Pink Sheets

The ETLT website news section has more details on the E-Sea mammagram clinic work being done by the company.

13,683 women were tested in 2005 [during only 2 months according to the separate press release]. ETLT was paid $5.00 each (total of $68,415). Imagine how much that would cost in the US. $100? This doesn't surprise me. When I was in India, medical costs there were unbelievably low (even by doctors trained in the West and better than most I might find in the US). It would be cheaper for me to fly to India and have a dental root canal and cap done by a top notch dentist than having it done down the street.

Eternal Technologies Group, Inc. (ETLT: OB) (“Eternal”) today announced that by the end of 2005, the last woman who was also the 13683rd one accepted mammary gland examination. More than 5% of the women who took the examination that year showed usual symptoms, and they were transferred to medical specialists for further examinations.

Being equipped with various mammary gland instrumentations and establishing examination stations has been the new profit model for the company. E-SEA has already signed agreement with China Women Primary Healthcare Fund International aiming to provide “China Women Health Project” with its products and to receive examination fees as a better return.

This business model starts with Longgang District, Shenzhen, China, where resides about one million women who have reached childbearing age. Most of them are working class women from all over the country who are low-paid, hard working, and rarely go for health examinations. E-SEA has signed a six-year agreement with local government to provide mammary gland examinations for women in this area. Local health authority pays RMB 40.00(U.S$5.00) for every examination conducted, and sets up health profile for every examined woman. As the government covers the examination fees, women are all willing to accept the examinations. The total examination fees of RMB 540,000.00 (U.S$68,000.00) received from 13,683 examined women is two-month revenue from only one station. Assume every instrumentation has a usage life of 5 years, this could raise RMB 500,000.00 revenue, which is 5 times the selling profit of a single instrumentation.

The corporation values more with the way to sell examination instrumentations through setting up examination stations as it avoids the risk of losing intellectual property rights and copyrights. Moreover, it prevents misdiagnoses from false operations of the instrumentations since all technicians have been properly trained.

In 2006, E-SEA is planning to establish 4 to 6 examination centres. Number of women to be examined will exceed 500,000, which will bring RMB 20 millions revenue for the corporate.

revisiting companies 1
revisiting companies 2
revisiting companies 3
revisiting companies 4
revisiting companies 5
revisiting companies 6
revisiting companies 7

IDIB (sec) Stock is up to 25.5 cents. Q3 Results: Cash is down, AR is up, loaned out money to related parties (partially offset by loans from RPs). Must have done an acquisition because goodwill is doubled. Current ratio fell below 1. More than half equity. Revenues are way down. But SG&A is down even more and they made an operating profit of $329K (loss in prior year). Net profit $196K ($534K for 9 months). 19.5 million shares on Nov 8, 2005. 6 million options on Dec 31, 2004. 4 million warrants (see below). Since no options were granted in 2003 or 2004, assume a totally diluted share count of 30 million shares. Net earnings for Q3 are $0.0065 per totally diluted share, which annualizes to 2.6 cents for a year and the stock might be worth 39 cents.

Cash flow from ops is very solid. Free cash flow is about $700K for 9 months. They invested $1.8 million of cash for Mentoring of America and HG Marketing (plus 2.5 million warrants and assumption of liabilities) and did a small amount of financing via notes payable. The drop in cash is due to the acquisition. The huge drop in SG&A is due to pushing all of this onto HG Marketing. Seems suspicious: seems like the costs haven't disappeared due to efficiency or any positive change, just who is charged for it. This kind of stuff often comes back to bite you in some way (or it's just plain fraud).

There are some complicated terms on the Mentoring of America deal involving escrowed shares and a monthly net income of $150K/month for 24 months.

Lots of other warrants issued for all sorts of stuff. About 1.5 million warrants. This is starting to look bogus. They keep issuing stock and buying stuff but revenues fall.

Also another acquisition of Hire Solutions acquired for 294K shares which could be "put" back to the company, which it was, for cash, but the cash is not due until Hire produces at least $100K of net income (which it hasn't yet).

I don't like what I see here. Too many shenanigans. Not enough business focus. Continue following for a while, but consider dropping it.

MHJ (sec) original post, Stock is down to $5.05 (from $5.50). I had figured it being worth $5.70.

Q2 Results: Revenues and gross profits are unchanged from the prior year. Operating income is more than doubled due to a huge drop in SG&A. They don't have the gain on a real estate sale which was in the prior year and added a one-time jump in profit. Net income is $551K. 5.8 million shares on Nov 14, 2005. 550K dilutive options. Unknown number of anti-dilutive options. Earned 8.7 cents diluted in Q3 (annualizes to 34.7 cents which would make the stock worth $5.21). Free cash flow matches earnings fairly well. Not much else going on besides operations and less than replacement capex.

Independent audit committee board member resigned with a replacement already selected (seems like it wasn't a surprise).

CEO bought 9.6% of the shares of a subsidiary.

MLR (sec) original post. Stock is up to $33.92 (from $18). Q3 Results: (comparing to Q2) Cash is up, AR is down, inventories down, current ratio is still very strong. Equity increased by over $5 million. Revenues are down slightly. Gross margins are higher resulting in higher gross profit. Net income is up somewhat. Earned 47 cents diluted (vs 45 cents). Cash flow from ops is strong (was very weak). Same for free cash flow.

New revolver with good terms. Australian military order is winding down (could have negative impact on the future?). Still, they have a "strong backlog". Negatively impacted by steel price increases.

HOOB (sec) Stock price is $48. The 10-K was released. 270K shares of stock on Dec 20, 2005. Gross profits are flat (pretty much every year). Net income jumped to $547K from $185K due to a drop in general expense and a drop in interest expense.

Medical business was dropped.

Cash flow is mainly generated by their Paramus, NJ real estate which is 100% leased out. Runs until 2012 when The Sports Authority lease expires (that building was acquired in 1971, 62K sq ft, acquired for $718K, $3.6 million capex, $3,6 million mortgage remaining). CompUSA lease expires in 2009 (that building was acquired in 1994, 31K sq vt, acquired for $2.6 million, no capex, no mortgage remaining).

Land is carried at $453K cost. I have no idea what it's worth.

Net rental income has been steady since at least 2001. Earnings per share starting in 2001: 58 cents, 58 cents, 74 cents, 68 cents, $2.03 diluted in 2005. $2.5 million equity.

Cash flow from ops has decreased each year, due largely to purchases of "trading assets" which seems like an investment activity.

Pension liability. Obligation is estimated at $3.2 million and has grown rapidly. The plan is mostly funded and the company has made regular steady contributions keeping it that way. Estimated return on assets is 7% (which is perhaps slightly high, but ok).

They've been buying and retiring treasury stock each year. They've been making approx $450K principal payments on mortgage.

$500K is probably a reasonable estimate of sutainable earnings. So the stock is probably worth $28 plus one-two-hundred-seventy-thousandth of the excess long term estimated value of the land (i.e. the non-bubble value).

HYDI (sec) Stock is up to $1.30 (from $1.15). Q3 Results: 4.6 million shares on Sept 30, 2005. AR is down. Fairly capital intensive. About half equity. Revenues down slightly across the board. Increased net loss. Negative cash flow from ops. Here's an 8-K full of excuses. They're working on new products. I'll wait and see what happens.

HWWI (sec) Stock is up to $1.00. They had lost 40% of their market when their implant business in the US was lost due to FDA changes. They're trying to get it back. I had figured it was worth 75 cents. Q3 Results: Revenues are up but gross profit is down. Expenses are down slightly. Net income is down to $118K (from $170K). 17.4 million shares on Halloween. When accounting for stock options granted, net income drops in half. Cash flow from ops is strong due to a drop in inventories. Will this business ever be predictable?
stop following

BUF previously MNRD (sec) Stock is at $1.85 (mostly unchanged). Q3 Results: 29 million shares on Nov 11, 2005. Cash is way up, but so is AR and inventories (huge expansion here), but not as much in PP&E. Current liabilities are way down. Balance sheet has gone from extremely weak to strong. Half equity (was large deficit). Revenue up somewhat. Larger operating loss. Huge net loss. Even greater burning of cash from ops. Huge influx of capital via preferred shares.

They merged with Technology Acquisition Corp.
stop following

DYSL (sec) Stock is at 87 cents. 10-K for period ending Sept 30, 2005. 3.8 million shares on Dec 12, 2005. 3.2 million options and warrants. High purity synthetic fused silica for optics. They stopped making glass and now just re-sell what others make. They acquired a business which doubled revenues. So I'd look out for low margins. Balance sheet is ok, but AR and inventories went way up (possibly from acquisition). Half equity. 30.6% gross margins, which seems good. 4% operating margins, which seems bad. 3.5% net margins, which is also low. Net income $173K, 2.5 cents per fully diluted share. Cash flow from ops is only $102K (AR and inventories). Free cash flow is close to zero. $768K cash paid for acquisition. Issued a bunch of preferred stock. Added some debt. The stock might be worth 37 cents.

DWVS (sec) Stock is up to 32 cents. Not much new except a resale of 7.5 million shares underlying a $600K convertable note. I had looked at the 10-Q issued on Oct 9, 2005 and decided the company was priced about right.

revisiting companies 1
revisiting companies 2
revisiting companies 3
revisiting companies 4
revisiting companies 5
revisiting companies 6

MRCR (website) Industrial infrastructure products. Stock is at 90 cents. Ghost ship for a while. Q3 results: revenues and net income are both up. Income for 9 months was 19 cents per undiluted share (10 cents for 3 months). No balance sheet info. No cash flow info. The website doesn't have much more.
stop following

GENX (sec) Stock is at 22 cents, unchanged from the prior look at the 10-K and Q3. Nothing new.

JSDA (sec) Stock is way up to $6.28 from $5.32. New CFO. Nothing else new. prior

LWLL (sec) Stock is down to 19 cents from 27 cents. They completed financing of $1.5 million by dilution of something like 32 million shares.
stop following

NROM (sec) Stock is unchanged at about a dollar. They've released some strategy info, but nothing else. prior

NXUS (sec website) stock is down to $7.54 from $8.75. Q3 results: revenues were $10.4 million (huge growth from 2004). Gross margins were 36.8%. They made an operating profit! of $870K (and $7K for 9 months). Net loss of $348K. Balance sheet is very weak with current ratio less than 1/2 and less than 1/7 equity. A 10% increase in revenue would probably give them a net profit (revenue growth from Q2 to Q3 was less than 10%). Positive free cash flow for Q3 of about $900K. They repaid some debt. 170 million shares in 20-F. 18.4 million options outstanding. 77 million warrants outstanding. This appears to be subject to a 1-for-100 reverse stock split meaning the fully diluted share could would be 2.65 million shares. So Q3 free cash flow would be about 34 cents per fully diluted share, but this is probably not sustainable. I have no idea what the stock is worth, but it might be interesting at $5.00. Keep following it.

OHRI (sec) merged with Concentra Operating Corporation.
stop following

OISI (sec) Stock is way up to $1.90 from $1.26. A major shareholder sold a large number of shares, but otherwise no news.

PPDA (sec) Stock is way up to $1.40 from 94 cents. They got a $15 million loan and acquired Charge.com. The interest rate is 17%!!
stop following

PHST (sec) stock went up to $1.80 from $1.60. No news.

EBHC (sec) Eddie Bauer filed registration on Dec 15, 2005 to re-list, but then withdrew it on Jan 25, 2006. They may need to re-state financials. Then they will file again.
worth following

PACI (sec) Stock is unchanged at 80 cents. No news.

PASW (sec) Stock is up to 14 cents (from 11). No news.
stop following

OPTO (sec) Stock is up to $1.25 (from $1.07). Q3 results: 22 million shares on Dec 14. Cash is up, AR is down. Equity is up. Revenue is up slightly. Operating loss for the quarter. Free cash flow is good (positive). Lots of stock options.

