.comment-link {margin-left:.6em;}

Thursday, June 29, 2006

Roller coaster of Luvoo (LVTI)

Today, I'm taking a not-serious look at LVTI (UPDATE, it's here), which is trading on the Pink Sheets on an unsolicited basis. That means it's so far in the dark corners of the market that even the Pink Sheets says they don't know anything about it. No SEC filings. No market maker. But they have a creepy website featuring Carmen Electra (Homer woohoo!s) for dating with lots of pictures of beautiful people on it. 9 women and 1 man. Seems like an online dating website would probably get a lot more men than women...

...we find Lilian
female Cleveland Ohio, USA
I am lilian Carey,25,a mature, intelligent and fun loving Lady i'm from Marlone in wisconsin but was brought up by an uncle in the Cleveland Ohio after the death of my parents in a...
...and Joy
Newport Beach, Balboa Penn; looking to meet someone local. Am a down to earth person, yet professional and look to meet same. It's all about chemistry. True heart he...
If you try to read their FAQ, you get a bunch of Not Found web pages. But elsewhere they say that they charge you a $1 fee on your credit card to become a "verified member".

Ok, so their website doesn't tell me much, except that it seems odd. I mean, check out this chat room. Here are the first 10 names in the list:
misty, jericho, treurigeste, Washtest, ChallengeHer, ritamigeeta, cowboy30, cindylouwho, misty, and um, Twinnie.

Here's the latest press release.
Luvoo.com (PINKSHEETS: LVTI) a growing online dating company is pleased to report a 725 percent increase in subscribers since June 9th which is the day the company became publicly traded. During the first three weeks of being publicly traded, Luvoo.com has exceeded their targets and signed-on over 4,100 online dating subscribers.

Unlike many industries, Luvoo.com's financial model is based on month over month residual revenue from online dating subscribers. Currently, over 60 million Americans are single and could use online dating services. Numbers are greatly larger when factoring in the global online dating experience. Most of these services charge a monthly fee ranging from $12.99 to $29.95. Luvoo.com is FREE for a limited time only. Management projects accelerated residual revenue to follow there after.

Management anticipates a continued acceleration of subscribers and market share due to their national airing on "Access Hollywood," aggressive nationwide marketing, increased celebrity endorsements, affiliate business opportunities and patent pending concepts and technology such as "Verified Member," "Instant Notifier" and "The Luvoo Dating Card."

L Yvonne Vanhoek, President of Luvoo.com, stated, "This is an exciting time for our company. Our 3 week 725 percent increase in subscribers provides further proof of the huge online dating market. We will continue to aggressively market our company and provide unique online dating services for our subscribers."

Another news item, featured today by the way, is some pump-and-fill-in-the-blank promotion of various companies including one of my "favorites", Billy Martin's. Another one talks about a Russian oil business.

The promoter says, "OTC-ADVISORS.COM is a website that profiles stocks of interest. We are not licensed brokers. The information here is believed to be reliable, but not guaranteed to be accurate by OTC-ADVISORS." ...and you can take that to the bank!

They've signed up super-star Pauly Shore. And there were 1.62 million shares shorted (although they don't really show a short interest).

So here's their financial disclosure. It claims 2015 shareholders of record, but the footnote says that this is the 1996 public shareholders representing 7.2 million shares held in Cede & Co. There are 133 million shares outstanding! The share price actually was over a dollar at one point, which would mean the stock briefly had a market cap of $133 million. But don't worry, the price is still above 25 cents, which means a market cap of over $33 million. It had been hovering around 15 cents and far less going back to 2004 when they were "eDollars, Inc." They issued 30 million shares of restricted common and 5 million shares of preferred Class A stock. 500 million shares are authorized.

The company is now run by Doug Wall and Lewis G. Kurtz (who is a director).

Linda Espirito is also Secretary and a director (a certifified tax preparer since 1994).

Lourdes Van Hoek is a director and "is approved by the Bureau for Private Post Secondary and Vocational Education" as the director and head instructor for the Wag My Tail Pet Grooming School. Oddly enough, this has the exact same address as Luvoo. Hopefully they keep the dogs from peeing on the 3 servers. They do have a different phone number (I mean, how silly would that be to answer the phone "Wag my tail petting dating service, how may I help you?"). Also a certified tax preparer. She owns 15 million shares.

Stephen P. Lusko owns over 40 million shares.

Greg Neu owns 40 million shares.

Greg Tannous (notice the link to Wag My Tail) owns 15 million shares.

No accountant or auditor.

3 full-time employees.

In Oct 2004, they discontinued a former online dating software and started this new one. They had Russian programmers working on it. They basically have a window popup thingee that works even when they aren't logged into the website (as if that's a good thing). And members can print out and hand out cards to people they like who then log in to the service. They filed two provisional patents. 1,500 sq ft of office space at $1,500/month. 3 servers.

So with a market cap of over $33 million and 4,100 subscribers, that works out to about $8,000 per subscriber.

Do you realize that this could very well be the most overpriced stock in the entire world??? Not to mention the lack of financial statements. It reminds me of QBID, but without the flair. They should have called the dating service "Wag My Tail".

Wait, I think I can see into the future. I'm seeing a personal ad... "Hi, my name is Spot and I'm just itching to be wit choo. I like long walks and fire hydrants. I dislike postal workers and cats."

You know, I think I'll pass on this one.



