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Sunday, January 08, 2006

another pile of companies

ARKN (sec), management software for car dealerships. CEO owns 21.8% of the stock.

Assets are almost entirely deferred tax asset. Also some capitalized SW costs and AR. Current ratio is slightly more than 1. Mostly equity.

Revenues increasing substantially. 46% gross margins. Lost money in 2005 due to $1 million increase in SG&A and increase in R&D. Huge income tax benefit causes a net income. Cash flow from ops is only $132K. Capex and capitalized SW costs are over $600K.

They've been doing better each year with operating cash flow (but still negative). They've been issuing common and preferred stock to deal with the shortfall.

Q2: Current ratio improves. More PP&E. More AR. Revenues still climbing. Expenses still climbing. $438K operating income for 6 months. Gigantic tax benefit again. I'd assume a normal net income of about $333K. 32 million shares. 8.3 million options and warrants. 40.3 million fully diluted shares. About 1.1 cents really earned in 6 months.

Free cash flow is negative due to AR and capex and capitalized SW development.

I have no idea what this company is worth. I'll bet the market thinks it's worth a lot. I'd say something like 20 cents, maybe. The stock is selling for 72 cents.
worth following (maybe the market will get disillusioned)

AMNF (sec), upscale frozen and refrigerated foods: pesto, sauces, pasta, focaccia, etc. Serial acquirer. CEO owns 12%.

Assets are securities, AR, PP&E, and inventory. Current ratio is very good. Mostly equity. 31% gross margins. 2.5% operating margins. $315K net profit which matches free cash flow closely. 13 million shares, 580K options. 13.6 million fully diluted shares. 2.3 cents per fully diluted share earned. Probably worth about 35 cents. Stock sells for 55 cents.
worth following

ARTNB (sec), water utility in Delaware. 71,000 metered customers, 232,000 people (28% of the state). Main source is groundwater, but they also purchase surface water via interconnections (18%).

Revenues have increased steadily each year, so has operating income.
Net income:
2004: $4.4 million ($1.08)
2003: $3.9 million (96 cents)
2002: $4.2 million ($1.14)
2001: 3.3 million ($1.05)
2000: 2.5 million (78 cents)

The stock is probably worth $18, maybe $20. It's selling for $31.
worth following

VBAC (sec), Veterinary pharm. Revenues have gone up every year since 2000. Net income has been all over the map. They've typically lost money.
not interested

VCAT (sec), Venture Catalyst. I already looked at this when I looked at Table Trac.
not interested

VCYA (sec), distressed asset handlers. Balance sheet is good, but it had to be restated (for the worse, of course). Revenues have been steady. Normally operating earnings are about $250K, but they took a $2.8 million loss on extinguishment of debt and ended up with a $2.6 million loss. HOWEVER, their interest expense kills them every year and they show net losses in the last 3 years.

This year, they've taken on a great deal of additional stuff (and debt). The current ratio dropped to less than 2 (it was huge). For 3 months they earned $225K. For 9 months they earned $484K. 16 million shares. 4 million warrants. Unknown number of options. Earned 1.1 cents diluted in Q3. But cash flow is horrifying. They burned $11 million, most due to buying up consumer receivables (isn't that an investment, not operations). It seems like earnings are going to be whatever they say due to provisions with no history.
not interested

VERA (sec), telecom expense optimization (doing this for 20 years). They work with Avaya, Cisco, EADS, Nortel, NEC, SBC, Sprint, and others. Revenues have declined slowly over the years while they've lost money in 4 out of the last 5 years (only 2003 was slightly profitable).
not interested

VFIN (sec), financial services for high net worth and institutional investors. Sherb is their auditor. Balance sheet is rock solid (cash is greater than all liabilities). 63% equity. $26 million in revenues (vs $24 million prior year). $9 million gross profit (vs $8 million). $1.5 million operating profit (vs $414K). Large gain on forgiveness of debt (which I'll throw out for figuring net income). Very low tax. Under normal conditions, they'd have about $1 million in net income vs about $225K. 40 million shares (has increased rapidly). 19 million options and warrants!!!! Assume 60 million fully diluted shares. This means about 1.67 cents earned in 2004 (almost nothing earned in 2003). Free cash flow matches my estimate of earnings.

Looking ahead to Q3: They lost money in 2005.
not interested

VHSL (sec), vet pharm. Balance sheet is weak (and was weak in prior year). 57% gross margins. Operational loss in 2004. Tiny operational gain in 2003. Also lost money in 2005.
not interested

VIIN (sec), Russian forestry. Cyprus subsidiary, which is a showstopper.
not interested

VKSC (sec), plastic casings for the processed meat industry (i.e. check the margins on this one). 20% gross margins. Went bankrupt. The numbers look like a comodity business without any low-cost leadership.
not interested

VLTA (sec), personal videophones (which I've long argued is only going to be useful for grandmas and for porno). Generally, I expect this functionality to get bundled into existing cellphones and not in some revolutionary product line. These guys have only lost money each year.
not interested

VSCE (sec), no operations.
not interested

VSTN (sec), commercial mortgage brokerage.
not interested

VSYS (sec), access control security products (intercom, emergency communications, elevator control, alarm, etc). Assets are mostly inventory, AR, cash, intangibles, and some equipment. Balance sheet is ok. About half equity. 57% gross margins (yeah, that's the stuff). But expenses increased more than revenues and they had an operating loss (vs income last year). Free cash flow was better, but still negative. Free cash flow was negative last year as well (even with profit). Stock options this year and borrowing last year covered the outflow.

Q3 2005: $105K net income for 9 months (half was in Q3). Free cash flow better, but still negative (large jump in AR). 16 million shares. 3.3 million options. Assume 20 million totally diluted shares. So we're looking at about 0.7 cent per totally diluted share and the company might be worth 10 cents. The stock is selling for 52 cents.

However, these people look honest.
worth following

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