Wednesday, June 27, 2012

Mango Capital: Redux.

A bit ago, I wrote about how it looked like Mango Capital sold off every asset that seemed to give it worth... Well, now they are using the proceeds of the sale to declare a dividend for an astounding 30 cents a share!

On the face of things, this is quite interesting, give that the share price had been significantly less in the not so distant past... today, the price jumped a ton on just a hair more than 3,000 shares trading hands:




However, I am a bit confused. I say this because as of the company's last filing with the SEC, they had debt that was substantial enough that it would have eliminated all of the proceeds of the sale of the intellectual assets. Given that the company openly admits in the press release that speaks of the dividend that they have no significant operations, one must wonder what has happened to or what is happening to the debt. In Nevada, the state where Mango is incorporated, it is illegal to declare a dividend that will put the company in a position to not pay it's creditors. The interesting thing, is that the creditors of the company, are related parties as of their last quarterly filing...

Now. This is all fine and dandy, but, the company is no longer filing with the SEC. Essentially, this means that we don't know if debt was eliminated, or if the company can legitimately pay the dividend. To me, this is a pretty tricky situation that isn't overly transparent. As such, caveat emptor.


Disclosure/Disclaimer: I have no position in regard for or against any of the entities mentioned. I reserve the right to change my positions at any time. This post is my opinion. Always do a ton of your own research before even contemplating anything that I say, do, write, or so much as think about.

Monday, June 25, 2012

Why We Blog...

Whopper Investments just put up a great post entitled "Looking to become a better investor? Start a Blog." I would argue that it doen't just make you a better investor, but also makes you a better writer. It also makes you smarter- I feel like when I link to an article and write down a few thoughts about it, I retain the information a bit better.

I for one, have improved a lot from my first post on this site (in regard to Dataram, no less!). I don't know if I am more shocked by how bad of a write up it was or that it was nearly 4 years ago!

Blogs are also a great way to share ideas, discuss them, and even be able to prod at management to do more to increase the value of a company. Take for example, the response to the article that Manhattan Bridge Capital issued once getting wind of Saj Karsan's post about related party transactions and such.

I certainly hope that everyone reading the article at Whopper will consider sharing their thoughts with the investment community. As with Whopper, I always like to link to other blogs that I like. :)


Disclosure/Disclaimer: I have no position in regard to any of the entities mentioned. I reserve the right to change my positions at any time. This post is my opinion. Always do a ton of your own research before even contemplating anything that I say, do, write, or so much as think about.

Saturday, June 23, 2012

Sitestar Properties For Sale/Rent.

Check it out. You can even click on the properties to find out more about them.

http://www.sitestar.com/properties/

I am pretty sure that this is not all the property that the company has or has an interest in. Additionally, as I have noted before, I am unsure as to if some of these pieces are owned outright by the company, or, if they are owned with other entities. However, I think that this can give one a good idea for what the company is doing.

Also, check out what Frank is doing on Craigslist in order to try to move the properties. You can get a good idea as well, if you just browse through the Craigslist ads. There are a lot more...

http://roanoke.craigslist.org/reo/3076738935.html
http://roanoke.craigslist.org/reo/3085136052.html

Here is one that is particularly interesting. I remember going to it and thinking that it was a bit overpriced as a house, but that it had some re-development potential. Turns out that the company is selling it based on the fact that it has B2 zoning.




http://roanoke.craigslist.org/reo/3072471413.html

All in all, I would say that the Craigslist presence is a pretty smart move by the company's CEO, Frank Erhartic. I even use it for my own rental houses. I have found that I not only get a better quality of tenants on Craigslist, but, it is free, whereas the local paper is over $100 bucks to advertise for a single weekend!

Disclosure/Disclaimer: I, various members of my family, and our family investment club are long shares of Sitestar and have a 13D filed on the company. I reserve the right to alter our position at anytime. This is not advice of any kind. I assume that Sitestar's webpage is accurate, but have no way of knowing how much it has been updated. Always do a ton of your own research before even contemplating anything that I say, do, write, or so much as think about.

Thursday, June 21, 2012

Irrationality in Residential Real Estate... AGAIN!?