UPDATE Friday June 30:
Ok, so they updated their site so it's not nearly-all women anymore. But it's still a creepy website. Oh well. Ichi go ichi e

UPDATE Saturday July 1:
Carmen Electra? Nonsense. Three cheers for tradition! (hat tip instapundit)

The old "doublewide" housing just ain't what it used to be.

Wednesday, June 28, 2006

SunWin (SUWN) launches marketing campaign

SunWin (SUWN yahoo sec website google), which I covered here and here and here and here and here, announced a new marketing campaign (when that link expires, just get it from their website) for their Stevia artificial sweetener, OnlySweet(tm). It's going to be on radio, web ads, TV, billboards. Distribution will be via health food stores, specialty grocery chains, various food chains, and online sales. Should be available in Q4 2006.

Will it succeed? Probably not on any big scale at all, at least not right away. I haven't talked to these guys, so I don't know, but I'm guessing their plan is probably to push for acceptance as a food additive. Right now it's only allowed as a food supplement (sold separately). If stevia catches on in a groundswell and they can get approval, then I'd expect it to be big. But I view that as a total gamble.

Obviously some big players are involved which is why the stock went up so much at the start of the year (and no, it wasn't me, I'm not a big player and I don't own any of their stock). I suppose if I was working with very large amounts of money (hundreds of millions of dollars) then I'd consider putting about 1% of my portolio into it and working with management.

Good luck to those who are involved with it.

BakBone Software (BKBO) Announces More Waiting

In this press release, BKBO announces more delays in getting audited results.
...announced today that it has identified a number of sales transactions in different geographical regions which had product return or exchange rights and which were not previously considered in the Company's historical accounting policies. Accordingly, the Company has determined a detailed review and analysis of these historical sales transactions is required....
The review itself will take 60 days. Then they will, I'm not making this up, "
review the timeline to bring current the Company's outstanding financial statements." In other words, they'll try to figure out when stuff will get done.

That's it. The delays don't bother me all that much. The company's operations seem to be doing ok.

CPI Aerostructures (CVU) gets a shiny star

In this press release, CVU gets a pat on the back from Northrop Grumman.
has been recognized by Northrop Grumman Corporation's (NYSE: NOC - News) Integrated Systems sector as a 2005 Supplier of the Year for its work on the RAMICS and ALMDS programs. This is the first year CPI Aero has been selected as a Supplier of the Year by Northrop Grumman.

CPI Aero was one of eight companies to receive a Supplier of the Year designation in this, the second year of the awards program.
Ok, so that tells us that they're probably pretty good at making this particular customer happy. Wonderful.

We now return to the long, long wait for those big revenues that seem to take forever. I'm sure a lot of investors are feeling like Linus waiting for the Great Pumpkin, if you remember your Charlie Brown comics.

Saturday, June 24, 2006

Strathmore Minerals (STHJF) updated uranium estimate

I've been meaning to do a better estimate of uranium value for Strathmore for some time and now's a good time to do it. I did a lousy post just guessing a year ago.

Strathmore has this table in addition to the details in the links below.

What I'd like to do is discount the amount by the type of resource, do a better adjustment for the cost of extracting the uranium, and account for the grade concentration of the uranium. So first I'll discount by some amount for the type of resource: 10% for measured, 10% for indicated, 10% for determined, 40% for inferred resources, 50% for possible or estimated reserves. Next, I'll assume 65% of that remaining amount can actually be extracted (technically, the higher the price of uranium, the more ore that can be profitably extracted, but at a higher cost). Finally, I'll assign a cost of extraction based on the grade (which is way simplistic, but it's better than a guess). I'll figure that anything less than 1 pound per ton is not worth much. 1-2 pounds per ton might cost $35 per pound to extract. 2-3 pounds per ton might cost $30 per pound to extract. 3-8 pounds per ton might cost $25 per pound to extract. Anything over that might cost $20.

1 tonne is slightly more than 1 ton, so I'll just assume everything is in tons. Most of this stuff is done before the National Instruments 43-101 standard, but I'm going to use the data anyway without modification. It's difficult to know how much this might differ from the current standard.

NOTE: No one has checked these assumptions for sanity and I suspect someone like David Miller would be horrified by it. So remember that this is simply a slightly better guess. Not to mention that I can make basic math mistakes.

Duddridge Lake
Estimate 0.75 million pounds @ 2.14 pounds/ton (but this is widely varying from 9.8% down to typical 0.15%).

RESULT: 0.244 million pounds, cost=$7.3 million to extract.

Dieter Lake
"Possible" resource (quoted from 3rd party source) of about 65 million pounds at 0.25%. (5 pounds per ton). I'm only going to accept about 35% of this instead of 50% and I'm going to assume just over 2 pounds per ton.
The company says OR this could be 50 million tons of ore at 0.10% U3O8. I'm not sure I want to go with that. I'll stick with what I have above.

RESULT: 14.79 million pounds, cost=$444 million to extract.

Athabasca Basin
This is a large area. Strathmore "currently holds the largest land package in the Athabasca Basin", but I don't know if it's the best parts. It's tempting to see the nearby drill results 15km away from Strathmore's property coming up with 21% (420 pounds per ton!) U3O8 across 5 meters, but we know that uranium deposits are highly concentrated and localized. This doesn't tell us much.

RESULT: This is a huge wild card. It could be anything, but considering the experience of the Stathmore team, it's likely to be "a whole lot" (meaning it can't be quantified and is just icing on the cake).

Waterbury Lake
Once again, nearby projects have come up with great reserves, including the Cigar Lake mine (89 million tons of ore at over 15%).

