Here's a little ditti from Leroy about MISM (now CMOZ) that was written just over six months ago. It's useful because it demonstrates how this company can spin like a top but eventuality, like all tops, it falls down.
I post it not to knock Leroy -- though I do like to tease him (no I don't "hate" Leroy) -- but to point out how this company doesn't live up to expectations that it helps sow, especially by exploiting the naive entheusiasm of naive-novice investors.
DO YOUR OWN DUE DILIGENCE!! I am doing the best I can to provide information to present and potential shareholders. It is in my interest for the stock to appreciate but I am a long-term shareholder and expect substantial stock appreciation in the next 15 months. The majority of that appreciation may occur in the short-term or it may occur after complete audited financials are released next year. I do not try to predict stock price movements.
Audited financials for the company will be prepared in the next month or two for dissemination to shareholders and submittal to the SEC to become a reporting company. But, the financials will not show how the companies perform under MISM management. The actual profit figures will not be available until the next year's reported numbers. For example, MISM has identified numerous areas to cut costs at Pretzelmakers. As a private company, Pretzelmaker purchases several corporate box seats at the major sports events in Denver, pays high salaries to owners, etc. These expenses will be cut but won't show up on the MISM bottom line in the form of audited earnings until next year.
The question (in my opinion) is NOT whether MISM will move up: the question is WHEN??
Nevertheless, given the near-term events that are about to happen, I think activity in MISM and the price of the stock will be going up VERY SOON. In my opinion, the patient shareholder of MISM is about to be rewarded.
OVERVIEW OF NEAR-TERM EVENTS
1. Finalizing $18 million loan
2. Acquisition of Mr. Twister Pretzel (23 locations in Southwest U.S. and Canada)
3. Acquisition of Pretzelmaker, Inc. (220 locations in U.S. and Canada). There may be some international locations (e.g. Korea)
4. Final information on two auto deals. One is 30-52 stores that are mall-based auto repair stores sold by a large company that is restructuring. These stores will be company owned but sold off to franchisees. The other is a 27-store auto franchise in Ontario.
5. A Proxy statement is being send out to current shareholders this week regarding the $18 million loan.
Last Thursday and Friday, I spoke to Bob Millstone, Clint Cantwell and Dan Masters. The following information is a summary of those conversations.
PROMOTION OF MISM
First, the promotion for the company by the two PR firms will not start until the above mentioned deals have closed. I am not sure about the auto deals and their status but the Pretzel deals will close immediatly after the funding is available. Accordingly, PR by the two PR firms will formally start at that time.
MIS is currently preparing (it may be complete) information for Bob Millstone to produce and distribute. This information will include overall company plans for the next three years and provide three year projections of earnings. Personally, the projections should be taken with a grain of salt but it is VERY useful to see where the management would like to take the company.
I personally like the fact that the company is waiting for the promotion until AFTER the deals have closed.
FINANCING
Ten days ago, Dan Masters informed me that the CASH from the financing (provided by an unidentified Investement Banking firm) would be available in 5-20 days. We are in the second half of that time period. It is expected that the Cash will be available in the middle of this week.
Once the cash is available the two pretzel deals will close out and further information on the auto stores will be released. The company has prepared a series of FOUR press releases to occur in the days following the completion of financing.
A Proxy Statement is being sent out early this week to inform investors that Preferred Stock is being issued to the Investment Banking firm to secure the $18 million loan. If the company should default on the loan, the Investment Banking firm could use the Preferred Stock to take control of the company. MISM revenues were just over $1 million for 1997. Therefore, the majority of the assests of the company are being financed by this loan. The Preferred stock will be held by the Investment Banking firm until the load is repayed.
There have been delays in the closing of the pretzels deals because the financing needed to be increased. In mid-March the owner of the 27-store auto franchise in Ontario agreed to sell the company to MISM. MISM had wanted to buy the company last year but the owner had backed out at the last minute because he had decided not to sell. When the oppotunity arose again, MISM did not want to pass it up.
Accordingly, the loan was increased from $13 million to $15 million. When MISM management met with the investment banking firm nearly two weeks ago, the investment bank agreed to increase the magnitude of the loan so that MISM could pay intesest on the loan for the first year and have enough additional cash to close an additional, as yet unspecified, acquistion. I consider the confidence of the investment bank in MISM management to be VERY positive.
OTHER ACTIVITY
The company is still developing their Costco outlets. These outlets are where they are selling "wholesale" pretzels. These pretzels are sold cold in packs of 6 to be reheated in the stove or microwave. Instructions are provided on the packages.
When this expansion is complete there will be about 10 operations in Costcos going at any given time. I believe they move from different Costco stores on a monthly basis (it may be on a weekly basis). If you want to visit one of these locations, I would check with the MISM office to see where they are currently located. These operations have been working very well and gross-revenues are between $4-5,000 per week. Two of the outlets will be company-run in the Toronto area. The other 8 outlets will be (are) franchised.
The company developed a new recipe for the pretzels last year to be able to support this type of operation. Mall-based stores sell warm pretzels that are made on the spot. The wholesale pretzels sell for about $1.00 (canadian) apiece while warm pretzels cost $1.99.
