Despair: Good thing, bad thing
by: GetVeryRich (45/M/Ithaca, NY) 2954 of 2955
Good Thing:
CXI has a good technology that has been demonstrated to be superior to other alternate technologies. It has several contracts, and hopes to win both domestic and international contracts. Currently as of
"December 31, 1998, total backlog for the Company was approximately $80,000,000, as compared
with approximately $109,250,000 as of December 31, 1997. Approximately
$46,000,000 of the total backlog represents work for which the Company has entered into a signed
agreement or purchase order with respect thereto or has received an order to proceed with work
up to a specified dollar amount. The remaining backlog of approximately $34,000,000 represents
the Company's current estimate of work for which the Company has been notified that it has been
chosen for a project but where a contract has not yet been finalized. The Company estimates that
approximately $18,500,000 of the total backlog represents work, which will be completed in the
next 12 months. Backlog amounts have historically resulted in revenue; however, no assurance can
be given that all amounts included in backlog will ultimately be realized, even if covered by written
contracts or work orders."
Bad Thing:
CXI is spending more than it receives, and it is acquiring companies that won't add to its cash flow in the near future.
"The Company's 1999 forecasted corporate expenses are anticipated to exceed annual cash flows
from operations by approximately $1.6 million. The Company is hopeful that it will raise additional
financing in the near future. However, the Company believes it has, as of December 31, 1998,
sufficient cash and cash equivalents ($1,798,000), and unused borrowing capacity (approximately
$1 million) to fund ongoing activities through the end of 1999."
"The report of the Company's independent accountants with respect to the financial statements of the
Company, from which the financial data included in this press release is excerpted, includes an
explanatory paragraph stating there are matters which raise substantial doubt about the Company's
ability to continue as a going concern."
Likely Outcome:
To improve its performance, CXI must continue to win additional contracts, reduce overall cost, and expand (acquire) only when operational revenues (cash flow) exceed operational expenses (cash outflow). The management has to meet this as a performance requirement. When the management does not deliver on this, but chooses to acquire other companies that do not show any potential to generate revenue and positive cash flow, that too on borrowed funds, this approach will take this company mostly to financial distress. It appears that this poison pill approach that also includes huge severance packages ti top-tier executives has been Blum's way of running companies in the past.
Alternative:
Alternatively, one of its domestic or international competitor or Teledyne could acquire this company and better manage the revenues and the expenses, and try to provide shareholder value.
The current stock price may serve as a warning to CXI management to stop its acquisition, or it may be a result of CXI failing to secure additional funding.
Whatever it is, Amex delisting, and penny stock status are here to follow.
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Posted: 05/05/99, 5:28PM EDT as a reply to: Msg 2953 by KativaT
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