RESULT: Another big wild card.

This is a silver/gold mine. No idea what resources it has or the quality of them.

Another big wild card. It could be very promising. There was exploration done, but Strathmore doesn't say much.

Roco Honda
NI 43-101 compliant resource estimate. They provide some good detail on how the estimate was developed. There was some article I saw that talked about the polygon measurement method. They assume a cutoff grade and then develop a model of the ore within a polygon containing this grade or higher. And the polygon shape has certain requirements as well. This ore is in sandstone is can likely be extracted by ISL methods (cheaper, easier to get approval, can use with smaller amounts of uranium).

Estimate 17.5 million pounds at 0.23% or 4.6 pounds per ton.
Inferred 15.8 million pounds at 0.17% or 3.4 pounds per ton.
I'm discounting both of these by 50% since the inferred resource is based on an estimated resource.

RESULT: 10.82 million pounds, cost=$46 million

Church Rock
NI 43-101 compliant resource estimate.
Measured 3.23 million pounds at 0.10% (2 pounds per ton).
Indicated 8.61 million pounds at 0.09% (just under 2 pounds per ton).
Inferred 3.53 million pounds at 0.09% (just under 2 pounds per ton).

RESULT: 8.31 million pounds, cost=$281 million

Powder River Basin
Demonstrated resource of 2.6 million pounds @ 1.4 pounds per ton.
Inferred resource of 0.625 million pounds @ 1.2 pounds per ton.

RESULT: 2.72 million pounds, cost=$95 million

Cedar Rim
No idea. Assume nothing.

Copper Mountain
Inferred and indicated resource (treat it like an estimate) of...
24.6 million pounds @ 0.54 pounds per ton.
14.4 million pounds @ 0.34 pounds per ton.

RESULT: It doesn't look like this can be extracted using ISL, so I'm writing it all off.

Northeast Wyoming
No idea. Assume nothing.

Pretty much an estimated resource of 15.6 million pounds at an unknown grade. Assume 1 pound per ton.

RESULT: 5.07 million pounds, cost=$177 million.


Total extractable pounds of U3O8: 42 million pounds (plus the various wild cards)
Estimated cost to extract: $1,050 million

At a price of $45 per pound of U3O8, the gross value of the uranium (after cost to extract) becomes $840 million. I say gross value because there's going to be a cost to monetize this beyond the cost of simply extracting the U3O8 out of the ground (anyone doing the actual mining operations will want to earn a significant profit). There's also the time value to consider. But there's also the various wildcard properties to consider.

Let's assume that Strathmore gives up 50% of the profits in exchange for running the mining operations and part of the exploration operations (plus this might cost Strathmore all the cash + short term investments that Strathmore has on hand: roughly $30 million).

I've assumed 100 million totally diluted shares that will eventually be outstanding. If Strathmore gives up half the value of the uranium in order to monetize it, and the price of U3O8 remains at $45 per pound, then it means they're left with $420 million ($4.20 per share) which must then be discounted for time but increased by the value of the wild card properties. Some of the 100 million share dilution might be double counting some of the cost of monetization, but not much.

If the average realized price of uranium at the time of monetization is different, then we multiply the difference by 21 million (half of the uranium since we assume we're giving up half of it in a joint venture to mine it) to get the change in value (which must still be discounted for time and increased by the wild card properties). Since I'm assuming 100 million shares, any difference in assumed U3O8 price would be multiplied by 0.21 and added to (or subtracted from) the stock value. So bumping the U3O8 price assumption to $65 per pound roughly doubles the value of the stock to $8.40.

The most important thing to me is that the value is not less than the current stock price. Taking everything into account in the various posts I've written, I think that's fairly safe (current price is around $1.50). I tend to think that the wild card properties are worth a lot. I also think that Strathmore will likely give up quite a bit in order to monetize the uranium. And I tend to think the average realized price of U3O8 will be significantly higher than $45.

It's very important to note that there are a lot of assumptions going into this stuff.

Update June 27, 2006: After 175 years, Harriet died, having outlived all other animals. It was a sad day.

here's a video of a radio controlled airplane

Sunday, June 18, 2006

Celebrated liberal strategist was a paid shill

I discovered this New York Post article on the Little Green Footballs political blog. Apparently, Jerome Armstrong (a strategist for Howard Dean who wrote the book Crashing the Gate along with the Daily Kos guy) was a paid advocate for BluePoint Linux Software Corp (sec filings, pink sheets) accepting below market shares to write, are you ready for this?, ordinary message board posts over at Raging Bull [I keep fixing the link and it keeps breaking]. Unfortunately, the messages don't go back further than Jan 2005, so you can't easily see what he wrote.
"Armstrong posted over 80 times on the BluePoint message board located on the Raging Bull Web site in the first three weeks [it traded]," reads the complaint, filed by the Securities and Exchange Commission. At no point in any of the 80 posts did Armstrong disclose he was paid for the service, the suit alleged. In fact, The Post has uncovered hundreds of Armstrong posts from 1999 to 2003, many supporting now virtually or entirely worthless stocks. Armstrong denied to The Post that he did anything wrong and said the SEC made a mistake in charging him. "This was a long time ago and I settled the case without admitting or denying guilt, and I paid no fine," said Armstrong, who refused to comment further.
Raging Bull is not exactly a good place to do PR. It's even more hokey than the Yahoo message boards, and they're plenty hokey. Message boards are good for getting info that you then go and verify independently. Just touting or badmouthing a stock ("THIS POS IS GOING TO ZERO YOU LOSERS!!!!!!!!!!!!!!" that sorta thing) is absolutely pointless.

