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Monday, February 20, 2006

revisiting companies 10 (finished the cycle)

revisiting companies 1
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revisiting companies 8
revisiting companies 9

DRUG (sec) Stock is at 67 cents. Dragon Pharm. Q3: 63 million shares on Sept 30, 2005. Current ratio improved to slightly less than 1 (but same as last quarter). AR and inventories fairly steady. Assets are mostly PP&E. About 1/3 equity.

Revenues nearly doubled over prior year to $13.3 million, up 17% over Q2. 23% gross margins (down from 27% in Q2). Sizable net loss (more than Q2). For 9 months they have a net income of $1 million. Free cash flow is $1.4 million due to AR. Capex is greater than depreciation (both are very large at $6 million and $4 million). They paid down a related party loan. The stock might be worth... who knows? probably more than 30 cents.

ERIF (sec) Stock is down to around $28.50. Erie Family Life Insurance Company. 94% of their revenues are life insurance. Only 25% of the company is owned by public shareholders. 5 million shares (53.5%) owned by Erie Insurance Exchange, 2 million shares (21.6%) owned by Erie Indemnity Company. Net income per share has been over $3.00 in 2003 and 2004. 1.83% owned by executives and directors. 9.5 million shares on Halloween 2005.

Q3 results: Keep in mind that 82% of their assets are stated at "fair value".
82% of assets are fixed maturity securities and equities.
14.6% equity
put this one in the "too difficult" pile.
stop following

SMID (sec) Stock is around $3.15. Pre-cast concrete products used in construction, utilities, and farming. Q3 results: Assets are mostly AR, PP&E, and inventory. Both AR and inventories are increasing. Balance sheet is reasonably strong. About 40% equity.

Gross margins are 24%. Operating margin is 7.4%. Net margin is 3.7%. 4.6 million shares on Nov 10, 2005. 500K options at end of Sept. Use 5 million fully diluted shares. 4.6 cents per fully diluted share. 23 cents for 9 months.

$854K cash flow from ops (vs 1.2 million net income, 9 months). $645K capex. $68K cash repaid in financing.
return on assets (12.5%) and equity (31%) is good.
stock is probably worth around $4.60.

SPOP (sec) gone in a merger
stop following

SOTK (sec) Stock is at $1.60. New partnership with Sono-Tek nozzles.
Q3 results: period ends Nov 30, 2005.
14.3 million shares on Jan 3, 2006. Up to 1.5 million options. Assume 16 million totally diluted shares.
Assets are inventories, AR, and cash. Current ratio is around 5. $243K net cash.
Revenues unchanged (up for 9 months). Gross margins down to 49%. SG&A down. Operating income of 13%. Zero income tax. Net income of $280K with no tax. Assume about 1.2 cents taxed per totally diluted share for 3 months. Nine month income was roughly in line with this.

Cash flow from ops is half of net income. Capex is 2x depreciation. Repaid line of credit. Got cash from stock options and issue of stock.

An employee embezzled $250K via unauthorized check writing over 3 years.

They sold their first MediSonic patented (mousetrap?) polymer vacuum deposition process thingeemabob. See how sales go in the future.

TBV (sec) Stock is around $4.50.
Q3 results: 71 million shares on Nov 11, 2005.
Very strong balance sheet. Net cash is $30.6 million on total assets of $113 million.

Revenues up a bit to $19 million in 3 months ($50.7 million in 9 months). 73% gross margins. 43% net margin. Only paying 7.7% tax on operating income. Big foreign currency translation gain. Net income (without foreign currency gain) is $8.2 million.

Share count has been rock solid since Dec 2003. Retained earnings has been rising fast.

Cash flow from ops is $5 million lower than net income pretty much due to a $9.8 million not receivable from related party, also $4.5 million in inventory increases. The note receivable is almost certainly payment of revenues. Large $5.2 million capex (deprec is only $1.2 million). Small repayment in financing. Free cash flow of $11 million (was $20 million in prior year). Net cash increase was $10.7 million. Currency translation added $2 million.

Tiens was incorporated in 1990 as Super Shops, then changed names a few times. August 2003, a Chinese reverse merger. Tianshi International was incorporated in Mar 2003, British Virgin Islands. June 2003, Tianshi International acquired 80% of Tainjin Tianshi Biological Development Co. ("Biologicial"). Biological is a Chinese foreign equity joint venture company. Original partners were Tianshi Hong Kong International Development ("THK") which owned 80% of Biological, and Tianshi Engineering ("T-Eng") which owned 20% of Biological. THK is 100% owned by Li Jinyuan. T-Eng is 49% owned by Ms. Li Baolan and 51% owned by Tianshi Group. June 2003, T-Eng transferred it's 20% interest in Biological to Tianshi Pharm. Tianshi International acquired the 80% of Biological from THK (same owner, Li Jinyuan).

So now, Tianshi International is 100% owned by the Tiens. Biological is 80% owned as a subsidiary of the Tiens. Tiens is now 4.91% owned by public shareholders, 2.8% owned by officers, 92.29% owned by Li Jinyuan.

Once again, I'm not comfortable with a company that is controlled by an individual in China despite the fact that it's probably worth over $8.
stop following

TLF (sec) Stock is around $6.50. Tandy Leather Factory.
Q3 results: 10.7 million shares on Nov 10, 2005. Assume about 700K options and warrants. Assume about 12 million totally diluted shares.
Assets are mostly inventory (which is mostly finished goods), with a bit of AR and cash and PP&E. Balance sheet seems reasonably strong. 74% equity.

