Chris:
You have asked the single most important question there is about this company. The problems you recite are real. Is there any hope? For whatever it's worth, I'll give you my version of what has happened and Xecom's chances. This is going be too long and I apologize.
If you have been with this company from $4.00 to 0.13 [as I have] much of this history is old news. Joe Lanza was supposed to be the venture capitalist and money man for Xecom, but he ran out of money. So, in 1996 Xecom issued a whole bunch of preferred stock to continue the installation of the bases. All of the common stock was watered down and diluted by these transactions. The full extent of the dilution is now being felt. I expect there to be somewhere near twenty million shares common shares at the year end reporting period. Over fifteen million were reported at the third quarter.
The investors who bought the preferred thought they were getting sweet deals; but some are beginning to have second thoughts. Voyager Management, for one, is upset with the management of Xecom, as it made clear in the 13D it filed. Voyager may just agree to sell it's stock or may take action to oust Xecom management or simply do nothing. We will all wait to see how this plays out. It is an important event and needs to be watched.
But, notwithstanding the fact that Xecom gave away the store insofar as our shareholder interests were concerned, the real question is can it survive, be successful, and grow enough to justify the huge amount of common now in existence? As usual, there are no simple answers.
I believe Select Switch is gaining ground and increasing the cash flow of the company. The year end report due out February 15, 1998, should give us a clearer picture. We all know that the equipment financing payments begin June, 1998. If the company cash flow is sufficient to pay this bill, it will survive; if not, well, the company will not survive, unless more capital is raised.I believe it will be able to make the payments because of Dennis Casey's commitment.
Insofar as our stock value goes, it will be some time before the market is going to get over the shock of the growth of stock in the company; just think of it, a tiny company like Xecom with twenty million shares, ridiculous. I believe the asset value of Select Switch probably exceeds twenty five million. So, perhaps, assets equal or approach debt; that angers me, but it is where we are now.
Bottom line? I believe Xecom will survive but it will take time to absorb the stock growth and allow the price of the stock to appreciate. Can Xecom grow as now organized? I believe Joe Lanza wants the company to succeed, but I don't think he is the person to make that happen. Joe, for his sake and ours, should completely step aside and let someone who knows about the telephone business do the consulting for Xecom; Joe's a very large shareholder, even larger than he let's on; he doesn't like to acknowledge it for reasons he doesn't talk about; but he should get his ego under control and let this company be run like a real company and not a mom and pop store.
Wes.
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