Looking at the 10-K for 2001, I don't see any mention of shares being issued for this purpose. Note 11 a, b, and c have details for issued shares, but they're all for other things.

a) On October 1, 2000, 100,000 shares of common stock, par value of US$0.001 per share, of the Company were issued to an employee for past services rendered to the Group. The issued price was based on the market value of US$2.39 per share on that date, totaling US$239,000 with US$120 as share capital and US$238,900 as additional paid-in capital. The amount was recognized as an expense in 2000.

b) On February 27, 2001, March 14, 2001 and June 28, 2001, 15,000 shares, 5,000 shares and 150,000 shares of common stock, par value of US$0.001 each, respectively, were issued to employees for their past services rendered to the Group. The issued prices were based on the market value of US$0.531, US$0.781, and US$0.850 per share on those respective dates with aggregate of US$170 as share capital and US$139,200 as additional paid-in capital. These amounts were recognized as an expense in the year.

c) In March 2001, the Company reached an agreement with an investor to settle the debt of US$600,100 by issuing 120,000 shares of restricted common stock, par value of US$0.001 per share, at US$5 per share on March 14, 2001 to the investor when the market price was US$0.780 per share. As a result of the issuance of the common stock, an extraordinary gain of US$506,500 was recognized in the year with US$120 as share capital and US$93,480 as additional paid-in capital.
I can see that they issued shares on Dec 12, 2000 to "an Indiana corporation" to serve as counsel. It was 400,000 shares. I looked around a bit and didn't find anything else, but it wasn't an exhaustive search.

Overall, I find it more funny than alarming. And since I've never liked/trusted political types much, it doesn't change my views.

UPDATE 1:50 PM same day:
I fixed the Raging Bulls link. Also, check out the latest financial statement for the company.

They have assets of $514 in cash. They have $530,675 in liabilities, all of it is current (i.e. due within a year). Zero revenues. $2,821 in costs for the quarter which was charged to the company (not subtracted from the cash).
As discussed in note 2 (c) of the Company’s audited financial statements for the year ended December 31, 2005, the Company has suffered recurring losses from operations, has had no revenue generating operations since July 2005 and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern. In light of the situation, the major shareholder and CEO, Mr Xin Liu has pledged to provide funds to maintain the Company as a trading shell. In addition, the related companies and major creditors confirmed that they will not demand repayment from the Company in the near term. The Company has been contemplating practical plans for a business restructuring and/or possible arrangements to raise additional capital funds to support its continuation as a going concern, but there can be no assurance that the Company will be successful in such efforts.
So it's now just a shell company with a lot of liabilities hanging over its head.

And this is a good time for another Japanese video link: dual-DDR (those who don't know DDR won't realize just how difficult this particular feat is). Note: it's not a computer memory thing.

Saturday, June 17, 2006

Notice the Absence of Advertisements?

Every writing has a target audience and this blog is no different. Mr Rogers (yeah, the neighborhood guy) said that when he spoke to the camera, he would imagine a single child that he was talking to. When Warren Buffett writes his famous shareholder letters, he imagines he's writing to a particular relative (his Aunt?). When I write stuff here, I consider it to be written for a great, yet still undiscovered fund manager at Fideliwedbeareedgreenbairdwitter Management Capital Magnesium Partners. You may have heard of them? But there's also Joe Smith from the town of Centerville Mission Diego, Nevada who reads the blog. Like I said here, this is mostly a wholesale source of information, not for garden variety retail investors.

If you combine all the groups of who might read this blog, it's not going to be a lot of people. So I'm not going to make a lot of money from advertising no matter how much of the total available market I manage to get. On the other hand, it would annoy and insult my target audience of investors, something I'm capable of doing all by myself. The net result is clearly negative. I suppose it would make sense to set up my reading list books to get some sort of kickbacks from Amazon, but I doubt it would add up to much. And all of those things are just useless distractions, unlike my links to kitten photos, 175 year old tortoises, and obscure Japanese videos. You've gotta stay focused on what's important.

So you'll find no advertisements here so long as those things above remain true (which will probably be indefinitely).

China Expert Technology (CXTI) amended 2004 10-K

CXTI released an amended 10-K for 2004 and that means it's diff time. Unfortunately, there are so many differences that the diff utility overloads. I don't know if I trust any sort of web diff (salty brine created one). So I'll just do a side-by-side compare of original vs amended 10-K. We knew things were adjusted and reclassified for 2004 based on digging through the 2005 10-K (see Management's - Discussion, restatements).

In Description of Property
"The [Fujian] offices are provided to the Company by Mr. Lai Man Yuk The Company paid $133,404 [was $168,487 in original] being total rental for the offices in the fiscal year 2004 which was predetermined by both parties with reference to market rentals. The operating lease arrangements are cancelable and rentals are paid on a monthly basis."

Here's the reason for the restatement:
As discussed in Note 2 to the consolidated financial statements, the financial statements for the year ended December 31, 2004 and the related notes have been restated in order to properly reflect the compensation for consulting services for the reverse takeover as operating costs and to reclassify certain assets and liabilities. The effect of the adjustments is to reduce the net income for 2004 by $2,940,000 and increase the additional paid-in capital by the same amount. Common stock under the stockholders' equity as of December 31, 2004 as reported in the consolidated balance sheets and the related notes have been restated at $24,414 to reflect the par value of common stock issued and outstanding. 6 Prepaid expenses reported in the consolidated balance sheets and the related notes have been restated by reclassifying $500,000 from non-current assets to current assets, in order to properly present the current and non-current portion of prepaid expenses. Amount due from a former officer as reported in the consolidated balance sheets as of December 31, 2004 has been restated at $2,022,525 and amount due to a former officer has been restated at $2,137,881. They have been restated by reporting the gross amount instead of net amount.
We already know this stuff from the 2005 10-K.