OPCO (sec) Stock is up to 54 cents (from 42 cents). They acquired the assets of Pet Zone Products for 3 million shares plus 2.8 million warrants plus $465K plus a $250K 5-year loan, which is roughly costing $3.75 million. I can't tell much about Pet Zone.
prior

PGRA (sec prior) Stock doubled to 2 cents. Previously they had been way late on filings. They filed a 10-K for the period ending Sept 30, 2004, a 10-Q for Dec 31, 2004, a 10-Q for March 31, 2005, and a 10-Q for June 30, 2005.

Looking at the June 30, 2005 10-Q, assets are mostly AR (unchanged from 10-K) and goodwill. PP&E is over 90% depreciated. Current ratio is less than 1. Not much equity. Revenues declined from the year earlier (both 3 and 9 months). Slight operating profit for 3 months,but mostly due to gain on lease termination. Operations generated good cash flow. Capex is nil. Paid off a lot of debt. Stock is not likely to be worth more than 5 cents, but that would be quite a gain.

PCYN (sec) Stock is down to 40 cents (from 55 cents). Q1 results: solid balance sheet. Mostly equity. Revenues up slightly. Very high gross margins. SG&A up even more. Income tax benefit. About 1 cent earnings diluted [actually less]. Free cash flow is also about 1 cent fully diluted (using capex or depreciation, both are low). Paid down related party debt. 8 million shares on Nov 8, 2005. 200K pfd shares (convertable 1for1 to common and with significant dividends in arrears), 300K options. 8.5 million fully diluted shares. Stock might be worth 60 cents. UPDATE Mar 17, 2006: More like it's worth about 35 cents.

NVMH (previously PDSV) (sec) Stock is at $1.50 on the ask. They dismissed the auditors. They're buying up 70% control of Dong Fang Zheng Yi Film & TV Communications Ltd. and Beijing Dong Fang Zheng Yi Film Investment Consulting Co. They produce popular mini-series in China. Total cost is $800K plus 6.2 million shares which translates to roughly $10 million. (prior 8-K)

According to audited financial statements, Dong Fang earned a net income of $661,593 on sales of $2,943,901 for the fiscal year 2004. According to unaudited figures provided by Dong Fang, for the first six months of 2005 the net income reached approximately $719,305 earned on sales totaling $3,279,102. (The figures for the first half of 2005 are subject to final audit and may vary in the final audited report.)

This means they paid a P/E of about 21, which is too high for China.

Q3 2005 results: Balance sheet is extremely strong. $213K net cash out of assets of $260K. Net loss of $5K on revenues of $30K. Cash flow is good. $26K from ops. No capex. No financing. 8 million shares (before the acquisition above).

CKGT (sec) Stock is down to $1.15. Q3 Results: period ending Sept 30, 2005. 17 million shares on Oct 30, 2005. Balance sheet doesn't add up (cash and possibly other current assets are left out). But it looks like a strong balance sheet.

32% gross margins. 24% operating margins. No taxes. $100K foreign currency translation income (which is probably due to $6 million in cash that should be on the balance sheet but was left out). $436K earnings (without currency gain). Earned 2.5 cents per diluted share in 3 months.

Cash flow is terrible (negative) due to inventories and value added tax payables. Borrowed money from a related company. Very low capex relative to depreciation.

The stock might be worth $1.50. Not cheap enough.

INLM (sec) Stock is unchanged at 27 cents. Q3 results: AR increased. Membership lists intangible doubled (odd). Balance sheet reasonably strong. About half equity.

Revenues up slightly. Expenses up. Net income down to $27K (from $113K prior quarter). Earned 1/10 of a cent.
prior

ISCB (sec) Stock is down to $47 (from $53). They acquired part of something through a complex deal. They issued "guidance" for 2006 which doesn't say much. The stock is still probably worth around $40.
prior

IMMD website, Stock is up to 5 cents (from 4.5). Still no audited financials.

IAGX (sec) Stock is down to $2.05 (from $2.55). Q2 Results: AR is down, inventory is up, equity is up. Revenues are double prior year. 42% gross margins. Operating loss due to huge SG&A increase (supposedly non-recurring). Net loss larger than revenues. For 6 months, they generated $168K operating cash flow and sank $110K into informercials and stuff. The non-cash SG&A increase caused $254K cash for exercising stock options and warrants and they paid off $175K in debt to a related party. 11 million shares on Nov 21, 2005 with what looks like another 10 million (at least) in options and warrants. We could say that they have something like $500K earnings on 21 million shares for 6 months (not sure how accurate that is). That would correspond to 4.8 cents per share per year making the stock worth perhaps 71 cents. I might stop following after the dust settles.

IBTGF (sec) Stock sells for 83 cents. They filed their 20-F (Canada, Canadian dollars). Balance sheet is strong. Cash is up. Mostly equity. Revenues are up (as expected). Losses are even greater. Huge capex.

With Strathmore, ETLT, and CXTI all with rising stock prices, now is the time to remind myself what can go wrong with each of these. Each one of these issues has an answer, but I'm not focusing on answers right now, just issues.

Technology for mining has improved over the years and may speed up the process for getting uranium out of the ground as well as minimizing the advantages of experience/skill/knowledge in uranium mining. This allows competitors to add to the global supply quickly.

The price is rising very fast and possibly too soon. It would be better if the price stayed low while Strathmore continued work on the various properties. A high price is bringing everyone out of the woodwork and into the mining business.

It seems like Strathmore will probably end up giving up a lot in order to monetize the uranium in the ground. I'm assuming that for every 2 pounds in the ground, it will cost them 1 just to do joint ventures. And the other pound will probably still have the cost of extraction. Considering the Church Rock results into this, I figure Strathmore has the equivalent of about 1 pound of uranium in the ground for each share.

The U3O8 price could have been artificially driven up too soon due to speculation and investment such as Uranium Participation. What happens if the rapid rise is due to short term accumulation and not to the long term imbalance in supply/demand?

They're planning a gigantic $37 million investment in a new area. This is more money than their entire market cap. This represents a large startup-risk.

E-Sea is not really related to what the company does.

There are some unusual "basic business" red flags.

It seems like the whole Inner Mongolia farm was a mistake.

China could go through some sort of revolution where they could be tempted to trample of the property rights of investors, especially us foreign investors. I'm hearing about a lot of protests and friction (the repeal of the agriculture tax is actually suspicious).

Cash flow could be a real problem for them with new contracts.

The market went wild about the new contract but might have missed two securities offerings (one for 1.2 million shares for contract service and sourcing by Expert Network, one for 800K shares for compensation) that for obvious reasons weren't publicized. This adds dilution.

The financing they got recently wasn't such a good deal for the company.

Contracts run out and need to be replaced with new contracts.

26 million shares were outstanding on Dec 27, 2005. This offering added another 14 million shares (2 million shares were already outstanding). The two offerings above added another 2 million. The results would be 42 million shares. They'll probably earn $12 million or 29 cents per share. Tack on a P/E of 15 and you get a share price of $4.35. But if you figure on more dilution in the future, with some various adjustments for totally vague factors, it would make a value of about $3.75 per share which includes some benefit of being invested in a desirable currency.

Their costs could go up at the end of the contracts due to higher than expected costs of maintenance and bug fixing.

They're capital intensive because they get paid over a long time period and the costs are more front loaded.

UPDATE next day:
OK, so what can go right?

Strathmore: You end up with 1 pound of U3O8 per share which (after accounting for the pound we already gave up to monetize the uranium) might cost another $20 to pull out of the ground. U3O8 currently has a spot price of $37 per pound (it remained the same this week) and will probably go up to say $40. So you end up with each share being worth US$20 ($40 minus $20) when they're selling for US$2. Ten-bagger.

ETLT: On a regular basis in the not-too-distant-future, they'll likely earn $4 million from their legacy operations, another $1.5 million from these clinics they plan to open up, another $1.5 million from the original E-Sea operations. The $37 million investment will likely end up earning them a routine $5 million per year. The result is $12 million in earnings per year (remembering this is as a reasonably competant business in an economy growing at around 10% per year). With 40 million shares, that results in earnings of 30 cents per share. Give them a P/E of 15 and the stock is worth $4.50 per share. Ten-bagger.

UPDATE Jan 29, 2006: In the ETLT quick valuation above, I only added $1.5 million in earnings for E-Sea when they had $1.8 million net earnings after taxes in the 6 months ended June 2005. Given the additional new business model, I'll use $5 million for E-Sea total. This ends up with $14 million in earnings per year, and a stock worth $5.25.

UPDATE Feb 1, 2006: Uranium spot prices ratcheted up 50 cents this week after taking a breather last week. The price is now $37.50. Based on my current estimates, changes in the spot price match 1-for-1 changes in the value of Strathmore. As usual, the industry news includes a few expansionary items and nothing indicating any contraction in long term demand.

UPDATE Feb 2, 2006: See this post for why the ETLT valuation was too high here. It's currently $3.00.

I looked at Sunwin's 10-K and Q2 results and I looked at their auditor and I made fun of their press release.

My conclusion:

Due to issues with the auditors here, I would need more margin of safety for this company. Right now it's selling for what I'd consider to be a P/E of about 15. The company has been growing and they're putting a lot of investment into the business. But things can and do go wrong. I consider this to be only semi-audited, at best.

Sunwin issued this press release which says nothing. I haven't seen anything to change my mind about Sunwin as an investment. It was selling for a P/E of about 15 and any increase in price would be based on assumptions about the future. And if anything, the deal with Alan Stone & Co made me think even less of them.

The stock has doubled since I looked at it on Jan 1, 2006. There are a lot of other Chinese stocks that I'd say were selling cheaper than Sunwin. I guess Sunwin got their $20,000 worth of visibility with Alan Stone & Co.

UPDATE Jan 30, 2006: Ok, so now the stock has more than tripled.

I just happened to catch this press release about 10 minutes after it came out.

The initial clinic is located in Shenzhen and has been open for two months. During this period, the Company netted approximately $68,000 (or over $400,000 on an annual basis). All of the fees for the Company's services are paid by local government agencies. The Company hopes to open four (4) to six (6) additional clinics during the current fiscal year which should produce an additional $2,000,000 -- $3,000,000 of revenue at very little cost.

With about 40 million shares outstanding, this would mean something along the lines of an additional 4 cents per share profit which we would expect to increase the value of the shares by about 60 cents while the shares are selling for less than 40 cents.

UPDATE Wed Jan 25, 2006: Looks like the market finally noticed. The price went up to 48 cents and fell back a bit.

revisiting companies 1
revisiting companies 2
revisiting companies 3
revisiting companies 4
revisiting companies 5

Symbols being followed:
HEMA, HFIT, HNNA, MPAA, MPAD, MTWD, MHCO, SAUP, AVEE, GDVI, GNCI, GNCMB, GNSM, GLMA, PKX, HCAR, BKBO, BAWC, BWTL, BLLD, BURCA, BUKS, YIWA, SHFK, ADY, BABB, CBBT, QBID, CEEC, CITY, BGII, BONL, TELT, MRCR, GENX, JSDA, LWLL, NROM, NXUSF, OHRI, OISI, PPDA, PHST, PACI, PASW, OPTO, OPCO, PGRA, PCYN, PDSV, CKGT, INLM, ISCB, IMMD, IAGX, IBTGF, IDIB, MHJ, MLR, HOOB, HYDI, HWWI, MNRD, DYSL, HRBN, DWVS, DYHP, DTGLF, FAME, GACF, GBEL, GARM, DAAT, DAOU, DDSI, DEWY, DFNS, DNII, DSCI, DYNR, DRUG, EBHC, EPLN, ERIF, SMID, SPOP, SOTK, TBV, TLF, DXPE, GDVI, USOO, UMCI, LVLT, AORGB, APYM, ARKN, AMNF, ARTNB, VSYS, USTI, SUWN

HEMA (sec) Stock unchanged at around $1.70. No news. Prior.

