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  • Eggplant101 Eggplant101 Nov 17, 2010 3:13 AM Flag

    Here are my concerns

    1) Mgt now loses all credibility because their revenue and earnings guidance was so far off. They now have revised their 'guidance policy' to no longer give guidance. The policy revision makes sense, as there is no reason why any guidance should be believed.
    2) For this tiny company, there is too much debt. Forget the cost of being a public company -- there's $16m of debt, in a very complicated capital structure. And, there is $6.4m of convertible preferred claims, also in a complicated structure, paying dividends as high at 9.5%. And there is the somewhat mysterious minority interest, which seems to grow each quarter, regardless of the company making or losing money.
    3) CEO Turney actually spent time on the conference call talking about IR efforts? How embarrassing. So management was marching around the world touting the company story -- and revenue and profit guidance that was pure fiction? This is pathetic.
    4) This company is too small, spread over too much geography, probably eating scraps in tertiary markets that competitors have no interest in pursuing because there is no profit opportunity. Q3 Middle East sales were $110k. Why bother?
    5) MK was hired -- but at the urging of whom? The board, or the lenders? Sure, they might sell the company, but I'm not sure it is worth more than its debt and preferred stock obligations.
    6) Inventory is too high and grows like cancer. It smells like there is a bad/obsolete inventory write-down on the way. Maybe enough to wipe out the remaining $4.5m of tangible common equity.

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