Any comment on this?
To: Bidder (11959 )
From: JD
Monday, Oct 18 1999 10:17PM ET
Reply # of 11989
Regarding MEMO, someone posted to me on Fri. speculating that
this could be a 10 bagger, and then today there was a post on this
thread quoting out of date market guide summary - while never
mentioning little details like bankruptcy, $5+ mil. in debts, ...etc.
This is not a recommendation to buy, hold or sell - it is a
recommendation to do a little DD before you invest / post! I am not long or short on this stock (I bought a little Fri. AM after reading a post, market guide, and most recent news release. I sold it all after spending about an hour checking the most recent 10Q).
If you read the most recent 10Q you will find a few points of
concern:
I. SALES
- "However, this was primarily the result of the introduction the
new Digital Voice Recorder commencing with initial pipeline
shipments to its primary OEM customer Dragon Systems. These
pipeline shipments continued for the first three months of 1999.
The Company anticipates that following the initial success andsell
through of its product bundled with Dragon software in the first six months of 1999, that second half sales to Dragon will be
significantly lower due to a full product pipeline at the wholesale and retail level and increased competition."
1st. Qtr. '99 Sales = $5,730,030
2nd. Qtr. '99 Sales = $4,072,209 (29% decrease from previous
qtr.)
II. ECONOMIC DEPENDENCY (Too dependent upon one client):
- "Sales to Dragon Systems represented 88% of total sales in the
first half of 1999"
III. BANKRUPTCY
- "On November 2, 1998, The Company filed a voluntary petition
for protection under the reorganization provisions of Chapter 1of
the Bankruptcy Code with the United States Bankruptcy Court,
District of Colorado, file number 98-25542 RJB. The Company
continues to operate as a Debtor-in-Possession." "On May 14,
1999, the U.S. Trustee objected to the adequacy of the
Disclosure Statement. In June , 1999 the Company filed the First
amended Disclosure Statement to accompany the First amended
Plan of Reorganization dated April 21, 1999."
IV. LIABLILTIES -
"As of December 31, 1998, the Company had recognized
$4,367,828 in prepetition liabilities subject to compromise.
Claims filed by creditors totaled $5,385,442 as of June 30, 1999."
V. CONVERTIBLES & WARRANTS
- "Combined with the $2,450,000 convertible debenture, the
Company issued 940,000 warrants to buy shares of the Company's
common stock" "The Company has rejected this convertible
debenture as part of its proposed Amended Plan of
Reorganization" "The Company has rejected all outstanding
warrants as part of its amended plan of reorganization filed April
21, 1999 pursuant to Chapter 11 of the Bankruptcy Code.
However, no assurances can be made that the Company's Plan will
be accepted."
VI. STOCK OPTION PLANS - "Through December 31, 1998, the
Company had granted (net of cancellations) 426,443 options with
various vesting periods and an exercise price of between $.31 and
$3.00 per share."
"As part of its amended plan of reorganization..." "the Company
has rejected all outstanding stock options..."
"As of June 30, 1999, the Company has granted 702,200 new
incentive
and/or non-qualified stock options to officers, directors,
employees, and non-employees as part of its post reorganization
plan. 677,200 of these shares were issued at an exercise price of
$0.19 with an expiration date of January, 13, 2002. 633,700 of
these options vested January 13, 1999..."
- EPS for the 2nd Qtr. was $0.026 per share, but mgmt. warns of
"significantly lower" sales in the second half of this year from the
client that accounts for 88% of total sales (ytd). Mgmt. also says
"Third quarter research and development expenses are expected to
be significantly higher...".
- Meanwhile, Mgmt. is trying to toss out the
old stock option bonus plan (which starts to reward them only if
the
share price gets higher than $0.31) with a new one that is in the
money at anything over $0.19 per share. In my opinion, it would
appear
that mgmt. is not expecting any "10 bagger". It look like they
felt a share price of higher than 31 cents was too much to plan for!!
- I also noticed that mgmt. did not issue a press release when the
bankruptcy court rejected the adequacy of the co's disclosure
statement, which appears to have forced the co. to restate 2nd Qtr.
earnings (adding an adjustment to prepetition liabilities of
$297,292).
- I was thinking to myself that is would be nice if the co. could sign
just one more agreement like the one they have with Dragon
Systems, sales and profits would be much more sustainable. But
then I read this in the '98 10K: "the Company's contractual
relationship with Dragon precludes bundling by the Company of
its recorder with voice recognition software marketed by other
companies". Oh well.
......Now we wait and find out if the "significantly lower" sales
will produce any profits left for the shareholders after the court
assigns repayment schedules and determines potential dilution
from the convertibles, warrants, and mgmt. options.
No wonder its been 11 months since they filed ch.11 and the court
still does not know what to do!
Jerry
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