HFIT (sec) Stock is up from around $2.00 to around $2.60. They're offering 6.6 million shares with a prospectus. They acquired healthCalc.net for $4 million and 847K shares of stock. Are they acquisition-happy? Prior.

HNNA (sec) Stock is up slightly. 10-K is out. 2.5 million shares. Their mutual funds have fairly crappy performance in my view although they beat the S&P 500. They had earned 93 cents in 9 months and earned another 27 cents in Q4 for a total of $1.20 diluted for the year. P/E of 15 would be a stock price of $18. Selling for $28.

MPAA (sec) Stock is about the same. Q3 results: Revenues up 18.8%. Gross margins increased. Operating income was down 10.5% due to G&A, they said it was due to SEC review of filings and SOX. Net income was down to 19 cents for Q3, 4 cents for 6 months. Cash flow from ops was terrible due to a huge increase in inventory, also inventory returned, and credit due customer.

MPAD (sec) Stock is up over 30%. Nothing new except a special dividend of 15 cents.

MTWD (sec) Stock is down somewhat. Q3 results: strong balance sheet. Gross margins 44% vs 55% in prior year. Operating expenses went up due to advertising, license and permits, rent, and some other stuff. Net income was fairly close to prior year, but less. Cash flow from ops improved, but still below earnings. Free cash flow is about half of earnings. Earnings were 1 cent. Stock is around $1.00. Overpriced.

MHCO (sec) Stock is up slightly.

MIOK (website) Stock is way up to $1.50 from 50 cents (it was over $2.00 for a while). Here was what I said about them: "they're making a cheap GPS system, which is good, but I fear that the big companies will duplicate what they're doing and do it even cheaper with large volume." Their most recent financial report is for June 30, 2005.
stop following

AVEE (sec) Stock is up. Nothing new.

GDVI (sec) Stock is down, but not enough, best ask is 7.4 cents. Probably worth only 8 cents. Q2 results are out. Revenues are way up. Net margin is very low. Earned a quarter of a cent for 6 months.

GNCMB (sec) Stock is unchanged with best ask at $11.00. They're investing $29 million in Alaska DigiTel. A board member is retiring with their son taking over the role. There's still a lot of stuff here that I'm not looking at, maybe waiting for a price drop.

GNSM (sec) Stock price is about the same. No news.

GLMA (sec) Stock price is down from $1.70 to $1.55. The 10-K is out. 2.2 million shares, 55K options outstanding. Current ratio is now > 1. Equity is up. Revenues are up. Gross margins are down (and only 15.8%). SG&A is about the same. Net margins are only 0.5%. Earnings are 4.5 cents totally diluted. Cash flow from ops is negative. Capex is large.

They acquired a marine boat mold company in mid 2005. Q4 earnings were lower than the average of Q1-Q3.

PKX (sec) Stock is about the same. I recall they had a bad quarter and some issues.

HCAR (sec) Stock is down somewhat, but not below the $1.20 value I had estimated. They're buying Nissan of Natick (Mass) for $2 million plus inventory, parts, and tools.

BKBO (sec) Stock is down and I've been looking at this one. The Toronto exchange will probably drop them, but it doesn't affect the pink sheets stock. Also, they're going to acquire Constant Data for $5 million cash and contingent payments of about half a million.

BAWC (sec) Stock is more or less up. The Q3 came out right after I last looked at it. Balance sheet is about the same but revenues are way down. Operating loss, but not as bad as last year. Free cash flow is about the same. Their cash flow statement doesn't seem to add up.

BWTL (sec) Stock jumped back up to $1.94 from around $1.50. Auditors left. Revenues are way up but that's due to increased gas prices (restaurant sales decreased 9%). Net margin is nearly zero for Q3 in both years. Cash flows look ok.

Net income for 9 months increased from $384K to $495K and that's only because of the increased gas price. The costs associated with the new travel center are probably merely the costs needed to stand still in market share. Earned 10.8 cents per diluted share for 9 months. Perhaps the stock is worth $2.10.

New travel center (Picacho, AZ) opened Jan 18, 2005. It will replace an existing travel center (which had negative 38% comps due to the new store). Negative impact even in Q3 ending Oct (depreciation). Merchandise sales: $253K. Gasoline sales: $491K.

BLLD (sec) Stock is down somewhat to $1.11. They're late filing the latest 10-Q, no good reason given. Bulldog Mexico started operations and has teamed up with a Mexican VAR and another Mexican company supplying various stuff (fleet communications, satellite mapping, microscopes, etc).

Primary among immediate opportunities for the Bulldog/Irosa partnership is the soon to be passed Mexican Customs regulation requiring electronic cargo container security seals and GPS tracking devices on the border crossing points (Tijuana to Matamoros), the logistic corridor (Manzanillo-Kansas City ) and for the PITEX Program (temporary imports program for exports). Both a security and a customs revenue tracking mandate, this initiative calls for a dual purpose device that is affordable for transportation companies while providing complete transparency of cargo status and manifest integrity. To date, the patented Bulldog RoadBOSS™ GTS and YardBOSS™ are the only devices that are able to offer this functionality.

New prospectus. for 6.4 million shares of stock. These are being resold, not new shares (except for some warrants associated with an Aug 29 private placement and April 13, 2004 private placement). 24 million shares outstanding on Nov 1, 2005. This appears to be the same as the prospectus of Oct 12, 2005 prior.

BURCA (website) Stock is down slightly to $22.25. No news since the Q3 results in the prior revisit. Still not cheap enough.

BUKS (sec) Stock is way up to 51 cents from 34 cents (which was down from 50 cents). These are the Learjet upgraders. Their 10-Q is out for the quarter ending Halloween and the proxy is out. Condensed results show revenues and profits down.

YIWA (sec) Stock has tanked to 8 cents on the ask from 28 cents. They never released Q3 results, their website has expired, there's no news. This is very troubling. I want to continue following it just to see what happens.

SHFK (sec website) Stock is up a bit to $7.00. They're going dark. Nothing new, next expected statement should be the annual report on their website. Wait and see what that looks like.

ADY (sec) Stock nearly doubled to $12. It took off in early January when the company issued a press release giving financial expectations for the year of at least 70 cents earnings per share. And they expect 2006 to be nearly double that. They're hyping the stock now on US television. I suspect the stock will never be cheap again, but who knows.

BABB (sec) Stock is down to $1.09. No news.

CBBT (sec) Stock is way up to $10.00 from $6.50. The 10-K came out. They obviously added capital from the prior year, but they also had significant earnings. Revenues are way up. They earned 32 cents diluted for the year (11 cents in Q4), but cash flow from ops is way negative due to AR. So a lot of those revenues are financed sales. Also enormous capex (10 times depreciation) which is not surprising since they're doing serious investment now.

QBID and now for comic relief. The stock continues its long downward plunge. The best ask is now 1/50 of a cent. There are 1.3 billion shares outstanding so the market cap is around a quarter of a million dollars. But don't get too excited; these people do not seem the least bit business savvy. Consider this press release:

Triangle Multi-Media (Pink Sheets:QBID) announced today that, in accordance with SAAG, Triangle Multi-Media will start accounting for Q Television Network as a 100% wholly owned subsidiary. This means Triangle Multi-Media common shareholders own one hundred percent of Q Television Network's (QTN) total asset base, including its contracts with Time Warner, Cox Communications, RCN and Australia's SelecTV, as well as advertising revenue, tangible property, subscriber base and an independent audited film library worth over several hundred million dollars.... QTN will be accounted for as a wholly owned subsidiary of Triangle Multi-Media in accordance with SAAG.

SAAG! Haha. I knew they'd continue to provide comic relief. They corrected it later.

BURBANK, Calif., Jan 10, 2006 (BUSINESS WIRE) -- First graph, first sentence and second graph, second sentence of release should read xxx in accordance with GAAP (sted in accordance with SAAG).

The corrected release reads:
[rest of press release follows]

Keep making mistakes and correcting them. You're only helping out Warren Buffett (Berkshire now owns Business Wire).

And once again, they only sound stupid when they claim the film library is worth "several hundred million dollars". Any reasonable financial person would know that to make that sort of claim about something fairly intangible like a film library, you need something to back it up with, especially when it's an outrageously high number like that. Consider this: "several hundred million dollars" would be at least $300 million, right? So it would need to generate a net revenue stream of at least 4% of that, or $12 million per year. Something tells me they aren't pulling in $12 million per year from their films.

Ok, so Triangle Multi-Media issued this distress release:

Migrating its programming service from major urban markets to middle America, Q Television Network (Pink Sheets:QBID) has announced its launch on the Time Warner Cable Nebraska system, servicing the Lincoln area and the seven colleges and universities in the marketplace. Lincoln area cable subscribers will be able to sign on for QTN's live, original, gay and lesbian programming as a 24/7 premium network, carried on channel 392 effective immediately, for a monthly fee of $7.95.

Ok, so let's say 3% of Lincoln, Nebraskans identify with the gay and lesbian scene. We'll even bump that up to 5% considering it's not too far from Brokeback Mountain, Wyoming. Lincoln has a population of 226K and since we're talking about the greater metro area, we'll bump that up to 350K. So the total available market (TAM) is 1,500 people. Of course we need to assume some of those people are married, I mean in civil unions of some sort, so we'll say 1,100 households to be optimistic. I seriously doubt they'll get more than 25% of those households to sign up, which is still being optimistic. This means they might have revenues of $2,186/month before subtracting off whatever the cable company takes. So I'd be surprised if this is even $1,000/month of revenues, which is nothing when you're sitting on a film library worth "several hundred million dollars". But wait, in the press release, they claim:

The addition of Lincoln will extend QTN's reach by approximately 3 million digital cable households.

The entire population of Nebraska is only about half that much, and that's assuming each person is a household and has cable. They probably meant to say to 3 million, since they have Houston, parts of NY and NJ, and Maine.

Let's do the math for 3 million households. Realistic TAM is about 100,000 households. And now we need to be fairly conservative, so we'll say that about 10% of those households sign up for QTN and that QBID makes about $4 per subscriber. That's $40,000/month or about half a million dollars per year in revenue.

CEEC (sec) Stock is unchanged at 25 cents. CEO resigned but will act as advisor to the company.

BGII (website) Stock is up to 66 cents (from 40 cents). Q4 results: Revenues are double last year's revenues. Earnings are expected at 8 cents undiluted. Remember that these people had an SEC investigation in 2002. They had their gambling machines seized in 2001 and 2002.

AMEN (sec) Stock is down slightly. Q3 results: Balance sheet is very strong. They started getting retail electricity revenues. They have an operating loss for the quarter and for the year.
stop following

BONL (website) Q2 results: A lot more cash on the balance sheet. AR and inventory are higher. Current ratio is still insanely high. Nearly all equity.

Revenues are up significantly. For 6 months: Gross margins are 74% (actually down from 76%). 23% operating margin (up from 20% due to a 36% increase in revenue from prior year). Net margin 17% (up from 16%). 9 cents diluted for 6 months. Share count unchanged.

No cash flow statement.

Unit sales volume has seen a 79% increase due to an increased volume of lower priced units sold in the first half of the year compared to last year in same six month period.

Foreign sales are continuing to be strong at 38.5% of unit volume.

