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Sunday, July 08, 2007

Ajay Sports (AJAY)

AJAY, AJAY SPORTS, INC., no website, sec, yahoo, chart
[note: now AJAYQ].
Pro Golf of America, Inc. is the world’s largest franchisor of “golf only” retail stores, with over 110 stores in the United States, Canada, Europe and Puerto Rico, as of September 30, 2006.
I opened the most recent 10-Q and glanced at the balance sheet and literally sprayed my monitor with cranberry juice. Let's tally up the assets as a percentage of total assets:
If your trademarks are 91% of your assets, then you've either got a profoundly great business or a profoundly bad business. I'm guessing it's not the first one. My first clue was the fact that the current liabilities are greater than all of the assets, including the prized trademarks. Needless to say, the shareholder deficit is pretty...

Revenues for the past 3 months and 9 months actually increased slightly.

With total net revenues of $582K, the cost of sales is only $1K, so they have gross margins of 99.8%. Not bad.

Operating income is $74K. So good, so far. But interest expense is $242K. There's a gain on extinguishments of debts, definitely not a good thing.

Operations provided $17K of cash over 9 months. No financing. No investment.

Next we look at an 8-K file ominously named "f8kajaybankruptcydec2006.htm". I'm guessing this isn't going to be good news.

Back in Dec 2006, a jury awarded a prior employee (CFO and Chief Admin Officer), Ronald N. Silberstein, $1.3 million. Ajay filed an apeal and "expects a positive result upon Appeal." The only people who expect to lose on appeal are those who can afford to.
Due to the adverse decision reached in the wrongful termination case and the resulting $1,320,168 award, Ajay Sports, Inc. and its affiliates have filed a Chapter 11 Reorganization....
Well. That, and the fact that the business sucks [I'm guessing]. That was Jan 3, 2007 and there have been no SEC filings since then.

The 10-K shows the CEO owns 77% of the company. Poor guy. He must be pretty pissed off at Ronald.

The 10-K also shows the same killer interest expense.

Ok, so let's look at the stock price. Looks like a life-support signal that flatlined.

obviously not interested

I left this at valuevista, also

Bruce --

As you can see by the link, I like your blog. If I have enough energy, I hope Valuevista will develop into something like PinkSheets.

While I enjoy writing, so far I have found writing to add more time to the process than I desire. Though the writing process does impose an added level of welcome discipline.

When I went through the pink sheets the first time, I hired people to filter out the total garbage and then I skimmed over the rest very quickly to pick out the few that were worth looking at carefully.

What rules did you give your screener to filter?

What did you do to skim the others? Read 10-Ks and 10-Qs, or some other more accelerated process? I am interested in speeding the process on my end.

[Note to people reading this: I responded to ValueVista over on the ValueVista blog.]
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