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Sunday, September 02, 2007

looking for bargains in the archives

BakBone Software has dropped to $1.22 on the ask. Unaudited Q1 results (period ending June 30, 2007). Bookings were $13.3 million, a 16% increase yoy. Cash is down to $9.6 million from $11.4 million due to the ongoing big audit problems plus R&D for the Sun agreement. Seems a bit cash anemic, but I could be wrong about that. But BakBone's financial statements have been a mess for over 2 years... not a good sign.

Aida Pharm (AIDA). Price is only down slightly. Q2 results: Gross margins are down to 44% from 53%. SG&A is up. They were just below breakeven on net income vs 5.5% net margins in prior year. Customer concentration is still high, but has switched to a totally different set of companies since last H1. Operating cash flow is good due to a drop in AR, an increase in customer deposits, offset by an increase in inventories and decrease in AP. Capex is a bit above depreciation. Lots of financing going on: net borrowing. Current ratio is still below 1. The stock price hasn't dropped enough at $1.05.

American Home Patient (AHOM). My concerns were massive debt combined with a lack of growth. Q2 results: The massive debt is still there. Revenues are shrinking. Stock price hasn't dropped nearly enough ($1.30 vs $2.32 back in early July). No thanks.

Amerex Group (AEXG). I noted they need a huge amount of growth just to break even, maybe if they succeed they'd be worth 15 cents. They were selling for 32 cents when I looked at them in June 2007. They're now selling for $1.85!!! Yikes. What happen? A director quit. They got new financing from some sort of hedge fund, but it's pretty brutal. Q2 results: current ratio is still WAY below 1. Very ugly balance sheet. Revenues nearly doubled and they've nearly reached operating breakeven. Still a long way to go for net positive income. A good part of that is amortization of debt discount. Operating cash flow is nearly breakeven thanks to that plus growing current liabilities. I didn't like them at 32 cents and I don't like them at $1.85 with twice the revenue.

AFP Imaging (AFPC). $1.80 seemed like a reasonable stock price. It's now down to $1.37. No new results. Not cheap enough.

Asia Electrical Power International
(AEPW). These were the guys I considered to be totally wrong in their weighted average accounting. The company never responded to my second message to them. They approved 5 million employee/consultant stock options. Q2 results: 51,959,692 shares on June 30, 2007. 51,000,000 shares outstanding on Mar 31, 2007. Weighted average share count is listed as 51,319,898. The six month share cound shows as 51,159,949 whereas last quarter's 3 month average was listed as only 33,000,000. Looks like they ended up agreeing with me. I'm still not interested in the company.

Advanced Materials Group
(ADMG). This was the disposable pan*ty company ("*" added to avoid zillions of silly unrelated web hits). I had figured it was worth around 70 cents based on a 13 million totally diluted share count. SEC issues, nothing I'd consider serious. Q2 results: revenues up only slightly from prior year. Gross margins are down. Operations burned cash. The stock price is 90 cents. Not interested.

Zhongpin (ZHNP). I liked the company, but the stock price wasn't cheap enough at $10.75. It's now $9.50. Q2 results: Cash doubled to $41 million, but current ratio remains just below 1. $64 million in revenue vs $56 million in Q1. Earned about 3 cents per diluted share. Operations generated huge cash due to an increase in AP (plus earnings). Huge investment in construction project and huge capex. Huge short-term loan and sale of stock (lots of stuff in the SEC filings). This might end up being a great investment, but I'm not convinced enough to shift money away from what I currently have.

American Bank Note Holographics (ABHH). Originally, I figured they were worth at least $2.75, then at least $1.50. Since then the stock has gone up from $3.35 to $4.90. Q2 results: revenues up 9.3% from Q1 (down yoy). Part of the revenue is from a discontinued program. ABHH has expanded into secure government documents programs: Colombian national ID card. Net income was 6 cents per share. It seems to me that big trends in the world will favor this industry. I figure the stock is worth at least $4.00, but I'd need some significant margin of safety to buy it.

Optionable (OPBL). This was an interesting stock. Their presumably largest customer dropped them. There were accusations and then lawsuits. I figured the stock was probably worth at least $2.00, but then there were board resignations and I backed off from considering this as an investment. The stock has dropped to 15 cents from around a dollar when I looked at it. Hmmm. Q2 results: $9 million net cash on $15 million total assets. Revenues way up from prior year, but way down from Q1 (not surprisingly). Negative gross profit. There's an "impairment-consideration receivable from stockbroker" which is about 10 times greater than the total assets of the company, resulting in a massive net loss. They explain this in Note 5.
However, at June 30, 2007, based upon the statements made by the Investor [NYMEX], the Company is unable to assert that it will receive any of the benefits initially contemplated by the Stock and Warrant Purchase Agreement. Accordingly, the Company has recorded a charge to its statement of operations amounting to approximately $145.8 million, for the six-month period ended June 30, 2007.
Operations cash flow was slightly negative for the quarter. With 52 million shares, the market cap is $7.8 million, which is less than the net cash. The market is valuing the business as being worth less than nothing. Right now they need to find some new way to make money. They lost a lot of their brokers. The top executives resigned. The principal line of business is hosed. It's very possible that the current stock price is close to the value of the business. No thanks.

Just curious, if you're familiar
with FCCN? Their reverse merger
with Aero Exhaust will be completed
at the end of September:



I am wondering what you think about Commerce Planet (CPNE). I've been taking a look at it recently, and the last time you reviewed it (March) it was trading over $2 a share, now under $1.

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