"Our subsidiary, Bonal Technologies is continuing to grow in both US and foreign sales. We are happy with our results," said A. George Hebel, III, chairman of Bonal International. "We're also pleased to report that our new products Black Magic(R), for distortion control, and Pulse Puddle Arc Welding(R) are continuing to represent a good portion of our growth."

TELT (sec) Stock is up to 58 cents from 48 cents. No news.

visual financial statement format

cash flow three card monte (CF3CM): shifting portions of operations related receivables into long term receivables, notes receivable, floor-plan notes, leases receivable, or franchises receivable AND moving changes in those accounts into cash flows from investing rather than cash flows from operations. See this post for details.

diff output: diff is a utility which compares two files for differences, which is an important thing to do when a company releases an amended financial statement such as a 10-K/A. Using the -u option, the first character of each line determines what the line contains. A line starting with @ (actually two of them) specifies the locations in each of the files, don't worry about this too much except that each time you see one, you're looking at a new place in the two files. A line starting with "-" shows something that exists in the original file but not in the updated one. Likewise, a line starting with "+" shows something in the updated file and not in the original. A line starting with a space " " is just a reference point and is the same in both files (don't be fooled by these, thinking that it's part of the difference).

Example (the first two lines below specify the files being compared):

--- 10-K    2006-03-25 09:29:00 -0500
+++ 10-K/A  2006-03-22 08:15:00  0500
@@ -1,3 +1,3 @@
Cheatem and Run, Inc.
-10K issued by cheatem-and-run-dot-com
-we are lying to you
+10K/A issued by cheatem-and-run-dot-com
+we are not lying to you

In this case, the only two changes are that they changed "we are lying to you" to say "we are not lying to you" which is an important change, and that it's a 10-K/A now instead of a 10-K which is not an important change (it's obviously going to be changed).

diluted shares: number of diluted shares claimed by the company.

distress release: a press release containing information so underwhelming that it's actually bad news. Example: "XYZ Corporation announced that most of its employees showed up for work today."

Fardo principle: states that all non-financial management believes they're doing better than the accounts show. Therefore, if this management is allowed to use their judgement in reporting results, it will nearly always be overly optimistic. [named after the esteemed Elias Fardo who apparently developed the principle]

fully diluted shares: number of outstanding shares plus the total number of outstanding warrants and options.

ghost pirates: a "company" without viable operations which tries to acquire operations to have an excuse to draw a salary from the corporation, typically churning through multiple business failures.

ghost ship: a company without clear direction and leadership, usually coasting off prior success.

GRAAP: a hypothetical accounting system similar to GAAP, but much more flexible and open to the opinions of management. GRAAP based results are oddly always far superior to the same results stated using GAAP due to the Fardo effect: "...at the heart of every non-financial management person is the quiet belief that they are really doing much better than the accounts show." -- Elias Fardo --

local royalty: people who have lived in a small geographic area for a long time and have become highly respected within the community. Conflict can arise when global competition enters the geographic area since it's almost always more effective/productive/responsive/etc. than the locals. The local royalty has the advantage of having a strong reputation (built over a long time period) to protect, making them often more trustworthy. They also usually understand the local market better.

mousetrap: a company which is betting its future on some gimmick, usually patented. These are rarely successful because the business leaders are too focused on their fancy solution and not on the customers' problems.

plate-o-shrimp: an unrecognized cause of two otherwise coincidental events, often where those two events are incorrectly assigned some direct cause-and-effect relationship. The name comes from the movie Repo Man where the character Miller says, "suppose you're thinkin' about a plate o' shrimp. Suddenly someone'll say, like, plate, or shrimp, or plate o' shrimp out of the blue, no explanation. No point in lookin' for one, either. It's all part of a cosmic unconciousness." Later in the movie you see a sign in the background advertising a "Plate o' Shrimp" for $2.95 (which one could assume caused a coincidence involving a plate of shrimp). When confronted with a surprising coincidence or an unlikely cause-and-effect relationship, it's important to always look for the missing "plate o' shrimp" (i.e. unrecognized common cause of both events).

Example: I pride myself on having solved the "It's always Thursday" syndrome (mostly just because I recognized it as a plate-o-shrimp situation). Several co-workers years ago had this humorous theory that it's always Thursday because whenever someone would ask "What day is it?" and the answer would always be "Thursday!" Here's the plate-o-shrimp: On Mondays or Fridays you'll never ask what day it is because it will be obvious. Tuesday you still pretty much know what day it is. By Wednesday, you're starting to lose track. And by Thursday, you do lose track and you have to ask and the answer is: Thursday! This is obvious if you change "It's always Thursday" to "I'm always awake and never sleeping." [Is this related to the Zen assertion that people are more self-aware when their thought patterns follow unusual routes?]

serial acquirer: a company which compulsively buys other companies for no good reason.

totally diluted shares: total expected number of diluted shares some time in the distant future when I'd be selling the stock at full price.

underpants gnomes: a business with a compeletely flawed business plan without any clear idea of how to make a profit (see here for details).

In 1999, I made the prediction that generalized news would disappear and be replaced by "narrowband" and local news only. By narrowband, I mean news about a very specific industry like video games or home improvement technology. By local news, I meant news about your local geographic area.

That means the LA Times, for example, might be 75% about what's going on within the Los Angeles metro area, 20% about big things going on in California, and 5% about even bigger things going on in the Western US (mostly in how these things affect Los Angeles).

So if there's an earthquake in Central California, the LA Times might have a detailed article about an aquaduct feeding into LA being damaged but not about the earthquake itself. It would have links to (yes, this would mostly be online and not printed paper) the local news sites where the earthquake struck as well as geological news sites which cover earthquakes in general. It might link into Washington DC news sites that cover whether the president will declare the area a disaster area and provide funding.

I'd expect all news sources of the future to have two parts.

1. Gathering of news in their own small area of expertise (local geography and/or narrow subject).
2. Gathering all the needed links to relevant sources for each news item.

This is very much how blogs are evolving right now. So it may be that newspapers, television news, and generalized news magazines are going the way of the horse and buggy... well they definitely will if they don't adapt.

Here's a great article which talks in excellent pragmatic detail about how to transform local newspapers and why.

So I believe the best plan of investment is to watch for any well-run news organizations which make these changes aggressively.

Every now and then, something big happens which turns out to be hugely influential, only to fade into obscurity over time. The Columbian Exposition of 1893 was responsible for the creation of, introduction of, or inspiration for all of the following: hamburgers, carbonated soft drinks, the "cafeteria", the ferris wheel, the carnival midway, the theme park, Dvorak's New World Symphony, Scott Joplin's "ragtime", the 20th Century's museums of science and industry, practical AC electrical power, a precursor to flourescent lighting, motion pictures, the coin operated phonograph (aka jukebox), the indoor artificial ice rink, Emerald City in The Wizard of Oz, Disneyland (Walt's father was a construction worker on some of the buildings), Aunt Jemima pancakes, Cracker Jack, Cream of Wheat, Quaker Oats, elongated coins, Juicy Fruit chewing gum, the first US commemorative stamp set, the first USPS picture postcards, the first US commemorative coins, and of course Little Egypt. The moving sidewalk would have to wait several years before it was worked consistently.

In addition, the populace of the west got its first glimpse into the culture of Japan, which had been completely closed to the west until just 40 years earlier (the Tokugawa Shogunate had closed Japan to the West for 200 years). Who would have predicted where Japan would be 100 years later? or 50 years later, for that matter. Sadly, the Japanese Phoenix House was burned by "vandals" during WWII. At the exposition, it was pretty clear where Germany was heading: there were an insane number of giant Krupp cannons.

Most important of all... it actually made a profit, although some people didn't think that was a noble cause.

The object of the Fair is now frankly proclaimed to be that of making as much money for its stockholders as possible. Amusement, of cheap and even vulgar sorts, is being substituted for education, because most people prefer being amused to being instructed.

Lots of respectable people didn't like the midway. I wonder what they would have thought about the Internet?

UPDATE in response to no one and nothing in particular:
At a time when it seems like just about everyone is apologizing for the crimes of Western Civilization, I feel like I'm its only true believer. I will not apologize for something that has greatly lengthened the lives of, improved the efficiency in the use of resources by, improved the living standards of, increased the knowledge and education of, increased the productivity of, increased the choices for, increased the justice experienced by all of those who participate in it: If you take every single person born into Western Civilization in the last 100 years (or even anyone captured into it or adopting it voluntarily) and match them up with a equal sized group outside of Western Civilization from any single time period (i.e. no cherry picking), it will be extremely easy to match them so that every single "civilian" has a life preferable to the matching non-"civilian".

Along with that, I believe it's important that we continuously improve the world we live in. Not by arrogantly tearing down what others before us have built, but by adding improvements when we see something that can be added. As someone said, civilizations die by suicide, not by murder.

ANOTHER UPDATE: A Wall Street Journal editorial (registration probably required) looks at a poll within various countries seeking how many people agree with the statement, "the free enterprise system and free market economy is the best system on which to base the future of the world." Who's at the top of the list? China with 74% (the US is at 71%). Even after all that horrible communism (or maybe because of it), the Chinese still strongly believe in free markets. The Wall Street Journal beleives it's because of the Chinese culture.

...for a culture where common New Year's greetings include "I wish you happiness and many riches" and "may you make great profits," should we be surprised? (Most Hong Kong residents spend New Year's politely distributing packets of crisp new cash to their friends and family, ramming the message home.)

Of course then there's Europe where France was around 50% and the others in Europe apparently aren't much different. I'm wondering if we should have let Western Europe fall to communism during the Cold War to give them an appreciation for free markets and freedom in general. Right now they seem to have too much longing for the nanny state and powerful central governments telling them what to do. Oh well. They won't stop Globalism's great march forward based on the principles in Adam Smith's little red book. Capitalists of the World, Unite! :-)

ETLT announced that its tax holiday would have ended sooner than they stated in their financial statements, although this could have been a translation error.

The Chinese Agriculture Tax, which predates the founding of the Roman Empire by several hundred years, finally ended a couple of weeks ago. This just shows how long it can take to get rid of a tax once it's on the books: 2,600 years. And you just know there probably wasn't even a single year when that tax wasn't enforced.

This is what ETLT had to say about it:

The tax holiday which had been granted to the Company expired on December 31, 2005. This repeal will in essence, continue the tax holiday on the Company's agricultural operations and increase its return on the developing project in Hunan Province. It is estimated that the repeal of the tax will save the Company US$3,000,000 to US$3,500,000 during the development stage of the Hunan project alone, thereby reducing the US$37,000,000 dollar cost of the development by a corresponding amount.

My first reaction was that they claimed the tax holiday expired in 2008, not 2005. In their Q3 10-Q statement filed on 11/15/2005, they say, "The Company has benefited from this holiday since inception and anticipates that the holiday will extend through July 2008."

My next reaction was, "What the hell is this Hunan project?"

It turns out that the Hunan project includes the various projects that they've been announcing. I went back over the various news items on the website and it's pretty much all stuff I've already known about, except for the reindeer experimentation thing (Sika, which we call reindeer, are originally from northeast Asia).

UNBH (sec), a bank

UPDA (sec), real estate investment holding company focusing on low and non-performing assets. CEO owns 54.5% of the stock. Balance sheet is very weak, current ratio is less than 1/3. Shareholder deficit is more than twice the value of the assets. Losing money.

UPWT (sec), stopped reporting in 2002, but then issued a bunch of 8-K statements about an agreement to install at least 5,000 "Ice Island Machines" in liquor stores, grocery stores, etc. Their most recent 10-Q for June 30, 2000 shows assets of $1,000 and liabilities of $754K, no revenues, negative cash flow from ops.

URNZ (sec), a mine with no revenue.

USCA (sec), a mine with no revenue.

USGL (sec), a mine.

