates player ratings completely. If successfully completed, the company does not expect these systems to compete with Table Trac's solution in the markets it pursues due to a prohibitive product cost that is projected.

This was also in the 2003 10-K.

Chad B. Hoehne, 42, Chairman, CEO, President, Founder. BS in business admin from Mankato State U. Worked for Micro Control Company 1985-1993. Owns 32% of the business, small amount in stock options. Salary of $149K in 2004 (was only $77K before that).

Robert R. Siqveland, 60, Dir of Marketing, Corporate Secretary. Investment advisor and VC for 25 years. Worked for Table Trac for 6 years. 225K shares of options.

Vic Taucer, 50, Director, Consults for over 200 gaming casinos, mostly regarding table games. 26 years experience in the industry. Director of Casino Training for the new Paris resort in Vegas. Casino Training Director and Pit Manager at Ceasers Palace, etc. Professor of Casino Mgmt for a community college in Nevada.

Total outstanding options: 492K (at 13 cents)
Total remaining to be issued: 507K

No related party transactions.

Auditors are Carver Moquist & O'Connor, LLC. Billed $15K for audit services. No other fees. No audit committee (and no audit expert). Going concern qualification by auditors back in 2004 and 2003. The 2005 opinion doesn't have it.

Started out 2003 with 3.6 million shares.
Converted pfd stock into 62.5K shares
Private placement of 150K shares
Nothing else (except the 493K options)

Total assets: $68K
cash: $20K
AR: $26K
patent (net): $16K

Total liabilities: $17K
Equity: $51K

Sales: $595K
gross margins: 85%
SG&A: $400K (up from $266K)
net income: $104K (prior year was $97K loss)

assets and liabilities: ($21K)
deferred revenue: ($89K)
cash flow from ops: $3.2K

Nothing else!

System sales revenue is recognized on installation and title, loss-risk exchange, etc. No amortization. Some support and training is still due from the company.
License and maintenance revenue is recognized ratably over the contract period.
Service revenue is recognized after performed.
R&D is charged when incurred.

Furniture and equipment depreciation is 2-5 years. Hehe, get this, all furniture and fixtures were depreciated at the end of 2001. It's probably fairly old by now. Patent is amortized over 17 years.

A lot of NOLs flowed to shareholders when the company was a subchapter S corp until 1999.

As we see from AR (especially later on), the company grants generous credit to customers. All revenues in 2003 and 2004 were from 8 customers. 2 customers accounted for 78% of revenues and 71% of AR.

Famous last words:

Management believes that receivables are fully collectible. While the ultimate loss may differ, management believes that any additional loss will not have a material impact on the Company's financial position. Due to uncertainties in the collection process, however, it is at least reasonably possible that management's estimate of the outcome will change during the next year.

Operating lease liability for 2005: $13.2K (is this like someone's apartment?)

Massive NOL asset of $323K

(end of 10-K)

TCLL (website, sec), Q3: 94.8 million shares on Nov 10, 2005. Assets are 97% AR. Current ratio is a bit less than 1 (curr liabilities are AP). Shareholder deficit.

Distribution and sale of mobile phones to the global wholesale market. Competitors are Caudwell Group, Hugh Symons Group, Brightpoint, Cellstar.

Revenues increased a gazillion percent: from $4 million to $240 million. 1.2% gross margins (scaled with sales, so it appears real). Barely made a profit. Cash flow from ops is not as bad as you'd expect from the insane AR levels. They acquired Ace Telecom (ugh) with stock this year and ACL Distribution last year. Two subsidiaries filed for bankruptcy. They acquired Discount Intranet Supply Channel Ltd, but they are rescinding it because of poor revenues and high expenses (why didn't you see that before buying it???).

They were hit with a value added tax ("VAT") issue regarding payment of VAT tax "when there was a defaulting trader or a trader using a hijacked VAT number in the chain of supply, even though the trader claiming the refund was in no way involved in, and had no knowledge of, the failure of the defaulting trader to fulfil its obligations." A fraud issue when others are fraudulent. This was all overturned in Feb 2005 and business apparently started up again, which explains the huge jump in revenues.

Our sales are diversified, with no one customer accounting for greater than 50% of our sales.

10-K: UK reverse merger.

Perhaps the company is worth 22 cents, possibly more. The stock is selling for 15 cents.
worth following

TCNH (sec), Homeland security company in Providence, RI. Reverse merger with Genex on Feb 14, 2005... Valentines Day. Going concern qualifier. OK balance sheet but has huge goodwill and lots of PP&E. 48% gross margins. Huge operating loss from large SG&A. Heavy dependence on the government.
not interested

TCOW, now TCX (Amex) Tucows! (sec), Steadily increasing revenues, even in 2002 and 2003. 38% gross margins. 4.8% operating margins. Benefit from taxes in 2005 makes results look better than they are. Really earned about 4 cents a share in 2004 (3 cents in prior years). Balance sheet isn't too bad... has lots of cash. Free cash flow from ops is ok assuming 4 cents earned. Dilution isn't too bad.

