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Friday, March 30, 2007

CXTI partial results

CXTI announced that it can't file the 10-K in time, so it's getting an extension. Meanwhile, they're announcing some things. (CXTI combined links)

I don't own any shares of CXTI any more. I sold most of it earlier in the year (I wrote a bit about it here) and I sold the small remaining part today. My reason for selling today was because I need the cash for a private investment. I would have preferred waiting till next week since I had bought the shares on April 3 and 4 of 2006 (the stock price had dipped a bit back then and I bought some), so waiting until next week would have resulting in long term capital gains rather than short term gains. I knew CXTI's results for Q4 would look worse than they really are, just as Q3 looked better than they were. They were late in filing, as I had hoped, but offered a glimpse of Q4 results. Rats. So, not taking any chances about what the market might do after thinking about it, I bailed.

Lesson learned: Forget the taxes and just decide what to do. You can't predict near-term future stock prices. I should have sold it all months ago and then bought back when the price dropped today. Then I might be on the right side of the trade today instead of the wrong side. Forced error.

Long term, I believe CXTI stock will continue going up. If I can get a good price, I won't hesitate to buy back in. This is a good business to own. The real question is whether CXTI at this price is a better investment than the other stuff I own. Right now, I don't think so, but I could easily be wrong.

CXTI's revenues were $17.4 million for Q4. This is down from $19.4 million in Q2. No big deal. Net income for Q4 was $1.7 million, but there's a $3.8 million non-cash charge. This is the whole derivatives oscillation issue. When the stock price goes up, it makes earnings look worse, which causes the stock price to go down, which makes earnings look better, which causes the stock price to go up, etc. etc.

I don't know how much of that $3.8 million non-cash charge is due to derivatives, but it's probably at least most of it. Interestingly enough, they had a $3.8 million benefit from a change in fair value of derivatives in Q3. They showed net income of $6 million, but I argued it was closer to $3 million.

Q4 seems like it might have something like $5.5 million in what I'd consider earnings, but that seems a bit high, considering that revenues are actually lower.
Management and the auditors are currently reviewing the treatment and valuations of the convertible debenture associated with the October 2005 private placement post the Amendment and Waiver Agreement dated October 31, 2006, including certain non-cash adjustments related to the early extinguishment of debt.
While I wish I could say bad things about this, I actually consider this a non-issue.

The conference call should be interesting: 4:30 PM EDT, April 12.

CXTI has been a fabulous investment! And I suspect it will continue to do well.

So you chose to sell CXTI with apparently a large tax hit over selling CVU with a tax loss?
Well, yes. My sense has been that CXTI is closer to full value than CVU, although with CXTI dropping as far as it did, it was probably close enough to have picked CVU instead, taking taxes into account.
Bruce, any sense what cxti will do since they are talking about listing on a national exchange? time to buy some?
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