Long weekends lend themselves to trips down Sedar Lane. 12 years of financial statements and MD&A’s paint a rather fascinating picture.
VALUATION:
2005 (Dec) ATH (SP $1.14, 23 Mil O/S) = $26,000,000
Current ($0.11, 90.75 Mil O/S) = $10,000,000
Loss over 12 years: $16,000,000 or 61.5%
OPERATING LOSS:
2005 to 2015: ($15,500, 000) pre GFI sale
2005 to 2017: ($ 2,500,000) post GFI sale
REVENUE:
$38,096,000
WAGES (incl. consulting / mgmt. fees & stock based compensation)
$20,034,000 or 52.5% of revenue
SALES & MARKETING (largely salaries / consulting fees)
$4,891,000 or 12.9% of revenue
R&D:
$7,609,000 or 20% of revenue
SICPA / GFI deal in proper perspective:
2005 GFI purchase price: $8,787,000
Operating losses prior to sale: $15,563,000
Total (true) GFI cost: $24,350,000
Sale Price net of closing adjustments incl royalty guarantee: $23,200,000
Net Loss: $1,150,000
Noteworthy: Insiders collected some $350,000 in bonuses for putting this deal together and EUO’s CEO scored a SICPA consulting contract in the process.
Feel free to reduce this loss by whatever ”blue sky” you wish to attribute to future royalty income above the minimum but keep in mind that SICPA didn’t become EUO’s largest shareholder and demand a seat on the board purely for the fun of it. Any “sniff” of a large contract and EUO will be taken over at the lowest possible price and there is no even loosely connected shareholder group left large enough to stop this.
My bottom line … I say “my” because others may want to “spin” these numbers differently.
These 12 years cost regular retail investors $16 Mil in valuation losses while insiders (management, BOD, staff) received some $30 Mil in wages, consulting fees etc. and that does NOT include any gains from stock options.
“Value destruction and insider greed at its finest” sums it up for me.
As always, if anyone sees it differently, I’m all ears.