More Misrepresented Information in one letter than I have every seen before...
There will be a lot of postings having to do with the most recent “grossly misrepresented” letter to Medafor shareholders. I think SGA is a panic, because he knows he screwed up by not attacking Medafor before it was able to defend itself. Calling something a $2/share offer, when in reality it is much closer to a DIME (subtract off $1.50 from committed contract minimum purchases + $0.40 net preset value for the NOL), because otherwise we might get ZERO…not likely SGA…I will gladly take my chances. What a crock. Medafor sales are exploding. Cash flow is improving; probably to the point where Medafor can fight this battle until the end of the day. Does SGA really believe the substance of this letter...? If so, he should be the CEO of Dog Dung Inc. WOW, talk about a ton of stuff that does not accurately characterize the actual situation. It is difficult to even know where to begin with this one, because so many things have slants to them. Essentially, the letter is a passive aggressive rhetorical bunch of stuff that comes close to being a lie, without quite being one in fact, while being one in principal. When a guy does thing like this, he is not to be trusted. My shares and my active support are squarely behind Medafor management. Not much substantive truth in this letter, that is for sure.
Really, SGA's game plan is to disrupt Medafor; hence, driving Medafor shareholder's into CRY's hands on the cheap. It may take up management time, but our sales staff if still going full bore, with sales doubling every 18 months while CRY is growing in the high single digits. SGA, for enough money you could buy Medafor, but I don't think you have enough. You do not have enough cash to pay cash, at least if you are going to have any left to drive the sales you are talking about. Your stock is too cheap, thanks to your great management, so that it doesn’t buy much either. However, if you are serious, propose a 1:1 exchange and see if Medafor shareholders are willing to do that.
CRY might prevail, but Medafor is not going to be an easy target. You pay Medafor enough money under the current contract minimums for Medafor to fight CRY until the end of time. I hope you do not buy the minimum though, and instead lose the contract.
Also, maybe Medafor (hear that GS), or some other company, can go after CRY's high margin BioGlue market when it goes off patent in 2012/2013. CRY would be crying if that were to happen. I don’t see BioFoam as ever being a big deal either, at least not in the near term, so probably not any magic there either.
The going concern opinion in Medafor's audit statement is the kiss of death. No bank or venture capitalist will touch Medafor without a LARGE premium. The legal entanglements not withstanding, will be VERY EXPENSIVE to defend.
In a normal situation you are right on. I think you may be off the mark here. Cash flow at Medafor has increase dramatically. There is already adequate cash flow to both grow sales and to litigate, although medafor would much prefer to get along and just grow sales. I'm quite convinced that the financial statement will not be qualified in 2009, like it was in 2008, simply because of the much better cash position and much better cash flow numbers. I could always be wrong of course, but the Medafor model is so simple that revenues and cash flows can easily be estimated quite well by someone with a financial background.