They added this table to the overview:


Tentative Completion Contract Recognized in Recognized in Outstanding
Projects Start Date Date Sum 2003 2004 Contract Sum
Jinjiang (1st Phase) Apr 03 Jan 05 24.7 4.7 17.8 2.2
Dehua (1st Phase) Apr 04 Aug 06 15.6 -- 8.9 6.7
Nan'an Aug 05 Mar 07 14.5 -- -- 14.5


54.8 4.7 26.7 23.4

Remarks: Tentative start date and target completion date may vary from the original contract terms. Contract sum are net of PRC business tax

They removed this stuff:

The Company’s need for capital to commence new e-government projects may have an impact on its short-term liquidity during 2005.

As of December 31, 2004, management is focused on the immediate task of improving the Company's ability to capture the e-government market in China and to continue to provide income stability.

The Company anticipates, based on internal forecasts and assumptions, that it will obtain 2 new contracts in 2005, with estimated contract prices totaling approximately $30 million. Based on that assumption, management is projecting approximately 15% growth on its revenues and profits for the fiscal year ended December 31, 2005.

The table showing margin percentages is different due to the restatements (and be careful, they switched the order of the years in the tables). The breakdown of expenses is a bit different. They added more detail to G&A.
Amortization of prepaid consultancy fees $437,500
Increase in legal and professional fees 67,016
Decrease in financial advisory fees (122,494)
Decrease in payroll expenses (37,899)
Decrease in overseas traveling (24,554)
Decrease in telephone and fax (14,315)
Others (5,704)
Total increase in expenses $299,550

In Liquidity and Capital Resources, this text was added:
The Company required more working capital in terms of accounts receivable because substantial portion of Dehua (1st Phase) was completed and billed near the end of the year. The increase in prepayments and deposits was due to prepaid contract costs during the start-up stage of Dehua (1st Phase), as the Company had arranged prepayments to suppliers for the purchases of hardware on behalf of customers, and down payment to subcontractors for system development during the start-up stage of the project.
Good. Obviously some of the numbers changed due to the restatement. Lots of changed text here.

Management Assumptions were removed (perhaps just moved elsewhere):
The Company anticipates, based on internal forecasts relating to our projects, that existing cash and funds generated from the existing projects will be sufficient to meet working capital and capital expenditure requirements for all our existing projects for the next 12 months. In the event that the Company signs up new contracts, the Company could be required to seek additional financing. There can be no assurance that we will be able to obtain additional financing on terms acceptable to it, or at all.
Some changes in Foreign Exchange Rates text, nothing that seems major, just added CYA posturing.

In the auditor's statement, there were some essentially non-printing changes related to punctuation. Also, "and the related consolidated statements of operations" was changed to "and the related consolidated statements of income". The restatement of Note 2 was signed by the auditors on March 10, 2006.

I went through the consolidated financial statements and they match up with the restated 2004 numbers from the 2005 10-K.

Note 2 is essentially stuff from the 2005 10-K Note 2. I didn't check this exactly via a diff.

Overall, this appears to be what it should be: propagating the restatement details back to the 2004 10-K.

Friday, June 16, 2006

China Expert Technology (CXTI) new SEC filings

There were 3 new SEC filings associated with CXTI today.

First, Barron Partners now owns 1,623,507 shares of CXTI, or 5.8% of the stock. Based on their website, I'm guessing they held/hold some of the toxic convertibles. I went back and checked the older SEC filings, but didn't find them listed.

Next, there was an amended 10-K for 2004 filed. Comparing this to the original 10-K is not easy and I'll cover it in a separate post. It looks like a lot of audit cleanup, some of it might be material.

The last filing is a registration to sell shares associated with the toxic convertables and warrants. 16 million shares exactly. The offer is for $2.25 which is based on the last price on May 31, 2006. Before the offer there were 27,945,837 shares outstanding on May 31, 2006. This offering increases the share count by 16-2.3=13.7 million shares, bringing the total to up to around 42 million shares. The shares can be sold in various ways for up to 2 years. Back here I had picked the number 52 million for the totally diluted share count. That may prove to be a bit low, so I'll increase my totally diluted share count estimate to 65 million.

These shares are being sold by
Alpha Capital AG is selling 2,435,593 shares (they own 4.99% of the stock): 252K from already converted convertible debentures, 1,2 million when convertibles are converted, 980K due to warrants.
DKR Soundshore Oasis Holding Fund is selling 5,091,504 shares (they own 4.99% of the stock): 724K already converted, 2.4 million to be converted, 2.0 million from warrants.
Ellis International is selling 1,207,003 shares (they own 4.31% of the stock): 115K already converted, 602K to be converted, 490K for warrants.
Platinum Partners Advisors is selling 1,240,850 shares (they own 4.44% of the stock): 216K already converted, 241K to be converted, 784K for warrants.
Platinum Partners Long Term Growth is selling 6 million shares (they own 4.99% of the stock): 1 million already converted, 2.8 million to be converted, 2.3 million for warrants.

