Bingo!!! it's all about "cash"
You can believe that the sales contracts & letters of intents with the hub & spoke system and all the "virtually locked" sales & revenue NHMCF "would generate" for the next year. I'll even throw in that the letters of intent & contracts are NOT falling through.
Now what the market and the Big Boys that have been dumping & shorting NHMCF for the past year know (and the longs holding NHMCF still don't realize or mention here) is that before NHMCF makes a profit, it has to try to generate some revenue; before NHMCF generate some revenue, it has to sell its kits; before it sells its kits, NHMCF has to make it; and before MHMCF makes its kits, NHMCF have to BUY supplies (to fund Cost of Goods), and to BUY NHMCF need CASH.
Let's say that conservatively (because NHMCF has never disclosed its profit margins from their wonderful labour cost saving hi-tech Star Wars Robots) that for every $1 in sales, NHMCF "can" make it for 50 cents so they have a 100% mark-up. Now say the time between purchasing the raw materials to make the goods, sterilize the goods (takes time), ship the goods, RECEIVE PAYMENT ON TIME (very IMPORTANT; not that the customer won't necessary pay, which sometimes happens but that NHMCF receivables dept. is NOT on top of them which has happened) is 3 - 4 months (depending on the terms issued). NHMCF turn around on their cash flow is 3 - 4 months so they need more cash to feed the cycle as more of these sales contracts are signed. The more sales contracts the more CASH will be required to build inventories and make the kits to meet the sales orders. NHMCF does NOT really have that much cash to really push higher sales/revenues/make a profit. Last year, instead of using the cash from a Cnd$6 financing to build their basic business of just making medical kits, they used the cash to acquire a bunch of mediocre so so companies in the name of "verticle integration". It all "sounded" nice but these companies have yet to add any real value to NHMCF's bottom line. (Big Mistake by current management). From the last year end report we saw that NHMCF revenues grew (by adding the revenues from the so so companies they had acquired) but there were NO profits but instead a loss.
NHMCF Achilles Ankle has been that they have NOT been very effective in managing their cash-flow with just their current few sales contracts. NHMCF runs the risk of selling themselves into BANKRUPTCY. Just because they have a growing list of sales contract, it doesn't mean that the goods for sale will materialize from thin air. NHMCF still has to make them. The more contracts NHMCF acquires, the more difficult it will be for them to service their contractual obligations to deliver the goods. NHMCF may incur penalties from their buyers for non delivery of goods.
Bank financing you said? What makes you think that a bank is going to lend them enough cash if in the past NHMCF's current management has been unable to turn a profit from their current few contracts? What collateral does NHMCF really have? The robots? NOT (check robot leases & ownership). That's why NHMCF current management entered into two hideous convertible debenture deals to finance the company. Why didn't they just do another Private Placement instead? Because no one would touch them so NHMCF current management had to offer better terms through a convertible debenture that was skewed towards shorting the shares of NHMCF.
This is why NHMCF needs someone like Merril Lynch to come in and put the needed Cash into NHMCF. NHMCF is going to let the share price slide at least a few more months (they can't control it anyways). The situation is going to be grave. Shareholders will become very frustrated when they see their shares in the pennies. Then along comes the White Knight in the form of Merril Lynch. NHMCF will be in such dire straits that Merril Lynch will agree do a financing (perhaps even another one of those convertible debentures) at a ridiculously low price along with warrants in the name of keeping the company alive. Merril Lynch will have a significant position in the company, appoint a few directors to the board and replace the current Golfing President with one experienced in the medical industry and terminate current IR dept and other incompetents. This will be the turn around for NHMCF IF they manage to get Merril Lynch to come on board.
Don't worry about the current management. They still have almost free stock, 'repriced' incentive options and the President indirectly controls the leases to the robots.
The reason I'm sure that the price is headed LOWER is because of the first debenture they did back in Oct 97 with 2 Euro funds who had personal relationships with the current president. Do you remember how they eventually settle with them after NHMCF said they would no longer honour the conversion of the debenture? NHMCF eventually said that one fund would only be able to convert gradually so their cheap paper and it's effects will continue to put pressure on the stock.
This company is a mess & current management does NOT have the ability or commitment to turn it around. Sorry but NHMCF is still headed LOWER. |
