A Dreary Year
It can't get much worse, can it?
So the NASDAQ is returning to the $1 share price and $4 million net tangible assets at the turn of the year with rules changes only for the small caps. I am surprised that there was no change in the National Market listing requirement.
I do not think the January delisting warning that is nearly certain will have much of an immediate effect since the $1 level is not in play for now. 2002 Q1 is already a significant quarter since the market acceptance of the new business plan should begin to be evident by the end of the quarter. That is the more important test. The investors that GMGC is presently courting certainly must have already considered the listing situation.
GMGC management can just accept delisting and get on with the very tough business of launching the new product while seeking (as stated by management) $10 - $15 million additional equity investment in 2002Q1.
There is a hint of a more favorable financial position than I had assumed. Another poster said that IR said GMGC's current funds would last through June. At the burn rate of just over $2 million per month forecast at the last CC and with $9.8 on hand on September 30 and $4.5 million (net) added with the December financing, GMGC's cash would run out at the end of April if the burn rate remains unchanged. With expenses rising a bit as forecast, a prediction of cash through June would suggest $5 - $6 million in additional revenues in 2002 Q1. Let's see if any significant part of that is quickly revealed in a big deal with the Fortune Ten guy. These hints in the past have had a grain of truth but have seldom been validated with cash. Since my current position went red again, I am going to wait and see what news January brings. The week of January 7 will be a month from the "I've-got-a-secret announcement." I hope Russian doesn't do a January deal at $0.28 per share and then follow with the naming of the Fortune Ten guy. Another 15-20 million shares at distress prices will load the float to the point where $1 is perhaps out of reach for all of 2002.
Russian's recent suggestions/assurances include a November statement that the D&F preferred deal would help to prevent dilution and a December statement that the new investors were quite likely to be long-term investors. The first of these suggestions seems wrong so far. I think the volume before and after the December deals suggests that the second is also wrong. The bottom line on 2001 for Russian is likely to be the raising of a total of $4.5 million (at $0.32) compared to a May CC projection of $15 - $20 million. December 31, 2000, found the company with $20 million cash and equivalents. December 31, 2001, will find the company with about $8 million cash. There is no magic that Russian can work by himself. The next quarter will either bring some sales or another new business plan.
"Career openings" on the site went green with lots of new listings in November, but it remains pretty static with pretty much the same positions open for the last four weeks or so. Developer support on the site remains almost non-existent with little except sales literature and white papers. There is nothing there that an active developer community would be checking frequently for assistance with actual code. It is early here for Enterprise, but late for Gateway, which has certainly been a bust so far with almost no sales reported or projected for 2001.
Onstar will continue with its slow buildup but nothing spectacular. Competing products are beginning to be deployed, and Onstar's Personal Calling rates remain absurd at more than $0.40 per minute. Who is going to listen to a ten minute sports recap on the daily drive to work if the recap cost $4.00 in PC charges per day, $20 per week, and $80 per month? Who planned that one? There is an all-sports station in every major market doing rush-hour recaps for free. Onstar was bold and innovative, but it has not delivered for GMGC. GMGC's Network Operations Center, built in 1997, is now dated and unlikely in its present form to host anything of any size beyond Onstar. The NOC remains a feature of the business plan, but management at the recent CCs and two Redchips certainly did not put much emphasis on hosting.
The fire is almost out, and they are going to have to blow on it early in 2002. I think we will see $0.28 - $0.32 at the end of January if it is more of the same but busted even lower if the next financing precedes good news. I think we will see $0.50 - $0.60 on strong Fortune Ten news. Getting off the ground with a load of 93 million outstanding shares is tough, and it looks like more passengers will be getting on board at discounted fares soon.
One positive sign is that Layton was upbeat at the last Redchip. At the 9/11 Redchip she repeatedly called GMCC a "turnaround" situation. At Redchip 2, early in November she replaced the "turnaround" characterization with "General Magic is back." I have only met her once and these of course are just words. I was at the 9/11 Redchip and talked with her briefly afterwards. I met Russian there also, and he was so brash (good way to be as a CFO at a struggling company) that I decided not to accept his statements at face value. Layton seemed more forthright.
Lastly, I think GMGC is fairly valued now. Even with a complete collapse to Onstar plus professional services, the present market cap of $30 million (3.5 times Onstar 2002 revenues) would seem appropriate. If they stretch too far attempting to be a software company, they could undermine this; but another quarter or so on the present plan is inevitable and wise now that they have gone this far. Unfortunately, a $30 million market cap is BB territory, well short of the $50 million small cap criteria. |
