Daniel, you are right: POST has many red flags. Here's my take:
As a shortseller, POST popped onto my radar screen recently by making it to the list of the OTC-BB's most-active-by-dollar-volume. Making this list is a red flag by itself, in my experience, as most stocks making it there are lousy companies that have somehow suddenly become highly overvalued.
POST has a market cap of $107 M, at the current stock price of 10 1/2. That's for a company with incredibly meager financial statements, an unqualified executive team, and a product that little prospect for large sales.
The annual report, for the year ending 12/98 also includes unaudited results for the quarter ending 3/98. It doesn't look pretty:
sec.gov
To start with, they have had only $10,407 of sales, in their entire history, and that was to a single customer. Tiny.
The liquidity situation looks very poor. The auditor's opinion was qualified: significant doubt about their ability to continue as a going concern. Management's response to this qualification should normally offer a specific plan to improve the liquidity situation, but in this case management failed to include a specific plan.
They burned cash of $238 k in operations in the first quarter, leaving them with only $105 k. Nowhere is it explained how they have continued operating since then. Presumably they either sold some more equity, or they cut back to almost no expenses.
They have issued newsreleases claiming to have purchased some ISP's. With what money they purchased them, they don't say. Why it makes sense for a tiny cash-starved software maker to own some ISP's is beyond me; the explanation given in the form 10, made no sense to me as a business plan.
The qualifications of the executive team are really poor. How these guys can run a software company is beyond me. Before starting this company, the CEO sold office supplies, the Head of Strategic Acquisitions and Partnerships was a fly-fishing guide, and to round out the team, they've got a director who is a sailing instructor who formerly worked in real estate. The only claim of expertise in software that any of these guys make in their bios is that the director says he once wrote some spreadsheets.
The product is offered at a very low price, and it competes with a half-dozen comparable products, as reviewed in a computer magazine recently, without excelling in comparison to the competition.
zdnet.com
I don't see any prospect that it can produce enough sales to justify a $100 M market cap.
To top it all off, the company is located in Vancouver, the world capital of stock fraud, and it trades on the BB. As you found yourself earlier this year, Daniel, they are resorting to shady stock-promotion methods. |