USPL (sec), lumber made from recyclable material. Last 10-K was filed for year 2002. Nothing but huge losses and negative cash flow.

USPO (sec), ghost ship for a while, went into various unrelated businesses. Smart payphones. 511 payphones in 2 states. $1.9 million invested in telecom equipment which has been depreciated down to $390K. Total assets are only $471K. Liabilities are $970K. Massive money loser.

USWI (sec), Wireless company that went bankrupt on March 26, 2004.

UWNK (sec), entertainment software for touch screen video game terminals and amusement vending machines. Current ratio is slightly worse than 1. Almost no equity. Huge money loser.

AORGB (sec), Allen Organ Company, musical instruments (mostly church organs, good niche), datacom, electronic assemblies, and audio equipment.

Revenues have been reasonably steady since 2000. They lost money in 2001, but made money in 2000, 2002, 2003, and 2004. Average earnings per diluted share for 2000-2004 is $1.40. Dividends have been steady at 56 cents.

Current ratio is 5.3 and was 6.5 in 2003. Strong balance sheet. 7% operating margin, but was only 1.5% in 2003 (was around 6% in 2002). They have a pension liability (assumptions are pretty good, 7% expected long term return on investments going back to 2002). Very little dilution. Capex matches depreciation. Free cash flow has been well above earnings for the last 3 years.

I figure the stock is probably going to be worth at least $25. It's selling for $57. Not surprising; it seems like a great business. I like this company from what I see.
worth following

AMEL (sec), oil and gas, went bankrupt in 2002. Get this, they lost money in 2005.

AHIZQ (sec), bankruptcy.

ACTC (sec), market and sell Kachina dolls in the $6,000 to $8,000 price range. Carved wood doll from the Hopi Indians. Most competition is for dolls in the $300 price range.

Weak balance sheet. Current ratio less than 1 and current assets are almost entirely inventory. Small shareholder deficit. This is listed as a development stage company. Revenues for 2004 are only $2,500 (with gross profits of $500). Revenues for 2003 are only $3,200 (with only $700 gross profit). So I thought each doll was at least $6,000. Did they just sell like an arm or a leg? SG&A is $53K. Huge money loser.

ADDI (sec), patented urine specimen rapid drug screening test. Current ratio is about 1/2. Huge shareholder deficit. Very low revenues and they're declining. Huge money loser.

ADTR (sec), video game console distributor. Sony, Nintendo, Microsoft. 11% gross margins (which seems even a bit high). Net margins were (.7)% in 2004 and 1.2% in 2003. What value do these guys add? Seems like nothing.

WGAN (sec), last 10-K was for 2002.

WTCH (sec), last 10-K was for 2002.

WTER (sec), large scale water purification equipment. CEO owns 16% of the stock. Hideous financials.

WTMK (sec), oil and gas company, Colorado.

WYDY (sec), "Whos Your Daddy Inc" sports fan clothing and stupid gifts, previously Snocone, previously Riskebiz, etc. Assets consist of $402K of "Technology", $5K of prepaid expenses, and $1,455 in cash. Current liabilities are $110K. No revenue....

RSVP (sec), educational software. Balance sheet is fair, but almost no equity. Gigantic money loser.

This is an interesting stock which will become an unsolicited quotation. AMTEX (website) sells used textile equipment into Bangladesh, such as these 18 Karl Mayer knitting machine. They filled out a 15c2-11 information statement (explanation) to... not the SEC but the Pink Sheets LLC, and a tradability opinion from their lawyer, and a Q3 financial statement and they're ready to be listed on the Pink Sheets as of today! The primary venue is "Other OTC".

So far, there's no quote, no bid, no ask, no nuthin. Perhaps tomorrow.

Their financial statement shows that they actually made money in the first 9 months of 2005. They're incorporated in Oklahoma in 2000. Shamee Gafur is the CEO... and CFO.

Shameem A. Gafur has over 21 years of extensive experience in both international trading & textile manufacturing. Mr. Gafur is the founder of Arman Dyeing and Finishing Mills established in 1983. Under Mr. Gafur's guidance Arman Dyeing became one of the top ten Dyeing and Finishing Mills in Bangladesh in 1987. Mr. Gafur graduated form [sic] California State University Northridge (CSUN) School of Business Administration & Economics located in Northridge, CA. Mr. Gafur owns 2,767,500 shares of the Company.

Asma Begum is a director owning 2,767,500 shares of the Company. "Shee [sic] is very well respected in the pre-owned textile industry. Mrs. Begum brings her management experience along with her leadership capabilities."

Since the document lists Shameem Gafur and "Asthma" [sic] Begum as Control Persons, I would have assumed they're related, but "There are no relationships with any director or shareholder of the Issuer."

Kamrul Hassan is a director owning 307,500 shares. "He has put together more than ten composite textile projects established in Bangladesh and India." Apparently he's located in Bangladesh.

Tazul I. Dhali is a director owning 307,500 shares. "He is an industry consultant and advisor for several multinational textile mills in Bangladesh." He's currently Managing Director for H. H. Textile Mills Ltd. which is "one of the six largest textile mills in Bangladesh."

Also L. Peterson is listed as a Chief Advisor with "over 30 years of executive business management experience. He was a former IT consultant to Yahoo, IBM, Sun Microsystems, Hitachi." etc. etc.

The 15c2-11 statement shows they have 8.2 million shares outstanding with a float of 2 million shares and 32 shareholders of record as of Jan 11, 2006. The number of shareholders dropped from 109 on Sept 30, 2005. 6.15 million shares were issued on Sept 9, 2005 in Oklahoma for the acquisition of the California subsidiary.

"Robert Berube/Quality Tax Consulting" of Diamond Bar, CA is the accountant who prepared the financial statements. No auditing or even reviewing.

The assets are mostly machinery which is only slightly depreciated. There's also current inventory, AR, and $12,550 in cash. The current ratio is less than 1 with current liabilities being mostly AP. Equity is about 30% of total assets.

Gross margins are less than 10%. Net margins are a bit less than half of that. Net income is $73K. Cash flow from ops is $267K thanks to a huge increase in AP partially offset by a gain of nearly all inventory. Capex was about $900K which was paid for mostly by issuing 300K shares of stock for $490K and $150K note payable [to Mr. Meer S. Ali, Mr. Munir H. Khan, and Farzana Begum, paying 7% interest for 18 months ending Nov 2006].

The notes claim they're a California corporation, not Oklahoma and established in 2002, not 2000. The 15c2-11 statement explains that the operating subsidiary is the California corp (which was acquired in Sept 2005).

They claim to be the first used textile equipment supplier in the US to maintain a direct office in Bangladesh. Also buyers in India and Pakistan. Equipment comes from US, Canada, Mexico, and Europe.

They plan to immediately establish a 100% export oriented textile manufacturing (weaving) plant in Bangladesh. They plan to set up a denim mfg plant and a composite knit plant. Warren Buffett couldn't make a profit in textiles and that was decades ago before it got really competitive.

6 full-time employees.

Competitors: Gibbs International LLC (Greer, SC), USA Atkins Machinery, Inc (Spartanburg, SC), USA Republic Textile Machinery Inc (Rock Hill, SC). All are privately held.

250 sq ft of office space (about 4 cubicles?) with an additional conference room for use on an as-needed basis ("Yeah, you guys can use our conference room when we're not using it, just schedule a time with Betty"). Heh. $1,500 per month lease. They have 800 sq ft of office space in Bangladesh for $500 per month.

Etc. etc. [there are more notes, nothing stands out particularly]

So the company earned a bit less than 1 cent in 9 months. Maybe they're worth 15 cents or so per share, but perhaps we should go ask Warren Buffett about buying textile mills.

These (and the 50 or so after them) never went through a first tier filter, so it's nearly all garbage. Anything without a bold label is a "not interested".

VBAL (sec), a bank.

VCBC (sec), a bank.

VECG (no sec filings), a sugar company. Not sure which side of the sugar tariff they're on.

VCST (sec), video and audio communications over networks... yawn. Money loser.

VGPO (sec), hotel and restaurants. Money loser.

VIAI (sec), Paramount buying DreamWorks. This could be something great, I have no idea. Feel free to take advantage of it.

VISRF (sec), Yet Another Database Company. Money loser.

VMHVF (sec), Sell and rent DVDs over the Internet. Money loser.

VOII (sec), VOIP. I already looked at this, no? Huge money loser anyway.

APTD (sec), Yet another Internet stock market business. Horrible money loser.

APYM (sec), credit card transaction processing in China. Horrible money loser for now, but is in development stage.
worth following

ARME (sec), no operations.

UFBV (sec), management in search of something to manage. Horrible money loser.

UGTRF (sec), money loser.

The latest news on uranium shows U3O8 prices increasing yet again to $36.50 last week.

Lithuania wants to keep a nuclear power plant open, postponing the closure until a replacement reactor is completed by 2013.

In the US, the TVA is looking to build 1 or 2 reactors around Northeast Alabama, with construction starting in 2011.

New Hampshire is looking into a second reactor at Seabrook. The first reactor's license was extended.

France is looking into creating a prototype 4th generation reactor, to begin operations in 2020 (link is broken).

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

USTI (sec), application software to distributors, power equipment dealers, power sports dealers. DOS software, apparently. Also some Unix. 47% gross margins. Most revenues are from maintenance, most costs are salaries. 9% net income (down from 12%). Routinely earn about $320K on 56 million shares and 13 million options, assume about 70 million totally diluted shares. Earns about 1/2 cent per totally diluted share. Shares sell for exactly 7 cents. How about that?

Balance sheet is ok. About half equity.

Free cash flow is routinely strong due to lower capex than depreciation.
worth following

UTGN (sec), insurance holding company
not interested

UVICF (sec), contact lenses. Revenues have been increasing slowly. Overall business numbers have improved every year going back to 2001. They became [operating] profitable in 2005, entered positive equity in 2004, positive working capital in 2003. Share count has been increasing.

They rely solely on royalty income from Bausch & Lomb. They have one supplier (which could be replaced). This seems to mean that they rely entirely on IP. They have one patent.
not interested

UVIH (sec), vertically integrated insurance holding company.
not interested

AOXY (sec), No assets. No operations.
not interested

APOA (sec), They're late filing their 10-K. Distributor of disposable medical, dental, and vet supplies, HBA stuff, and pharms. They're moving to higher gross margin stuff: insitutional retail catalogue business. I don't see any moat here, whatsoever.

Revenues had been increasing until 2005. Gross margins are only about 4%. Over the years, they lose money as often as they make money. Balance sheet is not very good. Almost no equity. Low current ratio.
not interested

APRJ (sec), a BDC.
not interested

ARCS (sec), cellular base station antennas, portable antennas, conformal antennas (conforms technically and physically to its product environment, such as hidden inside a police car).

Slowly increasing revenues. Erratic gross profit. Generally not very profitable.
not interested

ARHN (sec), 1982 Nevada hotel and casino, with Colorado River frontage. Also owns property in Las Vegas, Dorchester MA, and Maryland. Casino caters to older out-of-towners from AZ, Southern CA, and elsewhere. Occupancy rates have been falling to 57% (down from 70% in 2004 and 77% in 2003). Owns 27 acres on the "Strip".

Assets are mostly real estate rental property held for investment. Very ugly current ratio. 1/10 equity. Consistently losing money due to huge interest expenses.
not interested

ARIS (sec), electronics parts catalogs. Revenues have been flat over the years. Operating income has gone up lately due to decrease in cost of software licenses and renewals sold (amortization costs of acquisition). Net income is about $2.8 million ($1 million last year, pretty much losses before that). 6.2 million shares. 1.2 million options! Assume about 8 million totally diluted shares. Net income becomes 35 cents per totally diluted share.

