here is the rest:
To: +John S. Baker (652 )
From: +John S. Baker
Tuesday, Feb 10 1998 10:05AM ET
Reply # of 2010
Continuation of long message re annual meeting....
Don stated that their current monthly expenses are in the $85-90,000 range, noting that he
could cut that some but was planning some staffing changes which would bring the "burn
rate" right back up to that figure.
Lots of big name clients, but only one is generating big dollars so far. AT&T is what took
the company positive, and they would not be positive without AT&T.
Discussion of "Kingswood" or "Kings Group"???? said they terminated the agreement in
February of 96 ... Kingswood owns 340,000 shares which are "legended" (meaning I think
that they cannot be sold????) ... company has sued Kingswood for $438,000, filed on a
contingency basis (minimal upfront cost to the company) but he doesn't really expect ever
to collect anything even if they win the suit. (This whole Kingswood thing pre-dates me,
so I may have it somewhat garbled.)
Noted that when we see large volume of shares traded, remember that it often is
"double-counted" or even "triple-counted". Customer buys shares from market-maker,
who goes short, but then buys shares from a seller. Each transaction is counted, hence
doubling. If the MM buys the shares from *another* MM, then the count can triple. He
estimates that the real number of shares transferred is about 40% of the total shown on
any given day.
Was asked about the loans shown in NOTE 6 of the financials (page 7). Responded that
the $30,000 note has been paid off with minimal interest. The second note was planned as
a 30-day note, which dragged on for two years. They did not actually pay 4% per month,
as shown in the financials ... rather paid about 15% per annum over the two years. The
third note has been repaid.
Regarding warrants shown in NOTE 10 of the financials (page 10).... Warrants shown in
Item i were issued to Kingswood, have now expired. Item ii (potential of 238,143 shares at
30 cents per share) were issued to an institution (he gave the name but I missed it) at the
time that stock was at 19 cents. Item iii was a "private placement" which converted debt
he had incurred on behalf of the company into warrants (potential of 407,401 shares at 40
cents per share). Item iv was a private placement when stock was at 19 cents (potential
of 337,500 shares at 20 cents per share).
Stated that no warrants have been exercised to date.
Margins. For a small client (ie not AT&T), their gross margins are 80%. Subtract the
G&A and a LOT flows directly to the bottom line. Don stated that they could double their
revenues with only a 10% increase in expenses ... the implication being that getting added
business form existing clients or adding additional clients would be *very* profitable.
That's all the time I have for now ... maybe more later.
(FWIW, I am long a modest position ... and will be looking for additional opportunities to
buy.)
JSB. |