These groups are selling all of their shares and will own 0% of the stock afterwards, although I'm guessing there could be more convertibles (or less and they don't actually sell this many).
On November 6, 2005, we received a notice of conversion from Ellis International Ltd. Inc for the conversion of 115,128 shares representing an amount equal to $80,000. On November 7, 2005, we received the following notices of conversion: (i) from Alpha Capital AG for the conversion of 251,844 shares of our common stock representing an amount equal to $175,000; (ii) from DKR Soundshore Oasis Holding Fund Ltd. for the conversion of 724,005 shares of our common stock representing an amount equal to $503,111.11; (iii) from Platinum Partners Long Term Growth I, LLC for the conversion of 1,002,426 shares of our common stock representing an amount equal to $696,561; and (iv) from Platinum Partners Advisors, LLC for the conversion of 215,866 shares of our common stock representing an amount equal to $150,000.
So they did convert a bunch of shares during that downturn immediately after the convertibles were announced. Figures.

Wednesday, June 14, 2006

Huge jump in uranium spot price

The spot price of uranium increased by $1.00 again this week! It's now $44.00 (oops, I mean $45.00). Obviously this is good for Strathmore Minerals. I don't know why the price has been going up so fast these last two weeks, but it could be due to the fact that Russia now claims they want to stop supplying the US with cheap uranium under the longstanding deal to downblend HEU from old Soviet warheads into LEU for nuclear power plants. If I recall correctly, this was predicted by the guy who initially did the writeup for Strathmore on the ValueInvestorsClub.com website (find it in the reply #34 on 5/11/2005). Putin and others were frustrated that Russia had signed the agreement with the US, Russia will need uranium for their own nuclear power plants in the planning stage, there's not much mining in Russia going on, and at least some of the LEU was promised to China. Well, it seems to be playing out as expected.

Here's an article worth reading from UxC: The Myth of Excess SWU Capacity (I haven't written much about enrichment here and it's an important consideration).
What would happen if the HEU deal ended? First, there could be a small reduction in SWU supply of perhaps one million SWU per year, since this is the difference between the SWU contained in blended-down HEU and the SWU required to make blendstock. But the larger effect is from the loss of about 6,000 tonnes per year of uranium from HEU. Such a loss would lead to a dramatic increase in uranium prices, which, in turn, would cause utilities to further reduce tails assay and increase demand for SWU. It is likely that neither the uranium nor SWU markets would "clear" under such circumstances.

Of course, the HEU deal also is of crucial importance from a nonproliferation standpoint, and thus more than the nuclear fuel market would suffer if it ended.
That last point is important because we're not just investors, but also people who need to be concerned about the terrible danger of nuclear weapons. I don't think Russia is that stupid. Iran, maybe.

The prices of uranium stocks have been dropping.
Cameco (CCJ)
Dennison (DEN.TO)
USEC (USU) for good reason
SXR Uranium One (SXRFF) I looked at them here.
Uranium Participation (U.TO)
...it's not just a Strathmore thing.

Uranium spot price 15 year chart, very long term price in 2005 dollars vs nominal dollars.

In Other Nuke News

Ontario's Premier, Dalton McGuinty says they have no choice but to accept new nuclear reactors.
"Fifty per cent of our generating capacity at present comes from nuclear and we will not duck this issue. Governments have done that in the past, I refuse to do that," the premier told reporters after an event at the University of Toronto's Hart House.
However, the bad news is that building new reactors there will only replace reactors that will be going offline.

As mentioned above, Russia has balked at continuing to supply uranium at cheap prices to the US (this was in the news last week). This week, they're in talks with the US on terms. Anything outside sales to USEC has a 116% import duty. Anti-dumping (which I've always considered a joke).

TVA is continuing to advance their plans for reactors in Northern Alabama.

And here's a short article on the nuclear industry in general.

UPDATE 6/17/06: I go away for a few minutes to get some split pea soup cooking and come back to find a bazillion people from theStreet.com. James Altucher strikes again.

Gold vs Uranium: right now uranium wins hands down, in my opinion, thanks to the massive difference between supply and demand, not to mention the inelasticity of demand and the long delay for supply to respond to higher prices. Gold is driven by emotion. Uranium is driven by nuclear power plants.

And since I mentioned True Religion brand jeans in the comments, I suppose I should provide a link to where I looked at them (including the photo in question).

And here's more on that new Edgar search engine.

UPDATE June 18/2006:
I want to make one more point about uranium right now and investing in general: The longer your time frame, the less clever you need to be. Lots of other investors know the industry far better than I do. My investment is not based on what events might happen this year, for example. I'm much more concerned about what will happen in the next 5 to 10 years and beyond, where big trends outweigh short term details.

While the price of uranium won't track the price of uranium stocks in the short term (less than two years or so), if things turn out they way I expect them to, then the stock prices will inevitably go up.

Tuesday, June 13, 2006

BakBone Software (BKBO) yet another open letter

BakBone Software (collected entries, website, yahoo, pink sheets, sec) issued yet another open letter to shareholders on May 5, 2006.

They still haven't completed an audit and still don't even know when they will. They had been delisted from the Toronto stock exchange and this press release contains a lot of explanation of what that does and doesn't mean. For people buying shares on the Pink Sheets, it means nothing.

They include some business results in the open letter:

Total worldwide bookings (the dollar value of contracts signed during the period, but the revenue is recognized in a complex formula which is part of why they're having endless trouble getting audited results) for the year ending March 31, 2006 increased 20.5% (to $45.2 million) over 2005. These bookings were for both software licenses and maintenance contracts.