Cash flow from ops is $2.7 mllion due to deferred tax. Capex and capitalized SW costs are $1.5 million. Free cash flow is a lot more like $1.2 million, so that's about 15 cents per totally diluted share. So the company might be worth $2.25. The stock is selling for $2.12.

Assets are mostly cash, capitalized software costs, AR, and other stuff. PP&E of nearly $6 million is nearly all depreciated. Current ratio is less than 1. Shareholder deficit.

Q1 is about the same.
not interested

...and the market goes wild!

This press release says they've upped the estimate at Church Rock to 11.8 million pound from 6 million pounds. I figure they have at least 100 million pounds of uranium ore. This adds perhaps 6% to the total. The market went up 7.33%, which I guess is rational after all (if they find a little bit more here, it seems likely they'll find more somewhere else)... except for the fact that each share represents well over 1 pound of uranium in the ground, it probably costs about $25 to extract each pound of uranium, the prices are now above $36/pound, but the stock is only selling for about US$1.75. The market should have gone wild when prices were down around US$1.00 per share.

Here's a humorous press release:

WallStreet Research, a prominent equity research boutique led by Alan Stone, Managing Director of Alan Stone & Company, LLC, announced today that it has released an update report continuing coverage with a speculative strong buy recommendation of Sunwin International Neutraceuticals, Inc.

You might think differently about this when you read the fine print:

Sunwin International Neutraceuticals Inc. has paid a fee of $5,000 to Alan Stone & Company, LLC in conjunction with the preparation and distribution of this update report, as well as a fee of $10,000 for a prior version of the report in the past, and has committed for $5,000 for future update reports.

Hahahaha!

But what's even funnier is that the stock went up substantially after the press release came out. It's things like this that renew my faith in the irrationality of the stock market. And how could I make any money if the market was totally rational?

UPDATE Jan 5, 2006:
Ok, so here it is, the next day, and the stock price fell back down to where it was. Was that worth $5,000? or $20,000 for the whole thing? No way. This just confirms my decision not to invest in SUWN here and here and here.

Now let's take a quick look at ETLT's auditor, Thomas Leger & Co.

They audited American Oriental Bioengineering (which sounds better than the original name: Harbin Three Happiness Bioengineering) (AOB sec) which has a $219 million market cap. They had to file an amended 10-K because the original had clerical errors in Leger's auditing opinion. Of course they filed a previous ameneded 10-K due to a mistake in the weighted average number of shares calculation. And they had yet another amended 10-K before that to add another risk factor and expand Note 3. And this was after this other amended 10-K to change a bunch of stuff. There was also this amendment to the 2002 10-K to add an exhibit that was left out. One of those above was for 2003.

Weinberg & Co had taken over as auditors at this point, so it has absolutely nothing to do with Leger.

The clerical error mentioned above was that the original did not mention the Public Accounting Oversight Board, it just mentions "auditing standards generally accepted in the US".
hmmm

They audited Quantum Bit Induction (website QBIT) which is on the pink sheets, but you can see a 2002 financial statement here. Leger gave them a "going concern" qualifier, which was well deserved. They mention Note 1 (which includes management's plan), which says they've relied on funding from the company's president and common stock sales to get by, and the doubts that it has sufficient revenues to meet operating cash requirements for the upcoming year.
check

They audited Med X Systems (sec) which is/was a blank check company. Last 10-K was for 2003. In the opinion, Leger gave them a "going concern" qualifier, saying they have no assets or sources of revenue, "which raises substantial doubt about its ability to continue as a going concern."
check

They audited SKREEM Entertainment.

As discussed in Note 1 to the financial statements, the Company is in the development stage and has suffered recurring losses from operations and had a net capital deficit, which raise substantial doubt about its ability to continue as a going concern. Management plans to continue funding the operation through an affiliate owned by the sole shareholder and also plans to sell the Company. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

check

They audited Sterling Equity Holdings (SEQU sec) The latest amended 10-K has a going concern qualifier due to recurring losses and cash flow problems.

They have a current ratio worse than 1/10, a shareholder deficit, a big net loss, they do have a small positive cash flow from ops.

Leger also gave them a going concern qualifier in 2004.
check

They audited Cape Coastal Trading Corp (CCSR sec) latest 10-K

The Company is a development stage company who was focused on importing artworks and crafts from Ghana, Africa to sell to its vendors and customer in the U.S. The Company has incurred substantial operating losses from inception (August 16, 2002) to December 31, 2004. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to those matters are also described in Note 2.

Note 2:

As of January 13, 2005, the Company will no longer operate the Business. Instead, the Company’s business plan will now consist of exploring potential targets for a business combination

check

They also audited Fanatech back in 2001. It was an unqualified opinion. They had a healthy balance sheet and earnings. Cash flow from ops was negative due to inventories and a decrease in costs and estimates in excess of billing.
hmmm

They also audited Dolphin Knowledge. It was an unqualified opinion. The balance sheet was ok. They lost money in 2003, but had made money in 2002.
hmmm

There's also Asconi Corp.

There don't seem to be any class action lawsuits against Leger.


I can't find anything bad about Thomas Leger & Co. They've audited several companies without anything blowing up. By their own account, they've been an accounting company for 45 years, but mostly local in Houston, TX. They have a Chinese auditor on the staff, Karen (Ruikun) Tao,

Auditing a company normally means treating it like an ongoing business and not as a pile of assets that will be liquidated. These two ways of looking at a business will result in two very different conclusions. An auditor might be treating an audited business as a going concern, but in some cases, it may be fairly obvious that the business is unlikely to continue as a business, barring some miracle. So the auditor needs some guidelines to know when to bring this up as an issue.

The rules for auditors regarding when to express doubts about the audited company as a going concern are covered by the document SAS No. 59. The amended version of SAS (Statement on Auditing Standards) No. 59 is issued by the Auditing Standards Board. As far as I know that means it is officially "designated" by the AICPA. If so that would make SAS 59 the most authoritative "Category A" GAAP... or perhaps it would be classified as GAAS (Generally Accepted Accounting Standards). Due to Sarbanes-Oxley Act of 2002, the activity of auditing is overseen nowadays by the Public Company Accounting Oversight Board. Just how many of these goddamn groups of "authoritay" do we need?

Here's an auditing dictionary. Ok, down to basics....

This article talks some about SAS 59. Start with the sidebar which says this:

1. An auditor's responsibility to evaluate whether an entity is a going concern is for no more than 1 year from the date of the audited financial statements.
2. Auditors are not responsible for predicting future events.
3. Even if a company goes bankrupt in less than 1 year doesn't mean the auditors were negligent (obviously).
4. Auditors are not required to perform specific procedures to determine if an entity is a going concern. The normal audit procedures are sufficient.
   
5. If an auditor concludes doubts about the company as a going concern, they are required to evaluate management's plans to deal with the problems.
6. If an auditor concludes doubts about the company as a going concern, they must consider the impact on the financial statements, to determine the effect on the audit opinion. I'm sure there are people who understand how this translates into some guideline of action. I'm not one of them.
   
7. There are specific documentation requirements (adding the "doubts" text to the audit opinion, for instance).
   

In addition to these, the absence of going concern doubt does not mean assurance to continue as a going concern.

Documenting compliance with SAS 59

Going concern issues for pension plans which has some interesting stuff in it.

As I've read through all the stuff on the subject, it's clear to me that this whole area of auditing is a huge mistake. Auditors should not be in the business of telling us whether the business is good or bad. They are suppose to tell us whether the financial statements reflect reality and if the accounting principles and estimates used by management follow GAAP. If I wrote the rules, I would say that an auditor only needs to express the doubts when auditing the company as a company clearly makes no sense.

Because the "going concern" qualifier is so fuzzy, it's probably a good way to evaluate an auditor: look at a large sampling of companies they audited and whether they had doubts about each one as a going concern vs whether I would have doubts myself.

Q2 SEC filing

(again, hat tip to Joel)

For the period ending Halloween 2005. Share count is 49 million shares.

Balance Sheet (comparison to the end of fiscal year).
Cash increased to $2.4 million (from $1.7 million).
AR held steady (while allowance dropped slightly).
Inventories dropped slightly.
Prepaid went up slightly.

PP&E went up to $3.6 million (from $2.7 million).
Due from related parties went up slightly.
Total assets up slightly.

Loans payable is down.
AP held steady.

Current ratio didn't change much.
Equity went up to $7 million from $5.8 million.

Income Statement
Q2 revenues are up 28% from prior year.
First half revenues are up 12% from prior year.
Gross margins: 33% (32% for the first half).

All the expenses are up, but Q2 operational income is more than double the prior year.
First half operational income is up 47%.

There's a huge benefit from taxes greater than operational income. Taxes were obviously very low in Q1.

If we assume a 32% tax for Q2, we would have income before minority interest of $356K. Net income would then be $279K for Q2 or about 0.4 cents per totally diluted share which would annualize to about 1.64 cents per year.

If we assume a 32% tax for the first half, we would have income before minority interest of $656K. Net income would then be $509K for the half or about 3/4 cent per totally diluted share which would annualize to about 1.5 cents per year.

Putting a P/E of 15 on this would result in a stock price of 22.5 cents, which is pretty close to where it's at. However, this has been a fast growing business. Will it continue to be? I'd have to say a definite "maybe".

Cash Flow Statement
If we take net cash from 6 months of operations and subtract both depreciation and minority interest, we end up with $1.55 million which is noticably larger than net income of $1.15 million.

If we take net cash from 6 months of operations and subtract capex and minority interest, we end up with $777K vs net income of $1.15 million. This is not surprising since we know they're investing in expanding the business across all three segments, if I recall correctly (or at least 2 of them). This is in the Notes, page 24.

In other cash flows, there was a decrease of $176K in "due from related parties" and paydown of loans of $287K. There was an additional benefit of $53K from exchange rate (one more reason to like Chinese businesses right now).

So cash flows looks great.

Notes
Inventories are now leaning more towards raw materials. About the same reserve for obsolete inventory.

Already covered China Direct Investments.

Segment Info for 6 Months:
The Chinese medicines revenue is up 28.8% (to $2.2 million). Gross margins are up to 42% now due to new products and improved sales skills. Also the Chinese central government rule mentioned in last post. They believe they are the first to complete the requirement. They plan to add a natural dietary health food series (which seems odd for PRC).

Animal medicines segment revenues are up 35% (also to $2.2 million). Gross margins decreased to 31.5% from 32% due to raw material costs. This industry also has the new Chinese central gov rule. Of 2,700 mfgers, they believe only 800 could pass.

Six month return on assets for both of these segments combined are probably a bit lower than 16%

The stevioside segment revenues are down 9%. There were delays with retooling, additional equipment needed (the $206K mentioned below?), and inspection delays, it wasn't operational until Nov 2005 (rather than Sept as expected). They had to resell repurchased stev in the meantime. Operating margins are 20%. Six month return on assets are probably a bit lower than 9.3%

Subsequent event: SUWN hired 3 consultants for business development, selling Stevia and Chinese herb products in the US and Canada. 910K options at 15 cents for 5 years, covered by the equity compensation plan.

$655K invested for leasehold improvements for veterinary medicine mfg.

$1.34 million invested for stevioside facility. $206K of additional unexpected investment needed.

Overall higher selling expenses mostly due to increased commissions. Also travel and entertainment costs. Shipping costs increased a bit. Advertising and promotion decreased a bit.

G&A went down by $44K due to decrease in business development expense, repairs and maintenance, bad debt expense. These were offset by increase in travel and entertainment of $56K and other stuff like phones and office expenses.

Tax credits from the collection of value-added taxes on certain products.

The big tax credit was due to a tax waiver from the local Chinese government through Oct 2005 (should continue to the end of 2005). Also they don't expect taxes in 2006.