Today, I got an email from my realtor in regards to a house that had a lot of potential that I didn't purchase... Here is the listing info:


It seems like a pretty nice house on the face of things. There were repairs that needed to be made to it. There were a few water problems, it lacked some insulation, had a decent bit of rotting wood, amongst some other things. Basically, I figured to get in into salable condition, so that it would be a truly nice house for people, that it would need about $20K in work. I also assumed that a safe sale price would be $120K, with the potential to get, say, $130K out of it... Given that it is about the smallest house on the street, Zillow and the PVA backed me up on that:



Now. MAYBE, just maybe, I undershot this house, and it would be worth $140K when dolled up really nice (but, you will have to spend a touch more). Granted, it has vinyl siding, an roof that certainly isn't new, older windows and such, but, still it isn't out of the realm of possibility... That said, here is my math for flipping it:

$80K Sale price
+.75K for closing costs, title insurance, and such
+8K for a new kitchen (1.5K for tile, 2K for cabinets, 1.5K counter tops, sink, and faucet, and 3K appliances)
+1.5K for Paint
+2.5K for some decent carpet
+1K for tile in Baths and entryway
+2K in misc. woodwork and other minor repairs
+1K for light fixtures
+1K for new vanities and faucets (which would actually be skimping)
+1K for 9 months in taxes (you want to be sure that you don't get too close to the line, here)
+.5K for insurance
+.75K for landscaping

That gets us up to 20K in known expenses, plus a sale price of 80K, bringing us to $100K invested into the house. This doesn't really include a contingency (say, for HVAC or a roof), borrowing costs (almost everybody has some form of leverage; a car payment, house payment, margin, interest, credit card balance, revolving line, ect) or, realtor's fee if you sell it. In regard to the kitchen, you could down grade it some, I would think that $5K would be the base line for it.

I get a pretty fair deal from my realtor; when I sell a place, I pay 5% (typical is 6%). If I sold the place for more than I thought it would be worth ($130K) when adding in commissions, I am left with $23K... Now, that isn't a bad return if you can do so in under a year, which there is no guarantee of. Granted, you will have to work for it, but, it's certainly not bad. If you borrow money at 6%, then, you get down into the teens. If you sell it for what I think is a more realistic price, being $120K, then, you are basically getting paid minimum wage to put your name on the dotted line for a good chunk of debt and in my mind, taking on a fair amount of risk.

Let's say that you turn it into a rental. I would think that it would take about $2K to do (mainly, wall repairs, paint, and minor things). The carpet and cabinets for example, still have a lot of life left in them, but it just isn't stuff that would help you in a sale situation. Say you bought it for $80K. You are looking at having $82K in a house that would probably generate $12K in revenue per year. If you are unlevered and have no expenses, that comes up to ~15% a year. Add in vacancy and repair allowances, plus, taxes, insurance and other items, and you are in the high single digits/low teens (but, do get the help of depreciation)... Granted, you could probably refinance out of it and pocket some money since appraisers generally don't know much when it comes to getting a good value on these things (I would generally trust Zillow over an appraiser, though, there are exceptions). But still, that reduces your margin of safety, and you will still have an asset that probably isn't worth what you owe against it. Inflation had better hit in a big way for you to do overly well. Even then, you may be left with no one that can afford to buy the house off of you since interest rates will likely be forced to rise to combat the very inflation that you are trying to protect against!

That said, the house still needs a fair bit of work at some point in the not so distant future... The new owners may not do it, but eventually, something will have to happen. Does anyone really want to move into a house that was recently a rental and still looks like it?

NO.

As such, it didn't do too much for me even at $80K. When I was going through it on the first day that it was listed, there were 2 other investors going through it... I decided that it really wasn't worth my while to even make an offer, as I probably would have come in at $70K for it, but still wasn't thrilled about it even at that price. I figured that it would end up going for something like $90K. As such, I didn't even bother making an offer.

So. What was the sale price of the house? $110K... That's right, it sold for more than 137% of it's list price.


You can't make this stuff up. This move seems utterly insane if the person buying it is an investor. To put this in perspective, my cousin, who lived in the same neighborhood, just got a sales contract on his house that has over 1,000 sq ft in additional living area, has a better lot with really nice landscaping, and is in immaculate shape, for $172.5K. Even if the person is going to live in it, they just made a deal that certainly isn't good- literally, there is  next to no upside in virtually any period of time.


