Hi Bob,
Some good points and some bad points. C.Assets to C. Liabs is 2.27. A CPA will have to tell me if that's good. Probabably does not mean anything by itself. $282K gross profit on sales of $516K is pretty good. The problem is that sales were only $516K. Sales increased by 34% over same Qtr. last year, and by 34% over Qtr ending, June, 1997,{ If trend continues that would produce $691K sales in final Qtr. *55% margin =377K more cash. (my evaluation, not in 10Q)}. They have $1.8M in cash and receivables. So lets say they generate $2.2M in Qtr. just based on trend. If they watch expenses and not make any capital outlays, that would get them through the Qtr.
They would need a significant sales increase to do better operationally. It appears that they sold about 1950 units, which is up considerably from last Qtr. when they were really first being shipped. There is $355K in inventory, and I wonder what that consists of. The $668K in receivables could be significant depending on how much is scanners/software and how much service income that we know about.
Regarding Preferred conversion: It looks like Encore converted to some 2.5M shares of common. Ouch!!! Need someone to do the math to see if they have anymore left to convert.
I am not too worried about Cogent. Where can they turn right now. They have put their algorithm in NRI's hands to develop. Competition has developed. If they tighten the screws too much and force NRI into Chap 11, then they lose bigtime. NRI is their main hope in this field.
They seem to have a lot of contracts that are just coming into their own. So, hopefully, and if Keytronics can produce enough scanner/keyboards, they may have a chance for an earnings surprise this Qtr. If they can show this, they may be able to get financing on better terms. Remember Clearwater, has taken a big gamble on NRI and they have big buck$.
Best wishes to all, and to all read 10Q for yourself and make own judgements.
Jaffo, It is getting time to pose Questions to JG again.
Sheldon |