For Q3, total bookings increased 21.6% (to $13.3 million) over the prior Q3.

For Q4, total bookings only increased 7.5% (to $11.5 million) over the prior Q4.

Their cash position decreased to $9.8 million from $14.7 million at the end of Sept due to an acquisition of Constant Data for $5.6 million in cash plus some contingent payments.

They also state:

On the operational front, we are in the process of broadening our product offering with the addition of NetVault:Replicator, the replication technology acquired from Constant Data, and NetVault:Report Manager, BakBone’s advanced reporting technology. As we move into fiscal year 2007, our goal is to continue to grow our VAR and OEM business, increase our maintenance retention rates worldwide, and continue to advance our IDP (Integrated Protection Strategy) product portfolio. Our partnerships with Adaptec, Apple, NCR Teradata and Network Appliance remain important components of our business model, and our goal is to grow and expand these strategic relationships. During the past six months, we have expanded our sales operations in both North America and EMEA (Europe, Middle East and Africa) to include inside sales focused primarily on the growth of our maintenance retention business. To date, we are seeing excellent results, and we will continue to provide support to this group to increase this growing component of our revenue base. Regarding the BakBone management team, Doug Lindroth has joined the Company as its new chief financial officer. Doug comes to BakBone with strong credentials in managing the global financial and legal responsibilities for Memec, the world’s leading specialty semiconductor distributor.
They don't mention total share count. However, this new guy was granted 300K options, 50% vests in April 2008, 25% vests in April 2009, and 25% vests in April 2010. He started the company with zero shares.

The VP of North American Sales has no shares.

The Change of Control agreements with senior management was re-written and the individual agreements are found here. 9 months salary and benefits, accelerated option vesting. In most cases it's 6 months.

John A. Kryzanowski owns 4.7 million shares, who appears to be a "successful stock broker in San Francisco". Yahoo list of insiders.

The stock price has been dropping lately to around $1.50 on the ask. I'm thinking this is a good price now and I'm going to see if I can grab some shares.

UPDATE later that day: I bought some shares.

Monday, June 12, 2006

Mistakes 2

mistakes 1

As far as I can tell, nearly all of my mistakes are "obvious" ones. They never seem to involve missing some tiny fact buried within a contract or some obscure detail. But that doesn't mean I can skip looking at all the details because you just know that as soon as I do, that's where something will be seriously wrong, not to mention that the collection of all the details is what paints the big picture.

No, my mistakes are things that can best be seen by stepping back and looking at the big picture as a whole. Buffett and Munger say this and it seems correct to me. What are the big, long term trends and how do they affect the investment? What are the real characteristics of the management? What things can happen without warning? What's the 2 sentence story of what's going on here?

Here's a true story that's somewhat relevant:
For something like a decade, I commuted a long distance to work along a high-speed highway that was fairly dangerous mostly because of the large amount of time I spent driving on it. I took a step back at one point and considered where were my biggest risks of death and I figured that a severe accident on that road was the overwhelming risk. So I focused a fair amount of effort to reduce it. I spent a lot of commuting time studying the behavior of drivers and trying to figure out the things that can go wrong. After several years, I got to where I could predict fairly accurately when someone was going to do something dangerous. On the very last trip on the very last day, driving home, I realized that after all those years, the risk was finally ending. Of course, then a few minutes later.... For all the worries and preparation, the accident was so minor that there was almost no damage. It clearly wasn't my fault, since the other guy bumped into the back of my car as traffic unexpectedly slowed down. And it would have been worse if I hadn't let my car roll as close as possible to the car in front of me (I could see the guy approaching too fast in the rear-view mirror and gave him as much room as I could).

I believe preparation and focusing on the important things pays off. It is time well spent. For investing, reading about business history, watching lots of companies over time is valuable experience. In the driving example above, time was a liability: every day commuting was another roll of the dice. But time could also become an asset by observing and learning.

Friday, June 09, 2006

Strathmore Buries the Bad News

Strathmore Minerals' latest press release makes a lot of noise about David Miller being appointed to the Board of Directors, which is fine. He's a very sharp guy who knows the industry.

But at the end of the press release, they mumble something about...
In order to make room on the Board for Mr. Miller, Mr. Steven Khan will step down as a Director and will be appointed to the position of Executive Vice President. Mr. Khan will continue in his corporate development role. The Board thanks him for his past contributions as a Director and welcomes him to his new position and continued presence in the company.
So what really happened here is that Khan* left the board. Nandeyanen! I'd consider that to be the big news in this situation. The market agreed with me and punished the stock on Thursday quite a bit.

Miller is good, but Khan was a very significant financial guy. Why did he leave?

UPDATE Sun June 11, 2006: It appears that this blog now shows up on The Truth Laid Bear as the 5,000th most popular blog (the very last one on the list).

* not to be confused with Khan Noonien Singh

Great new EDGAR search feature

RedneckRoleModel on the Motley Fool message board for Berkshire Hathaway posted a link to a new feature on the SEC's EDGAR database of SEC filings. It's still in beta testing, but it works great: search engine.