Disclosure/Disclaimer: I and various members of my family own real estate in the rough area where this was sold, as such, I guess we are long the same asset class. I am in the process of buying more real estate in the area. We reserve the right to change our positions at any time. This post is my opinion. Always do a ton of your own research before even contemplating anything that I say, do, write, or so much as think about.

Monday, June 18, 2012

Nevada Gold, Outlasting The Competition, & Some Legislation.

With Nevada Gold, it has certainly been a waiting game. As a matter of fact, my investment is underwater at the moment. However, I think that there are items that look up for the company.

I recently read an article about a card room in Renton closing. It is ~2 miles from 2 of Washington Gold's card rooms (owned by UWN). While Freddie's Club is very close to some other card rooms, I would imagine that SOME of the ~$4.4 million in revenue that it formerly produced will come through to Nevada Gold.


While the loss of jobs is abhorrent for not only Renton, but for Washington, the lengthening of the unemployment lines can in part be blamed on none other the state's legislature (the controlling party, by the way, takes a ton of contributions from Tribal Gaming entities):

"Dolores Chiechi, executive director of the Recreational Gaming Association of Washington, said Monday she received word of the closure over the weekend. 
Her association represents mini-casinos throughout the state and has lobbied the state Legislature to allow electronic gaming devices – essentially slot machines – in privately owned as well as tribal casinos. 
“I’m hearing from my members that they’re hanging on from a string. A lot of transitions are going on,” she said. 
“We’re still going through with our request to the Legislature,” she said. “We believe it will create jobs. We will continue to ask the Legislature to look at our proposal.”"

Read more here: http://www.thenewstribune.com/2012/06/18/2186122/fife-casino-closes-its-doors-100.html#storylink=cpy

When the state legislature reconvenes, hopefully, they will reconsider what promised to be a great price of legislation. This was a bill that would have funded education, public safety, and those that are most vulnerable. It was a measure that was supported by the public, regardless of if they knew about the legislation or not, as is shown by the poll that I had done in February:
Washington Results


Presently, it seems that the Republican running for the Governor's office has a slight lead in the race. Traditionally, in Washington, this is good for gaming and by extension, the state's massive budget problems.

In the meantime, the waiting game continues... more to come.

Disclosure/Disclaimer: I, various members of my family, and our family investment club are long shares of UWN. I reserve the right to change my (our) positions at any time. This post is my opinion. Always do a ton of your own research before even contemplating anything that I say, do, write, or so much as think about.

Sunday, June 17, 2012

Intrade and Greece.

Not that I know anything about Greek politics (or, for the sake of most of my investments, care)... but, I would imagine that in light of this statement from this article, followed by a screenshot of Intrade, things may be looking up.

"Analysts have viewed the Greek election as a potential turning point for Greece, with all eyes on whether voters will favor the leftist Syriza party opposed to the austerity measures that are part and parcel of Greece's international bailout package, or the conservative New Democracy, which is committed to upholding terms of that agreement."






I know that I say it a lot, but, this is certainly an interesting time to be alive.


Wednesday, June 13, 2012

Solitron's Share Price Is Too Low To Ignore A Buyback

Nate at Oddball Stocks just did a great post on the dynamics of a shareholder base keeping a stock cheap. I have had thoughts similar to those for a long time. I thought that this one snippet was of particular interest, obvious, and a great point to make (from here):

"I tend to invest and write about companies that have large majority shareholders, and attract value investors, companies such as MicropacOPT Sciences, and Solitron Devices (1,2,3,4).  I'm wondering aloud if part of the undervaluation is that we value investors are our own worst enemies, we are keeping the price low, and if the price rises to close to intrinsic value herd selling begins which drives the price back down.
 What's the solution?  I think in some of these cases the solution to the market valuation/intrinsic valuation gap needs to come from the company itself.  If the shareholder base isn't going to drive the price higher the company needs to be the catalyst.  This could mean a tender for shares, or a dividend, or even going private at a fair value."