Balance sheet gets stronger in Q3 2005. 3 month revenues are lower than 2004. 9 month revenues are a bit higher. They might earn 3 cents this year. Cash flow from ops is pretty good. Issued a pile of new stock. Stock is selling for 84 cents. Probably worth 50 cents. Maybe more.
worth following

TEGY (sec) black check company
not interested

Q3 results
and old Q2 results
press release
Cash increased to $47.1 million from $46.2 million.
AR decreased to $66 million from $77 million.
Inventories decreased to $55 million from $63 million.

Undepreciated PP&E increased by $21 million to $1.56 billion (depreciated by $380 million).

AP increased to $68 million from $49 million.

Equity rose by $15 million during Q3.

Revenue dropped from Q2, but it increased over the prior year. With an agribusiness, you must be cautious in quarter-over-quarter changes.

COGS rose by 5.1% while revenues only rose by 1.2%. Company says it's due to energy costs in the press release.

SG&A is up vs prior year but down vs Q2.
Operating income is $15.8 million vs $23 million prior year.
Net income is $14.4 million on 155 million shares (9.3 cents per share) vs $16.9 million prior year.

9 month net income is $50.7 million (vs $49.9 million prior year).

The net income for 9 months ($50,681,944) doesn't match the net income for 3 months ($14,377,302) plus the Q2 net income for 6 months ($35,919,132) which should equal $50,296,434.

Listed depreciation for 9 months is actually lower than the depreciation shown for 6 months.
Notice the $14.9 million of non-cash compensation. Since this is a positive number, it means the company is compensating someone (employees, vendors?) in something other than cash. Is that right?

They totally screwed up the AR line of cash flow.
On Dec 31, 2004, AR was $75,656,058.
On June 30, 2005, AR was $76,770,796. Q2 cash flow should have ($1,114,738) on the AR line, which it does.
On Sept 30, 2005, AR was $66,012,517. Q3 cash flow should have $9,643,541 on the AR line, meaning AR decreased by this amount. Instead, they show the negative of this number.
Some of the other numbers don't match the changes in assets and liabilities, but it could easily be due to them being partially non-cash based.
Inventories do match (which must match).

Cash provided by operations should be $95,009,764.

Capex is $36.5 million but yet undepreciated PP&E increased by only $21 million. Nothing shows a writedown or sale of the remaining $15.5 million.

The financing is off by exactly $100,000. They claim financing used $100,000 less than it did based on the balance sheet numbers.


I'm out. I dumped the last of my shares this morning. I tolerated the other mistakes YaSheng made here and here and here. But this is too much. When the numbers literally don't add up, it's time to exit. Are they cooking the books? Are they accounting challenged? I have no idea.

Based on the principles I spelled out in the disclaimer, I held off posting this until I was done selling shares. While I did make a profit, I wish I had sold at least some shares when it was well over $5 (which was getting close to my valuation for the stock).

Posco SEC filings
Posco stock chart

Steel company stock prices are low because of it (just like homebuilders). Buffett mentioned something about a highly profitable Korean steel company (it wasn't Posco), so I wondered just how profitable POSCO is and whether it might be worthy of looking at. I did this a week or more ago and I didn't put much effort into it, so it's not all that good, but useful to get a sense of the industry.

Top world steel producers:
World production increased 6.3% in 2005 vs 2004. Everyone just knows this will drop.

What I really need to look at is return on assets and gross margin per ton of steel. Those aren't covered here.

Arcelor
9 month revenue 2005: EU 24.26 million
gross margins: 18.5% (22.3% for flat carbon steel, 21.0% for long carbon steel, 5.8% for stainless alloys and specialty plates)
operating margins: 14.2% (17.7% for flat carbon steel, 16,8% for long carbon steel, 1.8% for stainless alloys and specialty plates)
net margins: 10.7%

US$141 gross profit per ton in Q3.

Mittal
operating margins: 10.9% in Q3, 18.3% in Q2, 26.8% in Q1
net margins: 6.7% in Q3, 14.3% in Q2, 17.8% in Q1

Mittal's charts show ROIC to be close to 30% for Nucor, Mittal, and Posco (in that order).

operating profit per ton dropped from US$114 in Q2 to US$59 in Q3.

