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eFoodSafety
(OTC BB: EFSF): Zero Sum Game This Week |
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eFoodSafety provided a little
excitement this week with two events that really couldn't have been more
opposite. The company put out 3rd quarter numbers Monday after the close.
They have an unusual fiscal year, and the quarter covered November and
Dec of '06, and January of '07. The numbers served to remind investors
this company is still a highly speculative idea despite the stellar performance
of the stock, and real revenues and profits are not in the rear view mirror-
they are out in front- if and when they come.
Then, first thing Tuesday morning,
EFSF
announced it had entered into an agreement with Dupont (NYSE: DD)
to evaluate Oraphyte- EFSF's environmentally safe treatment
to eradicate Nematodes- the round worms that destroys crops world
wide to the tune of $1 billion plus.
Dupont, along with Monsanto,
are the two biggest companies in the world specializing in agricultural
chemicals. This is a pretty major coup for tiny EFSF. Oraphyte
has just been rigorously tested by the USDA- now Dupont has an interest.
If Dupont enters into a licensing arrangement for the rights to
Oraphyte you could be looking at a substantially higher stock price.
However, the quarterly financial
statement did not reflect any of the revenues that should and will come
from the recent announcements concerning the retail network now offering
Cinnergen.
In fact, EFSF's quarterly
filing only showed $83,000 in revenues, and the balance sheet is nothing
to show your CPA- it leaves a lot to be desired.
First- the issue of revenues from
Cinnergen.
Until Jan 1, Cinnergen had been sold via direct marketing. EFSF
made a policy decision to go retail with the product after buying the rights
in mid December. These numbers cut off during the transition phase, so
they are anemic. In addition, I am informed EFSF won't book the
revenues until they receive payment- the retailers all have terms- those
terms range from 30 to 90 days- and some of them pay for the inventory
as the product is sold. Those numbers should start to show improvement
for the February to April quarter, and then get much better in the May
to July quarter. I'm not terribly concerned about the top line.
However, the balance sheet is a different
story. The company still had over $800k in cash, but an nearly equivalent
number in payables. I am informed the payables relate to Nutralab- and
will never have to be paid. The financial statement says different. You
have to assume this company is running day to day. As long as they stay
away from toxic financings, I can live with it for the time being. It is
a significant risk factor of which you should be cognizant- hence; the
SSL.
The Dupont announcement reminded
investors why this company is a great speculation- they have numerous products
that are blockbuster in nature, and a deal with Dupont could just
make the whole company. The possibility is there.
The week was a sort of Mexican stand
off for the stock. The financial statement didn't give anyone a reason
to buy the stock, the Dupont announcement reminded us this company has
a whole bunch of hidden assets that have the potential to turn very tangible
and profitable.
Here's the current chart.
Nothing much has changed since my
last BLOG. I still believe $.413 is the ideal low risk entry
level for the stock. If it drops much below that level, there could be
problems technically.
This week was a stand off- the weak
financial statement was matched with the great news concerning Dupont.
Hence- little action up or down.
If you are looking to accumulate,
I would suggest $.415 would be a good level to get aggressive, with
at $.36 SSL (suggested stop loss).
Revenues will grow from here, and
more products will get commercialized over time. Still a great speculation,
despite the cautionary flag raised by the 10Q.
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