A few days ago, Nate posted his letter to Solitron... As he noted of himself, I am not part of, or trying to form a group to cause some sort of change at the company. I am merely a shareholder that would like to see an annual meeting take place, as well as some additional value creation measures, such as a share repurchase. If you would like to see a similar change take place, I encourage you to write a letter to or call the company and in a respectful manner, make your opinion known.

_____________________________________________________________________________

Tender offers and the like can be great ways to increase the intrinsic value ofa corporation. As an example outlined in the article, if Solitron Devices would make a tender offer for any number of shares at a price of $3/share, then the company would basically be buying $9.5 million dollars worth of inventory, cash, and treasury notes, NET of all balance sheet liabilities for a significantly less than $7 million dollars (the market cap of the company)!

Scaled down to individual dollars, for every share repurchased at $3/share, the company would be buying back ~$4.18 in net current assets, net of liabilities...


This would essentially be an immediate, risk free, 40% ROIC! Not only that, but such a move would increase book value, earnings, and cash flow per share- enriching all shareholders. Essentially, if implemented, the company would be buying a stream of capital at whatever rate you think that the company will be earning money in the future- Nate uses 10% (which is significantly better than the treasuries that the company presently sits on). Don't get me wrong, there are a lot of good investments out there, and a lot of bad ones as well, but I am hard pressed to find something that is immediately that good and that close to being a certainty.

If that isn't good enough, did I mention that in above scenario I valued the company's PP&E at nothing? What about the significant amount of Net Operating Losses that don't appear on the balance sheet, but stand at over $14 million dollars? Lastly, we can't forget that the wonderful business that the CEO, Shevach Saraf, has built over the past few decades would remain intact- likely generating sizable returns for the foreseeable future (I am not overly worried about government budget cuts effecting the company in the long run). All these things serve to increase the value of a buyback!

It is likely that a share buyback may constitute the need to alter the language in the company's shareholder rights plan... But, that shouldn't be expensive in comparison to the value that a buyback would create. Additionally, I can't stress enough that when I imply that a company is selling for less than liquidation value, that I am in no way saying or implying that I think the company should be liquidated. I personally hate the idea of anyone shutting down Solitron (or, most companies, for that matter) for a quick investment gain. When looking at the earnings the company is capable of, the loss of jobs in the area, and the service that the company provides to the country, I think that it is too economically viable and vital to be liquidated. That said, it is a fact that the market is presently pricing the company at less than it's liquidation value... as such, the company should sieze this an opportunity to enhance the value of the entity for all shareholders.

It seems fair to me, that the company should start making efforts to aggressively buy back shares at the soonest possible time. As far as I can tell, while there is a restriction on the company paying dividends, there is nothing keeping them from buying back shares. I think that the company looking into a dutch auction share repurchase would be a step in the right direction. So as to not jeopardize the business, I think that a repurchase for up to 500,000 shares, at an opportunistic price of up to $3.50/share would not only be reasonable, but prudent, and value creating.

Disclosure/Disclaimer: I, various members of my family, and our family investment club are long shares of MPAD and SODI. I have no position in or against OPT Sciences. I reserve the right to change my (our) positions at any time. This post is my opinion. Always do a ton of your own research before even contemplating anything that I say, do, write, or so much as think about.

Monday, June 4, 2012

Walking Away From A Few Million Dollars... Part 2: Long Work Days & Financing.

I had originally thought that this would be a 3 part post... While writing it, I have realized that hope is an impossibility for readability and enjoyment's sake. I'll admit have no idea as to how many parts this will end up being, but I think that breaking up the posts more than I had originally intended will not only help me be more clear in the story, but will also make it more entertaining- as I doubt anyone wants to read super lengthy posts on the matter.

Moving along, to the beginning of the rest of the story...

_____________________________________________________________________________


For the duration of the purchasing process, I was generally commuting ~45 minutes from my home in Lexington, KY to the apartment complex in Frankfort, KY on close to a daily basis. For the first time in my life, I was getting up at 6:30 or 7AM by choice, often not needing an alarm to get up whereas I generally sleep til 10 or later... despite this, I was still going to bed between 2 and 3AM as usual. As you could imagine, it was pretty typical for me to work for 15+ hours a day for the slightly more than 20 days we were working on this. I even significantly cut back the number of nights I went out to shows and drank- which for those of you that know me, really says something about how I felt about the project... just seeing a single live band, maybe 2 per week was a real turn of events at that point in time.

