Fatt, wanna buy some DCHT? Read this Summary of their 10SB by an EXPERT....
To: H2SteveO (1953 )
From: Sid Turtlman Thursday, Aug 12 1999 11:01AM ET
Reply # of 1970
I took a look at DCHT's 10-K and, what can I say? It is really awful, but I guess no worse than I expected, given all the misinformation and nonsense that we've seen to date.
The financial statements themselves show a company that must beg for alms from passers-by to stay in business. Its share count is soaring as it must do private placements every few months to pay its bills. And I am not all that sure it is even paying its bills: DCHT's Accounts Payable is higher than the total of its Cost of Goods Sold this year through June, implying that it hasn't paid its suppliers this year and still owes for deliveries last year.
Losses remain huge despite slashing of R&D expense, which is likely to put the company even further behind all the serious players in the fuel cell field, where the research budgets are orders of magnitude higher. Steve recently gloated about how BLDP lost $17,000,000 in the quarter -- but where do you think most of that money went? R&D. When BLDP is spending that much, and DCHT is spending at a rate of about 1/100th of that amount, how does that allow DCHT even into the same game as BLDP? That is what makes Steve's "DCHT is a bargain because its market cap is much less than the real players" argument so bogus.
I could go on and on about how weak the finances are, and about the huge dilution from constant stock offerings, share payments, options and warrants, but that should be obvious to anyone with the most rudimentary accounting knowledge. Instead, I'll spend my time on a few less obvious things.
Exactly as I had predicted in my post #587 here analyzing the preliminary financial material on the company's website, the accountants took away the huge gross margin that the company was claiming. For the 6 months ending this June, the gross margin is 34%, as compared to the near 90% asserted by the website. That is consistent with the fact that DCHT lacks the ability to manufacture much in house -- the companies doing the work take the margin. This means that even if sales pick up considerably, the amount of the sales dollar that DCHT will get to keep itself is not all that big, assuming that it pays its suppliers. In other words, while rising sales, if that should happen, may help DCHT attract more investors to its private placements, outside financing will still be what keeps it afloat -- the earnings on sales won't be high enough to do that by itself.
DCHT could in theory expand gross margins by doing more manufacturing in house, but that requires specialized equipment, which means spending more money which it doesn't have. As it is, the total pre-depreciation value of all of DCHT's equipment totals only $95,530.
This brings us to a statement that DCHT makes concerning fuel cells that I find truly astounding: "Management believes that the single largest barrier to market acceptance of its fuel cells will be the lack of market knowledge about the benefits of fuel cells. With this in mind, the Company has embarked on a market education program. The Company has manufactured several prototype demonstration units of its fuel cells and has successfully operated hardware at trade shows and conferences. In addition, Company personnel have spoken at conferences about the fuel cell product. As the Company nears the commercial introduction of its fuel cells, these educational activities will continue to increase."
That is as wrong as wrong can be. There is NO lack of knowledge about the benefits of fc's. Everyone knows they are great in theory. The real stumbling block is a lack of ability on the part of any fuel cell developer as yet to manufacture one at a low enough price that people will want to buy it. THAT is the problem. That can only be solved by a combination of excellent design and highly efficient manufacture. The latter requires an immense investment in specialized, highly automated equipment that can turn out components to exacting tolerances and assemble them efficiently. Success will require sophisticated manufacturing expertise and equipment, and many years of trial and error work to get production to the smooth, mass market level that will result in low costs.
DCHT doesn't have the equipment, the manufacturing expertise, or the experience. Yes, it can get a 50 watt light bulb to work off of a hand built fc, but that is trivial. The company appears to lack not just one, but EVERY necessary factor to create a commercial product. Unless this company gets massive new funding (I'm talking many tens of millions, not the several hundred thousand it has been digging up every few months) and spends all of it on R&D, engineering and manufacturing expertise, and advanced equipment, it has virtually no chance of ever having a commercially viable fuel cell product.
Perhaps DCHT can eke out a living in the gas sensor business, although the paucity of sales so far raises some question about that. As to the fuel cell part of the business, DCHT appears to be little more than a stock promotion disguised as a company.
On the positive side, there was absolutely nothing in the 10-K about the so called business supposedly expected from Antaeus Corp., as I had predicted. This was an embarrassment that should never have happened.
Also, it is conceivable that DCHT's relationships with the outfits who invented the technologies it is trying to commercialize may give it access to additional technologies in the future, without having to spend much in R&D itself.
And as long as it can continue to find people to take its stock at a discount for financing or in payment in lieu of cash for services, it won't go belly up, and where there is life, there is hope.
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