Cash balances are:
US: $370
China: $2.4 million

Raised $903K of cash from sale of stock. That doesn't show up on the cash flow statement!

Shandong Shengwang Pharm Corp is often advanced money for purchasing stuff to effect buying power. At Oct 31, 2005, Shandong owed SUWN $1.2 million for PP&E advances to be reflected in the long-term assets (this area was what was restated in the past from related party loans).

Still no change in switching Qufu to a joint venture.

Still no legal proceedings.

No off balance sheet arrangements.


Due to issues with the auditors here, I would need more margin of safety for this company. Right now it's selling for what I'd consider to be a P/E of about 15. The company has been growing and they're putting a lot of investment into the business. But things can and do go wrong. I consider this to be only semi-audited, at best.
worth following

hat tip to Joel for this one

SUWN yahoo sec website google
10-K amended Nov 7, 2005

6 Youpeng Road, Qufu, Shandong, China 273100
wholely owned foreign enterprise in PRC
(86) 537 442 4999
Period ending April 30, 2005
43,367,276 shares outstanding on Aug 1, 2005

All operations are within PRC. Reverse merger April 30, 2004. Sunwin owns 80% of Qufu Natural Green Engineering Company, Ltd. (a PRC company). The other 20% are owned by Shandong Shenwang Pharmaceutical Corp. Ltd. which is controlled by Shandong Shenwang Group Corp, whose president is Laiwang Zhang who owns 22% of SUWN. Ya got that?

March 2005, entered into letter of intent to acquire 55% of shares of Jining Stevia Manufacturing Co. Very early in the process as of the 10-K.

The amended filing is for

• Pushing some payable from a related party to long term (from current)
• Funds advanced to a company to be acquired were lost and subtracted from retained earnings but should have been subtracted from paid-in capital on the balance sheet.
  
• Some unspecified revision of disclosure of manufacturing facilities, property leases, manufacture of stevioside in 2004, purchase and sale of finished stevioside from 3rd party mfgrs, and related party transactions. [Sheesh, anything else???]
• Note 1 changed somehow (do a diff).

47 management and admin employees
250 manufacturing employees
9 R&D employees ($171K down from $192K prior year)
85 sales and marketing employees
most employees are in Qufu, PRC (pop 600K)

46% of their revenues are from selling stevioside, a natural sweetener renowed for its "adverse effects in the male reproductive system that could affect fertility" and for being a "genotoxin" which damages DNA. It's not allowed in the EU, US, Australia, Canada, Singapore, or even in Hong Kong. In the US, it's allowed as a dietary supplement but not as a food additive. There are accusations that it's not allowed as a food additive due to corporate lobbying efforts.

The false rumours are based on a nonsense experiment with rats. In that experiment, each rat was daily force-fed extracts from about 2.668 g of dry Stevia leaves per day, i.e. 5.34 % of the body weight!

Apparently nutrasweet is far worse. But the problem is not what should be, but rather what is. Sunwin has been making stevioside continuously since 1998. The capacity is increasing from 200 tons/year to 300 tons/year. Last year they produced 150 tons (8.3% of the global production according to the Chinese trade group). The plant was introduced to China in 1977 and it ramped up seriously in the mid-1980s. China now exports supposedly 80% of the world production. This goes mainly to Japan (where it is 40% of the sweetener market there) and South Korea. Sunwin claims demand is rising at 15% to 20% per year.

At present Japan, Korea, China, Taiwan, Indonesia, Israel, German Brazil and Paraguay permit the use of stevioside as a sweetener and food additive.

Here's a strange mistake in the 10-K:

In 2003, as a result of the overall economic decline in China due mainly to the SARS outbreak, our production and sales of stevioside decreased to 176 tons, however, during fiscal year ended April 30, 2004 the production recovered to the approximate sales levels of 2002. In fiscal year ended April 30, 2004, our stevioside production reached 150 tons....

Let me get this straight: production decreased to 176 tons, but then in the year ending April 30, 2004, it increased to 150 tons? That makes no sense.

Major customers (one 15%, one 10%):

• China Minemetals Corporation
• Shanghai Sanming Food Co., Ltd.
• Shandong Pharmaceutical & Healthcare Co., Ltd.
• Shanghai Folo Trade Co., Ltd.
• Hangzhou Tian-Mu-Shan Pharmaceutical Enterprises Co. Ltd.
• Nanjing FenQin Bio-Chemical Co. Ltd.
  

They have some exclusive planting contracts with suppliers. 30% comes from growing contracts with several large plantations (277 acres). Pay 30% at planting time around March ($117K in March 2005) and 70% on delivery (Aug or early Sept). Raw material prices went up from $695/ton to $1,812/ton. They normally keep 200 tons in inventory and 1 month's sales of finsished product in inventory.

In this year, they manufactured 88 tons of finished product (upgrading and moving production caused a drop in output). They also purchased and resold 96 tons from 3rd party manufacturers (4 unaffiliated suppliers, largest supplier was 38 tons). In the prior year, they manufactured 150 tons and purchased 84 tons.

Major competitors (each with annual output greater than 100 tons per year)

• Huaxian Stevia Factory
• Julong Stevia Company

Revenues for stevioside declined by $2.2 million in 2004 due to the plant upgrade and location move mentioned above.

Sunwin also sells veterinary products (28% of revenues).

According to the China Animal Health Association, we are one of the top
three companies in this product category in Shandong Province and one of the top 50 in the PRC.

They also make animal feed additives based on traditional Chinese medicies. These are desirable because they lack the drawbacks of antibiotics and other Western additives (although they are not as effective).

They sell a plant polysaccharid and flavanoid extraction compound feed additive which can be substituted for antibiotics and other chemical compounds normally added.

They sell CIO2 food disinfectant. Developed in 1985 by American Baihexing Company. Accepted by the European Envionmental Protection Unit and the US EPA and sanctioned as a food additive by the US FDA. Japan, Australia, and EU followed. The Chinese Ministry of Agriculture sanctioned it as a recommended product for bird flu prevention.

Our Sunwin brand ClO2 disinfector is a steady ClO2 disinfector and can be
used directly without activation and dilution. The traditional ClO2 disinfector requires a stability dose to stabilize it after production and needs to be activated and diluted before use. If it is not used in time after activation, the effective substances will be depleted thoroughly in four to six hours. Our product can restrain the chemical activity of the activated ClO2 and can control the ClO2 to release the effective compounds slowly. The product has a storage life of 18 months after dilution.

They buy raw materials on the open market from several suppliers.

Customers (none 10% or more):

• Chengde Chengxing Animal Hospital
• Ha'erbin Donghui Veterinary Products Store
• Xiantan Golddragon Veterinary Co. Ltd.
• Gao'an Aquatic Bureau
• Shandong Veterinary Supervision
• Office and Hebei Veterinary Station

Terms are pre-paid up to net-60.

Major competitors:

• China Animal Husbandry Industry Co., Ltd.
• Qilu Animal Health Products Factory Co., Ltd.
• Shinjaizhuang Huamu Animal Husbandry Co. Ltd.

Veterinary products revenues were up 33% for the year to $3.2 million. Gross margins decreased slightly to 35% due to raw materials costs. The Chinese central government issued a new rul that all manufacturers in this industry must conform to GMP production process standards by Oct 1, 2005.

Among over 2,700 manufacturers in China, we estimate that only approximately 800 could accomplish this requirement on time. A significant market vacancy will be left by the companies that do not conform and pass the standard. We will not only complete the construction and finish the inspection process on time; we will also have eight production lines. We expect to obtain a greater market share in the fiscal year of 2006.

They also sell 120 (out of a possible 400) traditional Chinese medicine formula extracts (26% of total revenues). A lot of these are for veterinary medicine products (watch cash flow in case they don't remove intra-company sales).

Epimedium powder which is used to tonify the kidney, invigorate yang, strengthen muscles and bones and as anantiheumaitc

Hehe, they said "yang". Pretty much all of the explanations for why these things work are bogus. It may be that some of them work for unrelated reasons not associated with the five elements of wood, earth, metal, fire, and water (assuming wood elements are the ones for "invigorating yang").

The extracts are sold wholesale (bulk 25kg barrels). The main customers are (one 10% customer):

• Zhucheng Xinde Foreign Trade Co., Ltd.
• Shangdong Liuhe Feed Co., Ltd.
• Najing Traditional Chinese Medicine University
• Taiyuan Hengfengqiang Bio-Tech Development Co., Ltd.
• Beijing Xiangshang Veterinary Factory
• Hefei Huarui Co., Ltd.

The sales terms are extremely generous. They require a 10% to 30% deposit at the time of order. The rest is paid between 6-months to one-year. This segment accounts for 70% to 80% of outstanding accounts receivable AR.

Raw materials come from various suppliers etc. They utilize just-in-time manufacturing and don't carry inventory.

Some R&D is done in partnership with research facilities in PRC:
Shandong Medical University (joint development of molecular absorption purified rutoside)
Kelong Bio-Tech Co., Ltd, Biology and Physics Research Center of Chinese Acadamy of Science (soy bean oligosaccharide)
Tianfulai Bio-Tech Technology Co. Ltd. in Beijing (polysaccharide anthone extracted powder for forage).

They also use the research facilities of Beijing Medical University, China Agricultural University, and Taiwan Renshan Bio-Tech Co. They pay for use on an as-needed basis. $171K in 2005 and $192K in 2004.

Since 2000 we have successfully developed more than 40 veterinary medicines used to treat infectious bursa of fabricius of poultry, prevention and cure of bird influent disease and infection of digestive canal, prevention and cure chronic respiratory failure caused by septicemic and infective bronchitis. We have an additional nine new medications under development aimed at treating diseases caused by protozoon and seasonal febrile diseases of poultry and bursa of fabricius and epiornitic. Our current research and development projects include saikosponin, a liquid used for headaches and a capsule for bursa.

This market is very competitive with over 500 producers.

Chinese extracts revenues were up by 325% last year: from $805K to $3.4 million. Gross margins are 39%, up grom 33%. This caused the receiveable to grow by 100%, but far lower than the growth in revenues.

The Chinese central government issued a new rule for this industry that all manufacturers must satisfy GMP standards before Oct 1, 2005.

We believe that we are the first facility in this industry to complete this requirement in China which will help us maintain the reputation in this field and acquire bigger market share. Next year, we will be adding new products into the market and plan to start a new products series, natural dietary health food.

Sunwin Tech Group acquired 80% of the capital stock of Qufu in exchange for shares of Sunwin Tech stock. Management wants to update this status to a joint venture, which requires a cash investment from Sunwin Tech (the foreign company) to Qufu of 80% of Qufu's registered capital: $2 million. A private offering was held resulting in $877K going to Qufu. The additional amount might not be required if Sunwin stock can be used for the capital requirement (not clear yet). Why would this not be clear? It must be a fairly common thing? If not, Qufu's registered capital might be lowered.

Sunwin Tech owns 80% of Qufu Natural Green Engineering Company, Limited, a PRC company ("Qufu"). Sunwin Tech was organized in January 2004 and before that date did not have any business and operations. Effective February 1, 2004 Sunwin Tech acquired 80% of the capital stock of Qufu from Shandong Shengwang Pharmaceutical Corporation, Limited in exchange for 32,500,000 shares of Sunwin Tech's common stock. Shandong Shengwang Pharmaceutical Corporation, Limited is a minority shareholder of Qufu.

Operating expenses these last two years increased from two years ago due to...

• Increased selling expenses due to increased shipping costs
• Increased taxes from increased revenues
• Increased G&A costs due to increased overall operations
• Increases in repairs and maintenance and retooling associated with upgrading mfg plant
• Increases in professional fees due to SEC filings (non-cash $220K, stock issue)
  

The repairs and maintenance and retooling should decrease in future periods and should all complete by Sept 2005.

