Here is what the actual 10-Q says about DRIV:
You can view the full 10-Q by obtaining a free two week Edgar Premium Membership at:
edgar-online.com
The full 10-Q includes more details than the summary or the PR, posted on the web.
Item 1 - Assets, Current Assets
Sorry the formating is so bad, but the bottom line is that although the "cash" assets are listed $18,237, total "current" assets are $5,572,854. The non-current assets include property=$428,122, receivable officer/stockholder (?)=$201,512, mining (the gold mine?)=$748,276, and finally INVESTMENT IN DIGITAL RIVER = $27,966,028 based on Sept, 30 price of $8.75 (which is actually $29M for 3.2M shares). Total Assets are $34,916,792 on the balance sheet (obviously more at DRIV's current, and hopefully future price). Total shareholder equity is $18,165,939, or $1.60 per share. (see paste of numbers below).
Note 3 - Digital River
The company has the "option" (still) to acquire 3,200,000 shares of DRIV for $1.00 by Dec 31, 2000. The company reported gain on issuance of stock by DRIV of $2,509,000 for the quarter ($4,374,000 for the 9 months). I take this to mean that the value of their DRIV stock increased by these amount, although they have not realized any actual gains from this. In other words, while their ownership of DRIV decreased from 60% to the current 19% level, the value of the stock increased by these figures. There is no mention of realizing any actual cash benefit from DRIV (only operating losses). A "Balance Sheet Information" table shows that stock holder equity is now $29,345,000, versus $2,540,000 last year (more than 10X increase).
Then Item 2 is the Management Discussion information included in the summary posted on the web.
Also of note, the "Consolidated Statement of Operations" calculates the EPS of ($0.09) by showing that TSQD losses consisted of ($308,134) from income loss of operations, primarily due to increased marketing expenses for NetDirect. However, the Net Loss accounts for $32K net interest expense and for $271,200 for Cam Designs write-off and $370,029 for DRIV up to the IPO (both losses which will not appear on future earnings reports). Without Cam and DRIV, the EPS was only ($0.03)!
As I see it, TSQD may see a profit by 1-Q 1998, and after that things may only get better for NetDirect. The DTP Direct webpage is starting to look alot like the Egghead and Cyberian pages, TSQD seems poised to exploit the Desk Top Publishing and Net markets. TSQD says they believe they'll have enough current assets to make it through the year, and they may or may not have enough for 1999. If they don't, they may or may not have to use the DRIV option, or they may be able to leverage it to borrow, if necessary. But the most positive news to me is that the DRIV shares ARE reflected in the balance sheet, and TSQD has not felt pressured yet to have to exercise the option. I was the most skeptical about this arrangement at a time when TSQD was trading at 7% of DRIV's price. But now I understand a little better why it makes more sense for TSQD to not have to exercise the option until it is to their maximum benefit. I really like TSQD at this price, if (big if) it drops tomorrow I MAY buy more.
I respect Doc's position that TSQD is "flat", but my read is that things will get better for TSQD, and it can be greater than 30% DRIV before the end of next year. If so, these are great prices. Very risky, but with great potential. Please, everyone else, throw in your $0.02!
September 30, December 31,
1998 1997
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(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 18,237 $ 300
Restricted cash 197,177 143,623
Available-for-sale securities - 467,438
Accounts receivable, net of allowance
for doubtful receivables of $259,000
and $306,000 respectively 2,630,267 2,727,883
Inventories 2,342,776 1,890,480
Prepaids and other current assets 384,397 234,936
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TOTAL CURRENT ASSETS 5,572,854 5,464,660
Property and equipment, net 428,122 346,419
Receivable from officer/stockholder 201,512 201,512
Mining assets 748,276 748,276
Investment in Digital River 27,966,028 839,202
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$34,916,792 $7,600,069
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