10Q is out. Liquidity problems. Declining revenues.
They report a profit for the quarter thanks to the accounting gimmik mentioned in the last 8k. But not counting unusual items like that, they had a big loss.
freeedgar.com
The big story, IMHO, is a liquidity crisis and declining revenues.
Let's look at the cash:
Cash flow from operations was a burn of $8 M in the last 6 months.
Cash is down to $1 M.
Not a good combination, is it?
So it appears they have a liquidity crisis.
Significant sequential decline in revenues.
A/R is ballooning, now up to $19 M, despite falling revenues. As a rule, when you see this, it can be a sign of aggressive accounting in the recognition of revenue, or a sign of lousy customers who can't pay.
Two customers for switches in the quarter, and neither could pay. They were given extended terms by CYOE while they looked for credit. Looks like the same old story: CYOE gets the customers who can't get credit elsewhere.
Here's an excerpt addressing their liquidity problems:
At September 30, 1999, we have a negative working capital of $3.2 million and we
are currently exploring means of raising additional capital through debt and
equity financing to fund our immediate working capital needs. As part of this
activity, we have recently completed and received $1.8 million in funding on two
demand loans. The first loan, which is for a total amount of $0.6 million, bears
interest at the bank's prime rate plus 1% per year, is repayable on demand and
is secured by our investment in Systeam, S.p.A. The second loan, which is for a
total amount of $1.2 million, bears interest at the rate of 17.5% per year and
is repayable on demand after March 31, 2000. The maximum term of this loan is
three years to November 2002 and is secured by our investment in our wholly
owned subsidiary INET Interactive Network System, Inc. Under the terms of this
second loan, the lenders, certain of whom are affiliates of ours, have also been
granted three-year warrants to purchase a combined total of 73,500 shares of our
common stock at an exercise price of $4.50 per share. |