There will be further increases in legal and accounting fees during 2005 with SOX compliance.

They contradict themselves (see below for explanation) about whether operating expenses went up or down:

Our operating expenses significantly increased for the year ended April 30, 2005 from the year ended April 30, 2004

but then on the same page they say this:

For the year ended April 30, 2005, total operating expenses were $2,110,340 as compared to $2,164,105 for the year ended April 30, 2004, a decrease of $53,765 or 2.5%.

The contradictory decrease in operating expenses was due to...

• The increase in professional fees noted above
• A decrease in selling expenses ($923K vs $1 million). But more than offset by the increase in commission expenses (up $224K) shipping expenses (up $80K), and other selling expenses (up $70K). All offset by a bad debt recovery of $459K.
• G&A expenses dropped to $967K from $1 million due to a decrease in repairs, maintenance, and retooling. Offset by increase in salaries of $70K.
  

The contradiction is due to a cut-and-paste from the prior year's 10-K and a poorly edited update. Comparing the two we get:

Our operating expenses significantly increased [essentially changed 2004 to 2005] as a result of increased selling expenses, which was attributable to increased shipping costs and local tax costs associated with our increased revenues, as well as increased general and administrative costs which is primarily attributable to [removed detailed costs and added "increased operations and,"] increases in repairs and maintenance and retooling expenses associated with an upgrade of our manufacturing facilities [added "and increases in professional fees associated with our SEC filings"]. These expenditures for repairs and maintenance and facility upgrades during fiscal 2004 [added "and in fiscal 2005"] should decrease in future periods as we anticipate that this project will be completed in [changed Q2 05 to Sept 2005]. We anticipate further increases in legal and accounting fees during fiscal 2005 which are associated with our continued compliance with provisions of the Sarbanes-Oxley Act of 2002, including new provisions which will phase in during fiscal [changed 2005 to 2006] and beyond and fees and costs related to capital raising transactions. These increases could serve to further reduce our net income absent a significant increase in our revenues at the current gross profit margins.

so that's why.

Net income (before minority interest) increased 81.7%. Why? Here's their explanation...

primarily as a result of an approximate 2.0% increase in our gross profit margins for the year ended April 30, 2005 from 2004 period, together with the increase in total operating expense described above.

They forgot to mention the increase in revenues.

So for the year they had $828K of net income vs $465K in the prior year.

5 million shares reserved (and not issued) for stock options. No stock options granted yet.
15 million warrants are outstanding with a 15 cent strike price (most from April 12, 2005 private placement, some from July 2004). 13.5 million only have 2.85 years left.

So let's assume 20 million shares of dilution added to the existing 43 million shares (as of Aug 1, 2005) and I'd probably add another 5 million just to be safe: 68 million totally diluted shares

This results in 1.2 cents per totally diluted share for the year. A P/E of 15 on that would result in a stock price of 18 cents.

In mid-2005, they hired China Direct Investments, Inc. paying 500K warrants for help with SEC stuff. Total payment can be 2.7 million shares. Related party alert:

Marc Siegel, a 9.4% shareholder of our company, James Wang and
David Stein are officers, directors and or principal shareholders of China
Direct Investments, Inc.

No family relationships. Note the color coding of common companies in the bios below.

Laiwang Zhang. President and Chairman since April 30, 2004. Owns 22.1% of the company. Served as Chairman of subsidiary Qufu since January 2003. Also Chairman of Shandong Shengwang Pharmaceutical Corp (minority shareholder in Qufu), since April 2000. Founded Shandong Shengwang Group Corporation (holding company). Since April 1996 he has been General Manager of SUWN. 1992-1996 Manager of subsidiary Shengya Veterinary Drugs Factory. 1984-1992, President of Shandong Qufu Amylum Plant. Graduated from Shandong Technical University 1984, Masters in Engineering.

Dongdong Lin. CEO, Secretary and Director since February 2005. Manager of
Technology Info Dept of Shandong Shengwang Pharmaceutical Corp from January 2003 to December 2004. Ms. Lin joined Shandong Shengwang Group Corporation in 1996, as a supervisor from April 1998 to April 2000, and Manager of the Department of Export and Import from April 2000 to December 2002. Bachelors in Technology English from Haerbing Industry University. Masters in Economics from the China Academy of Social Science.

Fanjun Wu. CFO since reverse merger. Since 1997 employed by subsidiary Qufu as Director of Finance Section from 1997 to 1998 and thereafter as CFO. From 1992 to 1996, she was Director of Finance Section for our subsidiary Shengya Veterinary Drugs Factory.

Chjengxiang Yan. Director since reverse merger. Since 2001 Director of Shandong Shenwang Pharmaceutical Corp, and 1999-2004 Director of Marketing. 1996-1998 Director of the Marketing for Shandong Shengwang Group Corp. Director of Marketing for subsidiary Shengya Veterinary Drugs Factory 1993-1996. Graduated Shandong Agriculture University in 1993 with bachelor's in farming.

Baozhang Yuan owns 9.2% of the stock. He was CEO and board member from April 2004 until Feb 2005.

Lei Zhang owns 9.2% of the stock. Was Secretary from April 2004 until Feb 2005. He has the same address as Baozhang Yuan.

Xianfeng Kong owns 9.2% of the stock. Was Treasurer and board member from April 2004 to Dec 2004. He has the same address as Baozhang Yuan.

Alpha Capital Aktiengellschaft (of Lichtenstein) owns 8.1% of the stock and warrants to purchase 5.3 million shares. There's some complicated limitations on this.

Marc Siegel (Edge Capital, hopefully not this Edge Capital) owns 9.4% of the stock (including warrants). He has voting and dispositive control over the SUWN stock/warrants owned by China Direct Investments. His father, Alvin Siegel is part of Progress Partners (lawsuit). James Wang and David Stein are also officers of China Direct Investments.

The highest salary is $6,000 per year.

These people all come from all the same prior companies.

None of the board members are independent. No audit committee. No audit committee financial expert. It will cost money to get such things.

There is $1 million due from related parties. $655K was advanced to Shandong Shenwang Group Corp. for the construction and build-out of a new mfg facility for stevioside production. Qufu holds the land use permit. SUWN rents the building from Qufu ShengDa Industry Co (unrelated local government owned entity). Nearly all the money went to equipment and $82K went to leasehold improvements. SUWN will rent the facility, terms not yet negotiated. Will start up in Sept 2005 when the assets will shift from "due from related parties" to fixed assets. Funds for purchase of raw materials purchase will shift to inventory when the materials are received before the end of fiscal 2005. This whole thing was to take advantage of lower prices through stronger buying power via Shandong Shenwang and Shangong Shengwang Group Corp. No escrow.

$389K advanced to Shangdong Shengwang Pharm Corp and Shangong Shengwang Group Corp for new manufacturing facility for veterinary medicine mfg. Again, Qufu holds the land use permit, the building is rented from Qufu LuCheng Chiya Resident Committment. The assets will be shifted to fixed assets. No escrow. Will probably require another $34K.

$85K paid to Shandong Shengwang Parm Corp for management services for housing employees (in the 1980s I watched a company outsource to Hyundai and the employees lived in barracks in a fairly harsh lifestyle by modern western standards) government insurance for employees, and rent for certain facilities.


Auditors are Sherb & Co. who audit about 50 companies based on this list which makes them a fairly large auditor despite what this page says. Sherb seems to be involved in some lawsuits: Scott+Scott against Spear & Jackson along with Sherb and Dennis Crowley. Apparently there was also a lawsuit with Light Management Group (LMGR sec) on May 1, 2002 although they did put a going concern qualifier on it in the last 10-K and the one before that. and they weren't even the auditors in the prior year. Then there's ProNetLink class action suit.

The good news is that Serb left Feldman Sherb (can't find actual website that has this stale quote):

...the firm was founded in 2002 when Steven Sherb, Howard Brodman and Gary Singer left Feldman Sherb & Co., PC in order to better serve their clients.

There's also VoiceFlash (VFNX sec) This old 10-K says this:

Feldman was merged into Grassi & Co., CPA's, P.C., ("Grassi") and the
principal accountants who had been responsible for the Company's audit during the years ended July 31, 2001 and 2000 left and started their own firm called Sherb & Co.

So I'm a bit concerned about these auditors.

Audit opinion mentions that financial statements have been restated.
$978K classified as due from related parties should have been a long-term asset (I think I mentioned this above with the shift in equity, too).

visual display
Balance Sheet

Cash ................. ***************
AR ................... ****************
Allowance ............                 xxxxxxxxx
Inventories .......... **************************
Due from relat party.. *
Prepaid and other..... ******
Total Current Assets.. *****************************************************************

PP&E ................. **************************
depreciation .........                           xxxxxxxxxxxxxxxx
Due from relat party.. *********

Liabilities
Loans Payable ........ *****
AP and accrued exp ... *********
Income tax payable ... *****
Total Current Liab ... ***************************

Minority interest .... ******************
Equity ............... ******************************************************

Allowance for doubtful accounts is huge.

Income Statement
Revenues: $12 million (up from $10.9 million)
Gross margins: 31% (up from 28%)
Operating margins: 13% (up from 9%)
Taxes: 32% of income (down from 37% of income)
Minority interest: 25% (up from 24%)
Net margin: 6.9% (up from 4.3%)
Net income: $829K (up from $465K)
Net income per totally diluted share: 1.2 cents
Stock price for a P/E of 15: 18 cents

Equity Statement
1.5 million shares issued for services
10.3 million shares issued in private placement
Ending share count: 43 million

Cash Flow Statement

Free Cash Flow ....... *********** (cash from ops - minority interest and capex)
Net Income ........... ++++++++
Deprec and Amort .....         +++
Stock-based consulting            ++
Minority interest                   +++
Allowance for doubtful accts      -----
Accounts receivable               +++++++++++++
Inventories                                    ++++++++++
Prepaid and other current assets                        -
Accounts payable                                    ----
Income taxes payable                                *****
Advances to customers                          ----------
Net cash from ops .... ************************

Capital expenditures.. ----------
Due from Rel Part ....           -----

Proceeds selling stock +++++++++
Loan payable            --------

Net increase in cash   ***********

I've already covered most of the stuff in the notes.

No explanation for the huge AR.
Asset/liability method for taxes (which results in deferred tax assets and liabilities)

$500K US cash ($400K in excess of FDIC guarantee)
$1.2 million RMB cash left, however:

concentrations of credit risk with respect to trade accounts receivables is limited due to generally short payment terms.

What the hell, the terms go out to 1 year.

Advertising expense: $213K (up from $150K).

Currently evaluating share based payment, FASB statement 123R.

Inventories are about half raw materials and half finished goods. Reserve for obsolete inventory is only $61K out of $2.8 million.

Depreciation

Office Furniture                 7 Years           $     1,989
Auto and Truck                  10 Years                 3,802
Manufacturing Equipment          7 Years             2,958,019
Building                        20 Years               430,810
Office Equipment                 5 Years                58,750
Construction in Process          -                   1,063,220

Loans payable
$247K to Bank of China, 6.9%, secured by equipment, due in monthly payments through Feb 2006.
$115K to Qufu City Credit Union, 6.34%, secured by equipment, due in monthly payments through Aug 2005.
$104K to Qufu City Dept of Treasury, 5.58%, secured by equipment, due in monthly payments through June 2006.
$120K to Bank of China, 6.68%, secured by equipment, due in monthly payments through Aug 2005.

33% tax rate. Operating leases are less than $48K per year. No legal proceedings

They provide segment financial info, but I pretty much already captured it above. Assets are fairly evenly split between Steviaside and the other two parts with $900K other.