From: +InfoStream.com Sunday, Jul 18 1999 12:04PM ET
Reply # of 11047
Some additional remarks:
Company has been created by a reverse merger into a shell named "CALDERA, INC." - the acquired company at the time was IFHC.
edgar-online.com.
Caldera itself has predecessors:
"Caldera was formerly MW Companies, Inc. ("MW Companies"), the successor corporation to Sansidra Corporation ("Sansidra").
Sansidra was organized under the laws of the state of Nevada in 1984, it completed a public offering of 700,000 shares of common stock pursuant to a registration statement on Form S-18 that became effective November 9, 1984."
edgar-online.com.
Intangible assets:
I'm not sure whether the post "customer lists", as intangible asset would hold if put under question. They clearly must be derived, ie acquired, as there is no activation of self-created intangible assets.
As opposed to financial contracts with a definite cashflow (eg. loans, or any sort of cash receivable contracts) a customer list does not necessarily generate definite revenues, if at all. So it is, as you stated a certain form of goodwill.
That intangible asset was created by the next acquisition effectuated after the reverse merger, as presented per Sept 30, 1998.
Note that the "additional paid in capital, itself making most of the shareholders equity represents roughly the amount of the customer list".
But how effective is the derivation of the intangible asset if, as stated most of the assessed equity value is granted to the original owners of that asset. I am inclined to say that the reverse merger + the activation of a single huge intangible asset is a way of recognizing asset value perhaps not practicable in an acquisition not effected by a shell company.
"The purchase price exceed the fair value of net assets by approximately $84.1 million and has been included in customer lists. Effective December 31, 1998, Unistar acquired the operations of independent insurance agencies in Texas. These acquisitions were contributed to the Company by Unistar Insurance Agencies, LLC, owned by significant stockholders of the Company and valued at approximately $10.6 million based upon cash and note considerations. Included in this amount is $5 million value assigned to Talon Financial Services, LTD. ("Talon"), a Bermuda-based reinsurance brokerage company."
edgar-online.com.
Another red flag maybe the depreciation of this sole intangible asset. The quarterly depreciation is about 550k (former q: 538k) so amortisation would take 39 years. Adopting a faster depreciation would clearly wipe off any posted earnings. The last q shows earnings of 0.06, or 1.37M (the former: 0.05, or 1M).
As opposed to the earnings, the cash flow is a positive 12M generated by financing activities of 23M, invested into a receivable of 12M, some purchases and reserve allocations.
The USFH Acquisition was structured as a stock-for-assets exchange,
valued at approximately $75 million, with the Company issuing 3,975,000 shares of Common Stock in exchange for substantially all of the assets of USFH..
Zeroing out the customer list leaves the company with zero equity, as the Finance contract receivable is wholly offset by the note payable and some amount dues through all the subsequent quarters.
The question is whether the NTA criterium will be fulfilled.
I'm inclined to assess an EBA (include interest) valuation which would yield, given the operating income. EBA is roughly 2.8M, assume no same-agency-growth.
This would yield 11.2M annually. A modest 8x would translate into roughly $90M, or $3.73/shr.
Regards
is.
Message 10553980
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