Hi Kelly,
<< I wonder whether the reason for the additional depreciation of assets is due to accelerated or unplanned obsolescence, or whether they overvalued the assets when they were acquired and are re-valuing more realistically? >>
I did a quick review of the financial statements as follows:
I see the depreciation for the nine months ended 9/30/98 as $491,610 and for 12/31/97 the twelve months depreciation was $641,900. If I annualize the 9 month figure to 12 months, I get $655,480, which is within reason.
ETPI did increase their Property and Equipment value in 1998 by $2,773,155, compared to purchases in 1997 of $712,942, so you would expect higher depreciation levels.
The purchase of these fixed assets was financed primarily through the issuance of stock. The cash flow shows $424,374 in financing came from the issuance of debt and $2,404,387 came from the issuance of stock.
When I annualized the revenue for 1998, and compared it with 1997, I see that the revenue decreased 10% in 1998.
The cost of sales for 1998 was 41% compared to 45% for 1997, which brought in a higher percent of gross margin.
The non-operating expenses seem to be in line between the two years.
All in all, the income statement and cash flow seem to be reasonable. The main problem with the financials is the lower revenue. That would be my primary question. Why were revenues down?
Please let me know your thoughts.
Take care. Go ETPI!!!! Scoobey |
