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Technology Stocks : IFMX - Investment Discussion -- Ignore unavailable to you. Want to Upgrade?

To: frank doolittle who wrote (11096)	6/20/1998 3:53:00 PM
From: Mark Finger	Read Replies (2) \| Respond to of 14631

There are two parts to this to understand: 1. IFMX already has been paid for a lot of product that was sold to middlemen (VAR's, OEM's, and distributers). There is an assumption in accounting that IFMX will possibly have to refund some of that (if they fail to deliver products in a timely manner) or that they will have a lot of added expenses to meet these needs. I disagree with these assumption (not more than 20% maximum of the amount should do either of the above items). However, according to standard financial accounting, that means that IFMX does not have enough cash to meet all its obligations (note the short term assets--excluding A/R and compare to short term liabilities). The credit item we are talking about lets them "tap" the A/R to get some additional cash. Note that this is the reason that they wend out into the markets to get additional financing in the form of preferred stock and warrants. 2. To keep the A/R loan available (they actually are not using it, but want to keep it available if they do need it), they have to meet certain criteria. Some of them are somewhat technical. However, to boil them down, they need to make $.06 before taxes (and probably $.04 after taxes). Since the concensus report is only for $.02 for the next quarter, IFMX must beat the numbers by at least $.02 to keep the credit. This could be a nice surprise to the analysts, to see IFMX come in at $.04 or $.05 when they are only forcasting $.02. Further, in October, the report needs to be $.09 before taxes and $.06 after taxes. Since I suspect that the analysts are only expecting about $.03 now, this could be another nice surprise. Right now, most analysts are only forcasting only about $.10 profit for the whole year. When you consider that Q1 was break-even (actually the revised number was a fraction of a cent loss), and the required profits for the rest of the year are around $.16, IFMX could get some good bounces during the next 9 months. This could help some of those who wonder why the stock price is so high, because IFMX will have to keep the profits growing to meet the requirements (further, they must make a minimum of $.24 in 1999 after taxes). I hope this clarifies this for you. Mark