Jack, what a great post! Lets review your statements and compare them to the truth:
1) NMS Approval Process
Zahran: "Tell me should I trust NASD's stringent NMS approval process?"
Truth: TAVA is NMS listed. The NASD has three alternative methods for qualifying for NMS listing. TAVA obtained their listing under "Alternative 3", as follows:
Nasdaq Alternative 3 for NMS listing:
a) Market capitalization of $75 million OR total assets and total revenues of at least $75 million each. (TAVA qualified on market capitalization)
b) Public float of 1.1 million shares
c) $20 million market value for the public float
d) $5 minimum bid price
e) 400 shareholders
f) Four market makers
g) Corporate Governance Standards
TAVA qualified by keeping their stock price above $5 and issuing tons of shares! Investors should not consider this a "stringent process". Qualifying had nothing to do with the financial condition of the Company. BTW, to lose NMS listing under alternative 3, TAVA's market capitalization needs to drop below $50 Million.
2) Russell 2000 and Russell 3000
Jack: "How about their inclusion in the Russell 3000, ooops 2000?"
Truth: First, this statement gives the impression that the Russell 2000 is more exclusive than the Russell 3000. Nope. The Russell 2000 is the smallest 2000 companies in the Russell 3000! A typical Zahran misstatement.
Inclusion in the Russell 3000 is based on market capitalization, a minimum trading price and being domiciled in the U.S. Not too hard if you pump the stock price and issue more toilet paper (dilutive issuing of more shares).
List of Approved marginable stocks by the Federal Reserve Bank
Jack: "Oh, I missed one item, their inclusion in the list of approved marginable stocks by the Federal Reserve Bank."
To streamline their operations, the FED has ruled that any stock is "immediately marginable upon designation as NMS security". Zahran makes that sound like another "approval process". It is not.
Zahran goes on to say: "These are serious indicators of a strong financial condition." WRONG! TAVA qualified for all three, (NMS, Russell 3000, marginability) all because they issued shares and their stock price increased. This has nothing to do with the financial condition of TAVA!
Financial Condition
Jack concludes: "They are doing very well financially which is one of the first things we should look at."
Truth: Jack is half right. Investors should be concerned about TAVA's financial condition. But he is wrong about TAVA, they are not doing very well. The important aspect of cash flow is "operating cash flow". This is strongly negative (about $3.4 Million last quarter).
Here is an analysis of operating cash flow for last quarter:
exchange2000.com
Investors should be leery of companies that bleed cash, but keep issuing more shares to stay afloat.
Conclusion
Four statements, all half truths or simply wrong.
Caveat emptor, Bill
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