It isn't like I hadn't worked like this before, it had just been a while. At the time, my personal rental homes required very little in the way of upkeep.  When I rehab a house for a flip, I often contract out a lot of the work to get it done a bit quicker (especially things like painting, which can be economically outsourced)- besides, all of my project houses were completed and listed with my realtor. In regard to stocks, while I almost always read a lot, I could count all my allocations on fewer than 2 hands. It would take next to no effort for me to stay informed informed on them. Add in the fact that I was pretty much fully deployed at the time and not keen on moving things around, other than to buy up more of Sitestar and I was A-OK with not being on the prowl for allocations given the potential that this project had. This life of relative ease was drastically different to when I first started buying properties just a few years ago: I was a full time college student, would often work around 35 hours a week at a jewelry pawn shop- during Christmas and Valentine's seasons, occasionally getting in excess of 60 hours a week, served on the board of directors of a 209 unit home owners association (for free, mind you), was revamping a project house (doing most all of the work), was reading as much as I could, and still managed to have a decent social life... Being that busy was something that I kind of missed.

It can take a while to talk to a contractor or government inspector and walk them through a complex that is greater than 70,000 square feet. Interestingly, a lot of time was spent talking to the inspectors, who didn't want to look at too much, whereas contractors didn't want to talk, but rather, look at everything. Needless to say, a lot of my time was spent on site. The same could be said for Bill. The interesting part of this, was that at the time, he had the most free time that he had ever had in recent memory. His phone was ringing off the hook for rental units even though he was completely full, which remained the case for nearly 3 months. We figured this to be an obvious bullish sign for rentals, and by extension, a great sign for the complex that we were buying.

On my commutes, I was making various calls on the drive to the complex, pricing items that we would need, or even doing research the legal requirements to be an elderly housing complex so that we could act in total accordance with the law. Things that would normally seem simple could be quite complicated- something as simple as getting a quote for the insurance was a daunting task, as few brokers seemed to really understand the type of project we were taking on. Even when contacting companies that were owned by Berkshire Hathaway (as a value investor that practically worships at the altar of Buffett, I figured they would be the easiest to talk to) I still had trouble getting quotes that covered us in the way we needed, to feel comfortable. As an example, it is really hard to explain to a person how a building has fire walls, but that they don't go through the roof. Even though we would be extending them through the roof line, things of this nature made for some complicated quotes. Having a sprinkler system was surprisingly frowned upon, even though it makes a fire claim much less disastrous. The policy we would choose came through Zurich and was a hybrid sort of construction product on the individual buildings and common areas. We would eventually be able take off of completed buildings to a more standard apartment complex policy, building by building, despite having to pay for 6 months of coverage, with no refunding for an early cancellation in the event that we were ahead of schedule.

With lengthy work days and commuting, there were a lot of nights I would stay at my uncle's house so we could get a head start in the morning and work later at night- saving about 20 minutes of commute time. My Aunt Anna's delicious home cooked dinners would often occur with me eating at a desk, or bringing my MacBook and notepad to the dinner table (much to her chagrin). Conversations naturally always went towards the complex. Our best ideas were often hatched and solidified as a team, over the delicious cooking that can only be learned by a person who came from an agrarian society in impoverished Appalachia. Numerous nights, I couldn't sleep due to my excitement and would try to calm down by playing pool, streaming investing talks, or reading a book on the formative years of Ashland Oil... often, failing at my objective. I once overheard Bill saying to a few of his friends at a landlord meeting that "I have trouble keeping up. Jeff just doesn't stop... He doesn't eat, sleep, shit, or even sit down. He just keeps going..." I still don't know what to think about this, but, I keep telling myself to take it as a complement. ;)

_____________________________________________________________________________

The first point of contention was for us to get some sort of financing, as we had no real idea how to pay for the place- we knew that we would be able to make something work, but we didn't have the cash on hand to fix it up and it is such an odd project that financing could get sticky... Key for me, was to get in with very little of my own money. I really liked the idea of finishing the place, renting it out, and getting a nicely sized loan and after 9 months or so, especially as we would have enough cash flow and equity to where the debt load wouldn't be of much concern. I even floated the idea of selling off 25% of our LLC's equity in exchange for the purchase price of the property to single or various limited partners and then getting a construction loan to fix the place up with- the nice thing is that it would have been an overly collateralized loan and a situation that given a bunch of people a nice return on capital.

