Networm:
(1) Re financing: company has resorted to several private placements with institutional investors in recent months, and may well have to do another one, in my opinion, before the next purchase contract is announced. Their expectation is apparently to utilize the existing shelf registration to finance $ 25 - $ 30 mm or so when the next contract is announced. I personally think this contract will be announced before calendar year end (others are skeptical of this timing, however).
At one time the company indicated that it hoped to become cash flow positive in the 12/99 quarter. I think this was predicated on slightly faster initiation of orders, and a discussion with senior management (702-558-1000) indicates that this date has been pushed back to 3/00 quarter.
There is certainly risk with financing, but the current environment is certainly much better (ie, an announced p.o. with a major telecom company) to finance now than over the summer, so I think we are talking about dilution, not the availability of financing. I personally use 42 mm shares as the fully-diluted outstanding shares, and I use a net income margin of 20% once breakeven is reached (which Dawson stated on a prior cc to be about $ 40 mm/year in revenues.
(2) By anyone's measure, the technical picture of the stock seems strong. Point and figure chart shows the breaking out of a 5x top at $ 8.50, and Dorsey Wright indicated the same, as well as potential opportunity (if it occurs) to add to positions at $ 8.50, the prior top.
IMO guessing shorter term fluctuations cannot be predicted with more accuracy than that, ie, a $ 8.50 - $ 11.50 range until the next announcement. If it is a second contract, then I think we will see the old 1998 high of $ 11.50 taken out and a $ 14 or so stock...
So it really depends upon your aversion to risk, I would think. If you want to wait for further proof, then wait until the next contract (or financing) announcement if they are deemed positive. If not, buy around current levels. Or perhaps buy a partial position now in order to hedge against a sudden rise and wait for a lower price before taking a further position.
(3) And re Dawson: if you don't like him or don't trust him and the remainder of management, you certainly should not invest in this company. I've said on several occasions that one has to buy into management in order to invest in these or any other "restarts". I obviously believe in Dawson - went to the NI plant and had dinner with him and two of his top engineers, and think they know what they are doing. Larry Brubaker, on the other hand, obviously has much more distrust of the management, recently having referred to it as having "squandered millions of dollars of shareholders' money".
Your choice given your risk profile. |
