AS, cool off, you are getting too excited. I quote the last annual report available on the net. Do you deny that sales have gone down from over $102 MM quarterly to under $27 MM quarterly? Did you notice that their operating margins on these $27 MM were only 4.5% (or $1.1 MM), while their SG&A were at $32 MM (not counting "non recurring" losses and write offs, see more below about potential write off ofaccts. receivable), thus the burn rate in the last reporting quarter was $33 MM, this is what they reported so far. Mind you their SG&A in that last quarter reported were already 40% under the prior quarter, thus even if they get another 10% down it still leaves them with about $30 MM in SG&A, and with gross profit margins of 4.5% it takes a long time to get out of that hole. What you do not read in that annual report, but you can find it if you want to is that at $100 quarterly sales rate their gross margins were at 55%, but at $27 MM only 4.5%. Did you ever ask yourself why? Its called fixed costs, they need a critical mass to support their SG&A, and they have already cut quite a lot. CEO are very optimistic, they have to, but the actual truth comes out in the numbers they have to report by law in SEC document, all the rest, is a lot of "talk". Look at VLNC and years of "talk" about getting production to a rate of $100 MM plus a year, and then look at the actual results. I still opine that this outfit is a walking dead, until they prove otherwise, and the market knows best what their fair value is, about $.65/share. They have taken from the public more than $200 MM, and squandered $160 MM of it, and will squander what is left unless new management comes in put some order in, that might not even be feasible. If you knew how to read a balance sheet statement, you will find that their quarterly sales are supported with $122 MM of "working capital", any idea what that could be? Yes, you got it, accounts receivable. On $27 MM sales? These are mostly what we call "stinky aging" receivable, not very likely to be collected. You see a large portion of their former clients were small start up companies that are no longer being fed cash, and they have not paid for service rendered, sometime in the next quarter or two, they will have to write these offs.
Here is what they write in their 10K:
"WE HAVE EXPERIENCED, AND EXPECT IN THE FUTURE TO EXPERIENCE, A DECLINE IN OUR
REVENUES, WHICH WILL NEGATIVELY IMPACT OUR FINANCIAL RESULTS" pure and simple
I have no apologies to extend.
Zeev |
