comments on latest 10Q by accountant from RB
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06/30/00 10-K Analysis
I examined the 06/30/00 10-KSB filed on 10/12/00 in some detail. The following is a collection of observations and comments from my analysis. Velocipede talked about the financial statements disclosed in an earlier PR in this post:
ragingbull.altavista.com
In no particular order, one thing I note is the following passage from page 4 of the document:
“Recently, we entered into a Business Alliance Agreement with Hewlett-Packard Company, whereby the companies agreed to jointly market their products and services and to work on the build-out of SmartServ's global infrastructure. We expect Hewlett-Packard to introduce SmartServ's wireless m-commerce solutions to their interested enterprise customers.”
As we know, to fuel its growth, HP is restructuring itself as an Internet specialist providing Web hardware, software, and support. They have many enterprise customers and a large marketing staff.
Next observation
SmartServ is currently in negotiations with Data Transmission Network Corporation (DTN) to amend the licensing agreement whereby DNT would return the domestic and international marketing rights to the four products DTN licensed to SmartServ. These products are in no way related to the wireless and Web-based products, which SSOL is installing on Microsoft Mobile Information 2001 Server, demonstrating at trade shows and marketing to other customers. If SmartServ is unsuccessful in reacquiring these marketing rights, it in no way effects SmartServ’s current business plans. They would like the marketing rights to the DTN products back because they think they can make more money marketing the suite of products themselves, especially in International markets.
Next observation
From page 7 we see, “The Company employs forty-four people, forty-two of whom are full-time employees. We anticipate that staffing requirements associated with the implementation of our plan of operation will result in the addition of a minimum of twenty-five people during the period ending June 2001”
The company’s staff is growing rapidly. You may recall that SSOL only had 19 employees at the end of last fiscal year.
Next Observation
From page 18 we read:
“While we reported a loss from operations of $31,910,000, our net loss from operations exclusive of stock-based compensation costs was $1,639,000. Cash used in operations was $1,529,000, while cash used for investing activities was $1,541,000. Of the amount used for investing activities, $1,100,000 represents funds used in the development of our software applications. “
So total cash used in operations and investing activities was $3,070,000. Given the cash balance on the balance sheets of over $24,000,000, SmartServ could operate for over seven more years given their level of spending and business activity at 06/30/00. It should be noted that the $24 million dollars in cash on hand at 06/30/00 doesn’t include the $20 million HP has agreed to loan SmartServ to build out their global e-commerce infrastructure nor does it include the $1.1 million dollars received from the exercise of warrants subsequent to the balance sheet date. Also I note that of the $3,070,000 use of cash, $1,100,000 was voluntary expenditures to further develop SmartServ’s software.
I expect cash use to go up as the result of expanded employee base and increased operational activities, but not enough to effect burn rate to the extent that SmartServ is in an danger of bankruptcy in the next several years even if their revenues don’t increase significantly. |
