Sometimes the most important issues are the ones they didn't say or talk about.
There was a plus, NMS had $3.3 mln in cash from operations. Though, this is a one time occurrence driven by one time events, and won't soon be repeated. Stockholder's equity went up to $62 mln, but it will drop back from here as time goes by.
As for profits, don't smile so big, the fact is they probably really lost money again in business operations. When you toss in financial operations, they generated profit ONLY because of the debt buyback. What do I mean? They claimed they bought back debt at just under par. Yeah, well how much under? This is their profit!
Anytime Bob is optimistic you can be sure he's covering up something, so what is it this time? Probably management wants to dump some of their shares while the stock is so high. Also I suspect the trials aren't going as well as he leads a listener to believe. Even if they do sign contracts, unless this technology, Access Gate and My Caller, are adopted industry wide the revenues NMS will realize are minimal.
They forecast a next quarter earnings of up to $0.01/share, but admit they'll again go cash flow negative.
Oh, by the way, THEY ARE USING THE STOCK PROCEEDS TO PAY OFF DEBT. They purchased $13 mln in debt, and this allowed them to show a profit. I expect they'll do the same in the current quarter to show profit. This will mean they'll use more cash to remove debt.
So here's the dichotomy. In the past they said they'd buy back debt when the price was favorable. Well, if they bought at just under par, this doesn't sound favorable. So either they're lying about when and why they're buying back, or they're lying about what price they bought at.
Here's what will come out - they lost money in business operations just like they have the last 15 or more quarters. They showed a profit only due to paper gains on debt buyback. Mark it, believe it, it's true!
This quarter was a blip, they've admitted it. Bob's still in charge so this company is headed down just like it's been headed for the last few years!
FACTS??? Please explain how buying back the debt created a 2 cent per share profit. Just using quick math, assuming that the $13M buyback was done in the middle of the quarter, I get an interest accrual saving for the quarter of less than $100K. According to my calculator, that works out to be around .02 cents per share, NOT 2 cents per share. Either my math or yours is off by about 100 to 1. Please point out the error in my math.
When you buy back debt there are several effects on income.
Sure the interest will be saved going forward, but the immediate impact on earnings is the purchase price.
If you buy back debt at less than par, for instance assume par value is 100 and market rate is 90, then the difference is booked to earnings.
It's very simple accounting. They admitted during the conference call they bought back at near par. They conveniently forgot, purposely forgot, to give the impact on earnings of the debt buyback, and skirted the question twice with vague answers (they obviously did this purposely)!
If they bought back debt at just 94/100 of par then they more than covered all earnings shown with this debt buyback. I assume they bougt back at about 88/100, and called this price near-par during the conference call - this would attribute $1.5 mln in income just to the debt buyback - thus proving their operations once again were losing operations - which with Bob at the helm is a near certainty.
There is a clear reason why they didn't give the figure, and that's because they want to shield the real reason they were able to show earnings, and you know going forward earnings won't oft be repeated.
I'm sure they purchased all the debt before they were able to close on the equity. After they closed on the equity the market price of the debt came close to par as the risk around the debt was reduced considerably with the successful equity issue. So bye-bye earnings!