Here is some feedback on your comments:
>>> Preferred shares are not really well accounted for. If you use fully diluted shares, the market cap goes up by 1/3 to about $25M.</>
I agree that you need to factor in the fully diluted share count when determining your valuation. However, I think your terminology is a bit off ("not really well accounted for.") as the accounting is proper.
>>>>"Costs incurred on uncompleted contracts, in excess of progress billings" on balance sheet 4M - do you know what that is and why it went up from March 2010?
Here is the explanation of this from the 10-K. If you still have questions, please ask. "Revenue and costs are recognized on the units of delivery method. This method recognizes as revenue the contract price of units of the product delivered during each period and the costs allocable to the delivered units as the cost of earned revenue. When the sales agreements provide for separate billing of engineering services, the revenues for those services are recognized when the services are completed. Costs allocable to undelivered units are reported in the balance sheet as costs incurred on uncompleted contracts. Amounts in excess of agreed upon contract price for customer directed changes, constructive changes, customer delays or other causes of additional contract costs are recognized in contract value if it is probable that a claim for such amounts will result in additional revenue and the amounts can be reasonably estimated. Revisions in cost and profit estimates are reflected in the period in which the facts requiring the revision become known and are estimable. The unit of delivery method requires the existence of a contract to provide the persuasive evidence of an arrangement and determinable seller’s price, delivery of the product and reasonable collection prospects. The Company has written agreements with the customers that specify contract prices and delivery terms. The Company recognizes revenues only when the collection prospects are reasonably assured."
>>>>Operating cash flows about 30% lower than earnings. To be fair, last year OCF was much worse.
Your comments are correct. However, the differences between income and OCF have varied over the past few years both positively and negatively. The differences to a certain extent are related to revenue recognition (see comment above). If you compare the cumulative net income and OCF since the beginning of fiscal 2009 they are almost identical. So, this smooths out over time but the timeframe is longer than with most companies.
>>>>Company organized through reverse merger. This is yellow flag in Chinese stocks an orange flag in American stocks (American stocks have more opportunities to list than Chinese, so reverse mergers are very dinky).
Most small companies these days organize through a reverse merger. That doesn't bother me at all. However, I don't touch Chinese companies.
>>>>Related party transactions in 10Q sound like self dealing or worse.
This transaction happened in 2006 and is not a concern for me. It is prior to the current management.
>>>>Option grants to CEO are pretty high - 7% of non-diluted, 5% or diluted share count!
I agree that the option grant to the CEO was high. However, he brings significant experience in the solar industry and that seems to be bringing significant traction in solar. I think he is taking the company to the next level. I don't mind 5% dilution if his skills grow the company massively. If not, then I agree but I think he has already showed that he has added a lot of value.
>>>>2 customers are 70% of sales. They lose one and stock goes down 50%.
I agree that customer concentration is an issue. They are making steps to broaden their customer base but it will take time to reduce the concentration. In the mean time, it is important to watch their customers closely. I'm less concerned by loss of a customer than I am about the change in business condition for their customers (especially SOLR).
>>>>"Although we provide manufacturing services for large governmental programs, we usually do not work directly for agencies of the United States government. Rather, we perform our services for large governmental contractors and large utility companies. However, our business is dependent in part on the continuation of governmental programs which require the services we provide." - how sure are they that these government programs will continue?
I'm not sure what this text is talking about. I'm not aware of governmental programs that they are working on indirectly. Maybe this is legacy text relating to past business. I'd have to dig in further to understand this. |
