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Strategies & Market Trends : Floorless Preferred Stock/Debenture -- Ignore unavailable to you. Want to Upgrade?

To: Joe Copia who wrote (982)	9/29/1999 10:26:00 AM
From: Zeev Hed	Read Replies (2) \| Respond to of 1438

Joe, a cursory look at SBAS indicated that indeed the stock structure is somewhat problematic. Right now at todays prices, the number of shares outstanding would be about 46 MM. They have two series of convertible that are essentially floorless, but I believe (at least in case of the H series) that the stock is currently over the ceiling, so apart of hedging (which would have been completed some time ago) there is no more spiral activity in motion. What the market may not like however, is the fact that the company is still burning cash at a rate in excess of $1.2 MM per quarter (the growth of their Accts receivable to more than 90 DOS, is a bad sign as well). Their profits (or lack thereof) are not sufficient to support the growth in the top line (and the Accts receivable). They have only some $.8 MM (as of June 30th) in the bank, and by now should go back to the well. They will have to come back to the stockholders and ask for an increase in shares authorized since they already have 46 MM out (with options and warrants) and have only 50 MM authorized. Unless they start and move into positive cash flow (troth greater sales, bigger margins and better collection of receivable), the spiral down will continue. Right now however, I doubt that the the total convertibles (the floorless) come to more than 2 MM shares or so, and that is a small fraction of the total OS, thus dilution is still minimal. If they need more massive injection of funds and the stock drops under about $1 (the ceiling on the H are as low as $.73), then a spiral might develop. Don't you think that a market capitalization of about $90 MM is quite generous for an unprofitable company having low margins and sales of only about $15 MM or so? Zeev