After a few long days of meeting with various people at the complex, we had solidified some pretty good budget numbers and walked into my favorite bank with a nice packet. For example: we were able to track down the people that had previously worked on the sprinkler and elevator systems... The sprinkler contractor said, "Oh yeah! I remember that place. It should take 1, maybe 2 days... at the max to bring it on line. Shouldn't cost more than a grand or 2 and 2 days of work." We budgeted $10K. The elevator repairman said virtually the same thing, and that it shouldn't be more than $2K. We budgeted $20K, on the chance that our hunch that there were problems with the hydraulics system turned out to be true.

What we had originally thought on our back of the envelope projections from day one, our honed Excel spread sheets proved: this was a Hell of a deal... potentially the deal of our lifetimes. On the cover page, we broke down how little we were paying for each apartment in the complex: $3,080 dollars. We then noted that every day the complex wasn't online, we were essentially losing $2K in rent. When you put that on the cover page and your banker, who has a good bit of real estate experience and is a really smart guy says, "Man! I really like those numbers... That's GREAT!" you really feel like you have stumbled onto a gem. The 3 of us had a 10 minute conversation and our lender said that while he would have to take the package to committee, he didn't see an issue with anything we proposed.

Previously, I had told my banker when we were setting up a meeting time, that we would need around $600K for everything and that we were going to pay for additional improvements out of cash flow. However, upon realizing how bad of an idea that was (losing $2K a day and realizing that you would be renting units out of a construction project is a good motivator), we decided to try to get more efficiencies by buying labor and supplies in bulk. Plus, we wouldn't have tenants complaining about noise or contractor vehicles and the like. Thus, we were needing a bit more money- closer to a million dollars. He came back to us with a construction loan to accomodate that amount, where the bank would take a first lein on 3 or 4 of Bill's owned rent houses, with no interest or amortization. The liens would be released once the complex would be at 50% occupancy- just above the number where we would be profitable. Our rate was at a reasonable LIBOR +1% (with a minimal floor), to be adjusted yearly by a maximum of 1%, with an 8.5% cap. At our discretion, they would put it on an amortization of 15 or 20 years (our pick). All we had to do was pay for the appraisals and closing costs. When you are scared to death of rising interest rates and had made some contingencies for healthy double digit interest rates in your private numbers, this was all a BIG plus. Additionally, there weren't any covenants that made the loan callable... due to my experience as an observer and shareholder of Steak 'n Shake, Syms, and a few other companies that ran into debt issues, these were very important for us to have in the package. I have never been one to like the potential for being in a situation where onerous covenants that encourage short term thinking in operations, but also don't seem to care about the worth of the company, could potentially force a loan to need repayment, despite not actually being a bad loan risk or never missing a payment.

Effectively, my banker and I had just set up a deal where we going to get into this thing for a few thousand dollars out of pocket, which was much better than the deals we were offered from Bill's lenders. Even if we ran into any issues with state regulators, we would be lent the additional capital that we wanted, but didn't necessarily need. Bear in mind, this was despite our being overly conservative with our numbers AND throwing in a huge contingency allowance- well into the double digits, into the package. While the total came in at just under a million dollars, this was for a place that we were pretty sure would be worth well north of $2 million once up and running.

This highly levered package was justified to us and by the bank on the rents that we thought we could get- conservatively, $400-$600 a month per unit. We even threw in a huge allowance for all the utilities we were going to have to pay for the tenants, as the units weren't on separate meters. For figuring purposes, we assumed that energy prices would double from present prices on the day that we closed, that we wouldn't be insulating the building any more than it already was (even though we had plans to), that tenants would want extreme room temperatures in the winter and summer, and that energy rates would have a steady climb over the coming years (even after doubling on day 1). After all of that, hiring a manager, paying for on site security, budgeting a healthy repair allowance that was significantly more than either of us use on our personal rental units, and allowing a vacancy rate 10%, we would end up cash flowing just shy $15K a month... for each of us. This was a rate that would involve very little day to day work on our part once up and running. Even if the complex was just 50% occupied, we would still be above water.