MISM is restarting a program they had last year with Air Canada. Warm pretzels are being offerred on many flights. The purpose of this program is primarly for PR in terms of knowledge of the product. Also, the company sold one franchise as a result of this program last year.
PRICE, EARNINGS, ETC.
I will continue to hold ALL of my shares of MISM while the share price is so greatly undervalued. I may part with 20-25% of my shares when the share price is over $1.00 but that will depend on where the company is on expansion. If there are several more LARGE deals that are in the works, ready to close, etc. and I consider the share price too low, I may easily keep all the shares that I have.
I have reviewed available information and discussed general topics with Dan Masters. I have also performed my own analysis of the deals that are in the works and their earning potential. The following figures are based on my analysis.
The Pretzelmaker deal itself will earn at least 0.05 in the coming year and that number may be as high as 0.10. The other deals add additional earnings. Total earnings for the coming year I expect to be between 0.10 and 0.20. Given a PE of 15-25, I think the share price is worth somewhere between $1.50 and $5.00.
I consider the Pretzelmaker deal to be the really BIG one. In 1997, Pretzelmaker was ranked 129th in size and 63rd in growth for all franchising companies in the U.S. Pretzelmaker is a large, well-known franchise that has great growth potential.
As you can see, we're not even close to that price!! And, the financials of the company with the near-term deals suppport these prices.
My price target for the next two-three months is $1.00 to $1.50 and my price target for the next 12-18 months is $4.00 to $5.00. The numbers really preclude any significant further expansion.
If the share price reaches the $4 to $5 level, the expansion capabilities of the company are greatly enhanced. The growth rate could pick up substantially at that time.
SHARE COUNT
Total shares: 1,673,500 (held by individuals on this email list)
Public float: 5,500,000
Percent of public float: 30.43%
I have asked shareholders to give me information on their holdings. I really have no interest in personal information so you can give me the numbers through a stockbroker or any other means do it that way. This is PURELY VOLUNTARY. If your stockbroker is Tom Welter, I already have included your shares. Others have emailed me directly.
I have requested the share count for several reasons. First, now that I know the share count is so high, it's nice to know that this email list is reaching over 30% of the shares in the public float. I understand the public float is 5.5 million shares.
Second, there are questions about how Market Makers work and whether they are shorting the stock. Some recommend holding stock certificates yourself to prevent MM's from shorting the stock. Personally, I think there has been some minor stock shorting recently to drive up the volume of the stock. Market Makers make most of their money on VOLUME.
In that regard, if information on preventing shorts by MM's pans out, I may request as much as 80% of my MISM shares to be held myself. If anyone has an opinion (I want GOOD, SOLID information with SOURCES) please let me know.
If I were to remove shares from the market to prevent shorting I will let other shareholders know and perhaps others would do the same. Together, we might be able to do an effective short squeeze and drive the price UP!!
PR CONTACTS
PR firm: Bob Millstone, North American Corporate Consultants: (602) 561-1300
This firm is responsible for information to individual investors and stock brokers.
PR firm: Clint Cantwell, Rubenstein Investor Relations, (212)843-8051
MIS Interntional: Dan Masters, President/CEO, (800)268-8225
BACKGROUND
I am an individual investor in MISM. I have been an investor in this company since 1994. From February 1994 to the latter part of 1996 the company went nowhere. Until mid-1997 the company was listed on the Vancouver stock exchange (MIS.V). During that time Wilfred Shaw (presently Chairman of the Board) invested in MIS.V and eventually increased his investment to the point that he controlled the company. Near the end of 1996, Wilfred brought in new management. Dan Masters (present President/CEO) is the head of the management team and runs the company on a day-to-day basis.
I invest in MISM for the following reasons. First, I like the management both in terms of their skills as business people and their down-to-earth style of management. No hype, just the facts. Second, franchising is an increasingly popular business form. From past reading, I believe only 10-20% of individual businesses are successful while the success rate for franchieses is over 80%.
I attended a MIS shareholders meeting in January 1997 which fortunately was only a few miles from my office in the San Francisco area. I met Dan Masters and Wilfred Shaw. I was very impressed and greatly increased my investment during the first half of 1997. In my mind, Wilfred Shaw provides the financial backup and Dan Masters is a very capable and driven businessman. From Dan's past experience, it is my opinion that he KNOWS how to run a business and franchising is his area of expertise. It is also my opinion that it is CRITICAL for the upper management of a small and growing company know how to run a business and make a profit.
When I substantially increased by investment in early 1997 I did so on the belief (hoped for) that I had found a good combination in Dan Masters and Wilfred Shaw. It was rather speculative. During May 1997, I travelled to Toronto and visited the Wheel-to-Wheel location in Mississagua (this location at the time was the only W2W location and is still run by the company) and I visited one of the Pretzel Twister locations (and ate about 5 or 6 pretzels on two trips to this location). I was very impressed with the quality of the Pretzel twister product.
In the last two months, I have more than tripled my investment in MISM. I consider the present price with the deals that are about to close an excellent investment opportunity. If the price had gone above 0.60 in the fall and stayed there, I would not have increased my investment to the present levels; therefore, as an investor with great confidence in the MISM management and business plan, I am glad for the oppotunity to buy at these price levels.
EVERYONE should do their own DD. I am providing the is information for use by other investors. You should do what you need to do to verify this information.
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