But that's not the best part. RP99 found the most humorous SEC filing I've ever seen. An amendment to the incorporation of City National Bankshares Corporation, Exhibit 3i:
RESOLVED, a description of such 6% Non-cumulative Perpetual Preferred Stock, Series E, including the preferences and other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions for redemption, all as set by the Board of Direc you fucking new when i asked you liartors of the Corporation, is set forth in the attached Certificate of Designation Establishing the 6% Non-cumulative Perpetual Preferred Stock, Series E and Fixing the Powers, Designations, Preferences and Relative, Participating, Optional and Other Special Rights, and the Qualifications, Limitations and Restrictions, of the 6% Non-cumulative Perpetual Preferred Stock, Series E.
Yes, that is actually in the document submitted to the SEC and posted to the world. They really need to amend that document and change "new" to "knew". Sheesh.

I found a few of my own...

PALM's 10-Q filed on 1/10/2006 says:
Partially offsetting this decrease was an increase in warranty expenses of 1.6 percentage points due to a shit in our product mix towards smartphones.
In a correspondence filed on 5/25/2005 for Euroweb International Corp,
I trust shit has clarified matters. Should you have further questions, please do not hesitate to contact me.
A management agreement for Global Traffic Network Inc filed on 3/15/2006 says:
No modification or waiver of any provision of this Agreement shall be effective unless in writing and signed by the party against whore such modification or waiver is asserted.
And then we have an interesting Letter from the Management Company filed June 24, 2004 to the Chairman and CEO of InterCept, Inc.
I am writing to inform you that we agree with the market's determination that InterCept, Inc. (the "Company") should be worth substantially more with your imminent involuntary extraction from the position of Chief Executive Officer, which we would expect to result from the likely sale of the Company. Accordingly, we have increased our stake in the Company to 1,750,000 shares, 8.6% of the outstanding common valued at approximately $29 million.

As you know from our letter to you dated May 27, 2004, we have grave doubts about your managerial skill, fitness to run a public company and business judgment. All of these criticisms were substantiated by the investigation that we conducted and the numerous examples that were provided. For these reasons and the others identified here and in our prior correspondence, we will be pleased to withhold authority for a vote in favor of your re-election whenever the postponed annual meeting is held.

Unfortunately, your depiction of Third Point Management as a "sleazy hedge fund" in the June 12, 2004 Atlanta Journal-Constitution is totally baseless and possibly libelous. For someone who acquired iBill, a purported "merchant processing business" whose real activity is primarily to provide billing services to hard core pornographic websites, your credibility as moral arbiter is not strong. Perhaps from your vantage point in the porno industry, you find it unsavory that I support a children's cancer hospital (Tomorrow's Children's Fund), education for disadvantaged youth (Prep for Prep), women's rights in third world countries (Equality Now) and numerous other charities. Maybe it is the fact that, since inception, my business has generated over $600 million in profits and provided numerous jobs, which you find offensive.

In any event, calling your second largest shareholder "sleazy" in the media is further evidence of your poor judgment and exemplifies the type of behavior that should provide you with ample opportunity to join your son-in-law on the golf course in the not too distant future.


/s/ Daniel S. Loeb

Daniel S. Loeb
Dude, don't hold back so much.

And then there's this wonderful quote from a letter to the board of The New Germany Fund.
Both Saddam and the directors of The New Germany Fund are guilty of using their power illegitimately to guarantee victory by holding a sham election. Make no mistake. The directors of The New Germany Fund and their corrupt lawyers are not fooling anyone. It is obvious that their real goal is to retain control over the Fund even if shareholders want to elect other persons as directors. Here is a fundamental truth that you and your sleazy lawyers should tattoo on your arms: "It is always in the shareholders' interest to have a fair election."
Give'em hell, Phillip!

UPDATE June 13:
In the comments section, Kurt Preston found a great one here for Wanger Advisors Trust. I mean, how often do you find a limerick in an SEC filing.
A sexy young techie named Fisk,
Had a motion exceedingly brisk.
So fast was his action
The Lorentz contraction
Shortened his rod to a disk.
and he also found this interesting exchange.
At Mr. Stearns’ criminal trial, the government, which had previously seized all of Mr. Stearns’ assets, conclusively proved that not only had he defrauded the investors, but that he had also duped Mr. Wylie and numerous others as part of his scheme. Although Mr. Wylie and his law firm were neither aware of, nor participated in, the ponzi scheme, they were nevertheless sued in a civil action by the defrauded investors.

Tuesday, June 06, 2006

The overall US stock markets are...

...finally not overpriced based on the historic average P/E ratio of stocks and the estimated P/E ratio of the S&P 500. If we look at the numbers, we see that the estimate for core earnings P/E for the year 2006 at 16.54, which is pretty much the historic average of P/E ratios. I prefer the core earnings number since real stock options expenses have grown enormously lately and it's better to use a number which at least attempts to account for them.

Of course this says nothing about earnings in the future, but I would argue that in the long term, they will continue their slow steady march upward at about the same rate as the overall economy. They may grow faster as US listed companies have market share in big fast growing countries like China and India.

It's been more than 10 years since P/E ratios were this low. Buffett has argued that the markets tend to over-correct downward (which argues that stock prices would continue to drop). I would add that the long-term trend (hundred years or so) is for steadily increasing stock P/E ratios, or at least less drastic downturns. That trend rests on how the general population views stocks and the stock market. The trend has gone from viewing it as gambling to viewing it as a vital ownership of the business sector and a key place to park money. I don't see that trend ending as we hold businesses more and more accountable over the decades and as people become more and more savvy about economics and business.

But there's always the possibility of all hell breaking loose and people panicking. But they're a whole lot smarter about things today than 80 years ago.

This page is powered by Blogger. Isn't yours?