_____________________________________________________________________________


On day one, Bill had facetiously said that if he didn't jump at the project, it was likely that he would wither away and die, but if he went to my Aunt Anna and told her what we were getting ready to do, she would kill him... he was in a bit of a bind. An hour after that and saying that exact thing to her, she was on board and ready to go- arguably, just as excited as Bill. She even volunteered to be there 3 days a week to take rents, do books, dispatch workers, and the like. I mirrored their feelings in that I was thrilled to be doing something I considered to be really constructive (no pun intended), which is something that I hadn't felt in over 2 years, when I took on a project where I replaced a bunch of floor joists in a termite infested house... At that point, it was looking like I was going to make a ton of money AND do something that was going to take a piece of shit boarded up building, which had been destroyed by crack heads in their never ending thirst for copper, and turn it into something that would be productive for society. It was a win-win situation for both the capitalist and humanitarian that reside inside of me.



Still, raring to go and looking to close... ASAP.

Mango Capital Sells (Basically) The Only Thing That Gave It Worth...

From here:

Mango Capital, Inc. (MCAP: Other Over the Counter) announced today that its subsidiary, MangoSoft Intellectual Property, Inc., has sold all of its patent rights.  The transaction resulted in estimated pre-tax proceeds, net of transaction-related expenses, of approximately $2.3 million.   Other than the net proceeds from this patent sale, Mango Capital, Inc. and its subsidiaries do not have material assets, and they currently do not conduct any substantive business operations.Source: PR Newswire (http://s.tt/1djdV)
Before the sale, the company had negative tangible book value. After the sale, even if the company doesn't pay taxes on the proceeds, the sale was for less than the goodwill on the company's books. At the end of September, 2011, the company had a negative tangible book value of $2.299 million... which, looking at the historical asset burn, is likely to be less at present (though, could be different, as I will talk of later). The real kicker here, is that a patent lawyer had been given stock in exchange for a capital injection, and that there was the potential for a patent infringement lawsuit.



Basically, this company is trading for nearly 3/4 of a million dollars and has no operations or, from what I can tell, no real assets, provided that they use cash to offset their liabilities. As such, a buyer of the stock is paying a ton of money for the shell corporation, which is generally is worth a lot less than present prices. The one redeeming factor is that the company does have a lot of NOLs- from the last 10K:

The Company has federal and state tax net operating loss carryforwards available for future periods of approximately $72,700,000. The federal tax net operating loss carryforwards began to expire 2010, and state tax net operating loss carryforwards began expiring in 2000. As a result of the changes in the ownership of the Company, there may be limitations on the amounts of net operating loss carryforwards that may be utilized in any one year. The Company also has research and development credits for federal tax purposes of approximately $518,000, which expire beginning in 2011.
With the company delisting, which seems necessary to reduce cash burn, there is no real way of knowing what is going on... however, with the press release saying that the company has no assets, the following seems confusing (from here).


On March 1, 2011, the Company announced in a press release (Mango Capital Launches Aspyre Settlement Funding) that the Company expanded its market focus into consumer financial service markets with a new subsidiary, Aspyre Settlement Funding, Inc. The re-branding as Aspyre provides a fresh approach to the structured settlement funding effort. Through the Aspyre brand, the Company also intends to develop products and services in consumer card and payments markets. Aspyre is a wholly-owned subsidiary of the Company.  A copy of the press release is attached hereto as Exhibit 99.03.  The information in this Form 8-K being furnished under this Item 7.01 and Exhibit 99.03 shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of such Section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act or Exchange Act, except as shall be expressly set forth by specific reference in such filing.


While the company could have sold off Aspyre, which might have improved their balance sheet, I would think that they would have put out a press release as it seems that Aspyre is still in business for somebody...

In the meantime, I am sitting this one out due to lack of clarity and that there seem to be better NOL plays out there.

Disclosure/Disclaimer: I have no financial position in any regard to any of the entities mentioned. I reserve the right to change any of my positions at any time. This is not advice of any kind, is solely my own opinion, and is obviously for entertainment purposes. Always do a ton of your own research in regard to anything that I say, do, write, or so much as even think about.