Sarasota, Fl 3/4/2008 11:10:00 PM
SEC Filings and Financial Highlights
Pennycents Magazine Reports on Importance of SEC Filings Review
Pennycents Magazine, the market’s most valuable research tool covering micro-cap, penny stock and otcbb equities, issued the following daily column by Briane Kline.
While the requirements to trade on the OTCBB are more relaxed than for more senior trading forums such as NASDAQ or AMEX, OTCBB companies are required to maintain financial statement filings with the SEC. A 10K form is a company’s annual report and can be accessed by the investing public through the SEC’s EDGAR online system. Many OTCBB traded companies file a variation of the 10K form that is specifically intended for small businesses and know as form 10KSB. Quarterly financial statements are reported on form 10Q.
Simultaneous with the SEC filing, many companies make press releases announcing the highlights of the quarterly or annual financial results. Prudent investors are wise to study the SEC filings as well as the press releases. Negative news that can be an early warning for investors often does not make it into the press release but can be found in the SEC filings.
What an investor should be especially concerned with in the financial reports should be different depending on the maturity and current goals of the business. Companies listed on the major exchanges typically are mature enterprises with an established financial history. Investors here are often looking for steady earnings growth and increases in dividend payments. This can also be true of mature businesses trading shares on the OTCBB. However, OTCBB companies often have not even reached profitability and investors will be looking at the financial statements differently.
Cash flow can be the most critical financial concern for companies still in the development stage. Profits will be nonexistent and so will dividend payments. But there needs to be adequate cash available to sustain the company’s development plans. The Management Discussion and footnote sections of the SEC filings are where important future financing information can be found. Investors can expect to find information about progress towards established goals and if they are on track financially. Management must also state an honest opinion whether future financial backing will materialize.
Once an early stage business obtains profitability the financial statements help tell a different story. Comparing year over year annual statements explains if profitability is being sustained and if it is growing at management’s predicted rate. Also, look to see if expenses are preferably decreasing or at least staying even with revenue growth. Companies trying to grow to fast often lose control of expenses in their haste.
The entire SEC filing contains information important to investors. Besides the financial results, Management Discussion, and Footnote sections, investors are advised to review the Risks and the Legal Proceedings sections. The Risks section often contains vital information about how important it is that key personnel and the management team remain intact. Other information can include risks the company faces from government regulation changes as well as how competitors might be attempting to enter the market or garner a larger market share.
The Legal Proceedings section presents information about key legal challenges the company is facing. In our litigious society, these can popup from almost anywhere. Other companies might sue over patent infringement, shareholders may file a suit over management’s financial mishandlings, regulatory agencies might tangle the company in violation charges, consumers or clients can bring suit over safety, health, or performance concerns. The list of potential legal challenges a company can face is long. While management cannot know the outcome of a legal suit, they do have insider information and are expected to state their opinion if the suit will be settled favorably or not, and many times will place a dollar amount on the outcome.
What follows are recent financial highlights of three OTCBB companies.
Heritage Bankshares (HBKS) announced net income, after tax, for the year ended December 31, 2007 was $920,000, or $0.40 per diluted share, compared to $180,000, or $0.10 per diluted share, earned in 2006. Net income for 2007 included after-tax gains of $347,000 on the sale of the Bank's Plume Street office, and $191,000, net of professional fees, from a payment received in connection with the Company's settlement with a former professional services provider.
Shortly after announcing very healthy financial results for the year, Heritiage’s its Board of Directors declared a $0.06 per share dividend on Heritage's common stock. The dividend will be paid on March 21, 2008 to shareholders of record on March 10, 2008.
Asia Global Holdings (AAGH) announced that management account results for the year 2007 show the annual revenue from its media & advertising business segment at approximately $10,664,613, a 106.79% increase over the 2006 revenue of $5,157,174. Gross profit for year 2007 is approximately $7,169,485, a 120.22% increase over the 2006 figure of $3,255,561. Gross profit percentage has also accordingly risen, from 63.1% in 2006 to 67.2% in 2007, as a result of greater economies of scale. The abovementioned results validate the Company's sizable and sustainable growth in the media & advertising segment.
Due to the robust performance of the media and advertising segment, the Company's liquidity and capital resources stay solid. At the end of year 2007, management account showed a cash and cash equivalent of $841,632.36 and pledged bank deposit of $558,103.68.
Premier Commercial Bancorp (PCBP) reported consolidated record earnings for the year ended December 31, 2007 of $3.450 million ($.94 per share), more than doubling net income of $1.459 million ($.46 per share) for the year ended December 31, 2006. Consolidated net income for the three months ended December 31, 2007 was $688,000, compared with net income of $287,000 for the three months ended December 31, 2006.
Premier Commercial Bank Chairman and CEO Kenneth J. Cosgrove, stated, “We acknowledge that these strong results were significantly influenced by the successful sale of the Arizona subsidiary in the third quarter, but it is noteworthy that core net income from continuing operations also improved for the year to record levels.”
Any investor considering purchasing share in these companies need to perform due diligence by analyzing the SEC financial statements of the companies, going back several years if possible.
About Pennycents Magazine
Pennycents Magazine, along with the Pennycents.com web site, features information on up-and-coming micro-cap, and penny stock companies listed on the OTCBB and Pink Sheets, as well as commentary on the factors that influence the market. As a totally unbiased penny stock information platform, Pennycents does not accept payment from the companies mentioned in its articles or columns. Neither Pennycents, nor its staff or writers, are allowed to invest in companies featured in the magazine. You can have Pennycents mailed to your door or learn more by visiting its website at http://www.pennycents.com/.