Nippon Steel
For the 6 month period from March 31, 2005 to Sept 30, 2005
gross margins are 23%
operating margins are 14.3% (for the full year to Sept 30, 2005 for steel business only)
net margins are 10.5%

US$105 gross margin per ton of steel for year ending Sept 30, 2005.

JFE
not easily obtained

Posco
Q3
gross margins: 29.3%
operating margins: 20.7%
net margins: 19.4%

Q2
gross margins: 36.6%
operating margins: 32.1%
net margins: 23.4%

Q1
gross margins: 36.0%
operating margins: 31.4%
net margins: 23.1%

US$700 gross profit per ton

Shanghai Baosteel
State owned, I didn't find details

U.S. Steel
gross margins: 18.2% in Q2, 23.7% in Q1
operating income: 5.0% in Q3, 11.5% in Q2, 18.2% in Q1
net income: 3.1% in Q3, 6.8% in Q2, 13.0% in Q1

Corus Group
More or less first half 2005 results
operating margin: 9.1%
net margin: 6.3%

Nucor
9 months results
gross margins: 20.1%
operating margin: 15.8%
net margin: 10.2%

Q3 3 month results
gross margins: 19.5%
operating margins: 14.8%
net margins: 5.1%

PRXT (website), developmental stage company with no financial infomration.
not interested

PRYNF (website), internet bingo. stock is selling for $1.30 ask. They're getting listed on the TSX Venture Exchange in Canada. 1.4 million options. 12.6 million shares. 14 million shares fully diluted.

Q3 results: revenues up 60% from prior year, up vs all other quarters.
Assets are cash and AR. Strong balance sheet, no debt. 20% operating margins. Earned 1.9 cents per fully diluted share (3.3 cents for 9 months). Pretty good cash flow from ops. Low capex and depreciation. Great financials.

Director of strategic planning resigned.

Too expensive.
worth following

TARG (website, sec), another freight forwarding company. Unqualified audit opinion. Revenues steadily increasing over the years. 32% gross margins. 2% operating margins. Earned 7 cents diluted in 2005. Low assets relative to revenues, but still only 3.5% return on assets. Assets are mostly AR and goodwill, with some cash. Liabilities are a mix, nearly all current. Current ratio just over 1. Cash flow from ops is great this year, but stunk in prior years.

Q1 2006: earned 2 cents. Results just keep improving due to increasing revenues but also an acquisition. Cash flow from ops is bad. October 2005 was a monster month for them.

This might be worth $1.20 or more. Currently selling for $2.10
worth following

TCAR (website, sec), 10-K incorporated in CO, 7.5 million shares. They sell disposable diapers, "natural formula wipes", etc. via catalogs and health stores. Holds patents. No real competition. Four 10%+ customers. 10 full-time employees. Unqualified audit opinion.

Very weak balance sheet. Assets are buildings, inventories are half as much, and AR is half as much again. Large intangible "brand and trademarks". Almost no equity.

Declining sales. 31% gross margins. Frickin gigantic SG&A. Operational loss. Gain on sale of assets made them appear to make money in 2004. Lawsuit settlement made 2003 look profitable.

Q3 results: Inventories and AR still expanding. Still weak balance sheet. Operational loss for 9 months, but eeked out a profit in Q3 (but lost cash in Q3).
not interested

TCCC (website, sec), medical waste business. They were selling for about 30 cents at the start of November. Now they're at 80 cents. There was some big lawsuit settlement.

Q3 results: Assets are heavily depreciated PP&E, deferred tax, AR, and other stuff. Balance sheet is fair. 41% gross margins. High SG&A costs. Running at a loss for the year. Cash flow is ok. The lawsuit is not clear.
not interested

TCCO (website, sec), voice and data encryption to foreign governments. The latest quarter was entirely domestic sales.

Q3 results: PP&E valued at way more than total assets is almost entirely depreciated. Otherwise, assets are cash and inventories. Very strong balance sheet.

Revenues dropped by almost half. COGS dropped much less. Still they have 64% gross margins. Significant operating loss (was a huge profit in prior year). Even 9 month result has operating loss. Cash flow from ops stinks due to increase in inventories. 90% of sales in 2004 quarter went into Egypt.

Unpredictable revenues (not just lumpy, but totally unpredictable averages).
not interested

TCGN (website, sec), Industrial products in three areas: Eclipse systems spray guns, Clawson ice crushers (hotels, restaurants), Precision Metalform (pens and cosmetic closures). 25 employees.

Eclipse revenues dropped as part of what could be a long term industry decline in the US. Clawson revenues dropped due to the industry trends, but should start back again. Precision is one of only 2 companies who dominate the industry.

Overall, they made money in 2004, lost money in 2005, but operationally it was the reverse. Low margins. Strong balance sheet. Good cash flow from ops due to large depreciation (bad).
not interested