Revenues up somewhat. 57% gross margins. 7.6% operating margins. 6% net margins. About 10% return on assets. About 5.8 cents per totally diluted share for 3 months.

Zero cash flow from operations due mostly to inventory (which is now 15% over their internal plan). Capex is about 2/3 of depreciation. $505K paid down revolver. $101K paid capital lease obligations. $174K from issuing stock. Everything ate cash.

The 10-K has lots of great financial ratios for the last 3 years.

DXPE (sec) Stock is around $20.
Q3 results: 4.7 million shares on Oct 26, 2005
Assets are mostly AR and inventories. Current ratio is about 2. About 30% equity.

Revenues are flat. 26% gross margins. 2.3% net margin.

Cash flow from ops is weak due to AR. Capex is less than depreciation.

Acquired a business for $2.4 million. Sold $932K in property. Shifted approx $125K from debt to pay down the revolver.

They paid $4 million of employee taxes related to exercising stock options! It isn't enough to give away big chunks of the business, but paying the taxes for the employees is adding insult to injury.
stop following

GDVI (sec) Stock is at 6.3 cents.
Q3 results: period ending Halloween 2005. 149 million shares on Dec 15, 2005. 7 million options and warrants. Assume 175 million shares totally diluted.
Assets are mostly inventories, AR, and PP&E with some IP intangibles. Balance sheet is reasonable. More than half equity.

Revenues are 3x prior year due to three major contracts with So Cal schools (using designs acquired via another company's bankruptcy). 24% gross margin. 4.7% operating margin. Interest expense ate up nearly all the profits.

Cash flow from ops is killed by $1 million increase in inventory. $294K capex with $101K depreciation. $106K repayment of notes payable. $50K from sale of stock.

They had to restate the income statement, reducing revenues and COGS. Gross profit is unchanged.

$11 million totally diluted market cap. A company at full value would be generating $735K per year in free cash flow (or $184K per quarter).

Keep watch on this

USOO (sec) Stock is at $1.32.
Q3 results: 12 million shares on Nov 9, 2005
Assets are almost entirely AR. Weak balance sheet.

Revenues are up. Margins are very low because, although they're a transportation company, they had to purchase a huge amount of transportation. They earned $600K for the quarter. $1.9 million for 9 months.

Cash flow from ops is heavily negative due to [drum roll please] AR! They sold assets for a net gain beyond capex. Borrowed $1.4 million.
stop following

UMCI (sec) Stock is at 6 cents.
They lost a big contract. It was 40% of the company's revenues for 2005 (16% for 2004). The auditors quit before that. They were already losing money or else barely squeaking by.
stop following

LVLT (sec) Ahh, Level 3. The Great Pumpkin.
The plan seems to be progressing as it should. They've seen bandwidth usage double in the last year across the Atlantic and they're adding bandwidth. I think I already covered their Q4 results which were disappointing.

AORGB (sec) Stock is around $56. They're going dark. This is the church organ company I looked at here.
10-K is out. Net income is $4.7 million on increased revenues of $80 million. $4.06 per diluted share. The stock is selling for about what it's worth. Good company, though.

APYM (sec) Stock is around 30 cents.
Q3 results: 35 million shares on Halloween 2005.
Assets are mostly investment in joint venture and "other receivable".
Very weak balance sheet. Huge net loss with almost no revenues (ramping up). Why was I following this?
stop following

ARKN (sec) Stock is around 70 cents. Everything is all screwed up and must be re-stated due to inadequate documentation about how interquarter allocation decisions are made (SOX type stuff).

AMNF (sec) Stock is around 61 cents. Went dark. Nothing new since July 2005. Last looked at it on Jan 8, 2006.

ARTNB (sec) Stock is around $31. Water works. 82K of stock options granted in Dec 2005.
Q3 results: About 4 million shares oustanding on Nov 4, 2005 (class A and B).
Assets are almost entirely the utility plant. About 1/4 equity.

Revenues are up slightly to $11.3 million. 28% operating margins. Interest charges are big. 15% net margins. 41 cents per diluted share for 3 months.

Huge depreciation almost as large as net income. Capex is 5 times higher than the already gigantic depreciation for this year and even more in the prior year! Lots of financing activity: borrowed $10 million to pay a $9 million line of credit. Got advances of $6.6 million for construction. Looks like a lot of expansion going on.

VSYS (sec) Stock is around 47 cents. Auditor resigned.
Q3 results: 16 million shares on Oct 17, 2005.
Assets are nearly all AR and inventory with some cash, intangibles, and PP&E. Current ratio is about 2. Roughly half equity.

Revenues up slightly. 56% gross margin. Almost zero operating margin due to SG&A. Asset changes ate up any cash flow.
stop following

USTG was USTI (sec, website) Went dark. No new financial statements. Wait and see.

SUWN (sec) Stock is around 75 cents. They have a forecast for 2006 and 2007. They expect to get revenues up to $14 to $20 million with net profit increasing to 16% (from 10%). That would mean net profit of about $2.4 million or something approaching 5 cents per share. They're predicting earnings in the range of 6 to 8 cents per share in 1-2 years. So perhaps the stock might end up worth a dollar. It's currently selling for 75 cents. Continue following it.

...and a German newspaper says they don't know what this means!

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