Bad Toys released is Q2 numbers post close yesterday, and they would pretty much fall into the category of a “non-event”.
The company delivered $11.1 million in revs and $581k in net profits, which translates to $.03 per share.
Profits were a little soft because the company shut down one unprofitable division, and added two new ones during the period. They lost the revenues on the one side. The two new services are taking some time to gear up to full capacity. I would expect earnings to improve to about $.05 in Q3.
I continue to believe there is one key to a resurgence in this stock. You might believe it is the successful spin out of Southland into a separate public company. I don’t believe that’s the case. Bad Toys has two nagging problems it needs to solve which are both inherited from previous management- The company still owes $7.8 million in taxes and $2 to GE Capital. I’m estimating the amounts from the financial statements.
Both of these headaches were inherited from the past administration. The company has turned consistently profitable, but still has to eliminate these legacy issues.
Bad Toys has made no secret of the fact it is working on a more favorable debt financing to eliminate its defaults and restore its fiscal health. If we read about a financing to take out the past debt defaults, this will set us up for a successful spin out of Southland.
In the meantime, not much to say about the stock:
Here’s the big picture, going back one year. The stock traded great in the Fall as investors warmed up to the high levels of revs and reasonable profits.
It peaked early in the year when the company announced the spin out of Southland. Those who follow the situation know this has not gone according to schedule- the company has not gone x dividend, and the process of going effective on the S1 appears to be stalled. They are in the process, but it is, of course, taking forever.
It’s been all down hill since the company failed to go x-dividend. I believe management has simply lost a lot of credibility. They have not delivered what they promised.
Watch for the company to deliver a new debt financing to clean up the past problems and be current in all respects. If they pull it off, I believe that will be a turning point for the stock.
In the meantime, don’t lose sight of the fact that the company is delivering north of $44 million in annual revenues and about $3.5 million in net profits.
Comments and questions are welcome.
At the end of Friday’s session, BTYH dropped to 0.65. This is hard to understand considering this is a profitable company. Any thoughts on what is really going on here?
Editor: The stock is behaving like so many others this time of the year. I have written about the slow summer months a number of times. The key is volume- there is little or no volume in this stock- it is just drifting down on small sellers and no buyers. The company has provided no news to stimulate buying. It is probably due for an oversold bounce. The key is a debt deal to take out the old, problematic stuff- the IRS back taxes and the GE Capital note- both were inherited problems. The company is working on it- if it happens, watch the stock rebound nicely.Â
Tomorrow (8/31) there is a “planned sale” of about 130,000 shares from four different BTYH employees. Any comments on that, and do you think the low price of .70 will be affected or has that already been accounted for?
Editor: Here’s a few thoughts on that questions. First, by the time you read about the sales in the insider trading filings, they have already been done. That may explain why the stock has traded so poorly of late. Even though this is a minimal number of shares, in August it can hurt your market. Secondly, those are new names I haven’t seen before. However, with the exception of the one board member, I don’t believe those are employess- they were just investors that owned their stock from some time in the past. The one board member has been a consistent seller of very small amounts. I am told he needs the money. The two new ones I don’t recognize. However, as a general rule, these small filings don’t mean much- people need money for all sorts of reasons. Lunan is the big issue. He and his family have the lions share of the insider stock, and they have sold very few shares. Lunan believes he can pull this thing off. I hope he is right. Watch for a new financing package to get this thing moving again.Â
It seems that something is happening with this stock. Any recent news about the Spin Off ?
Best regards.
Editor: Comments on this issue were published in yesterday’s newsletter.Â
well, today is Wed. Sept.6 and volume at 3:00 p.m. is close to a half million shares…at this point i see no news thtat would quantify this increase in vol. AND PRICE but I like it….any info on your end? rumors are welcome also…
Editor: There was a comment on yesterday’s action in the newsletter. No one has any idea why, including myself and CEO Lunan.Â
What was today all about. biggest jump in weeks and no press or market support. Did it Hit a level that people decided again it was a good value? The volume was also very high. Someone please school me up.
Editor: I covered it in yesterday’s newsletter- I have no idea why it traded so well, and neither does CEO Lunan.Â
well, 24 hours later and we’re at 67 cents.. if you look at this stock as a potential “winner” then you have lost nothing,yet. Too bad yesterday’s spike was not the real thing…holding 4500 shares @94 cents with good thoughts in my head about the future…good luck all!
Editor: it’s kind of bizarre the way this stock wants to put in these big spikes out of the blue, then go straight back down. Looked to me like some sort of buy in against somewhere who sold shares they couldn’t deliver. It seems like these spikes represent good selling opportunities.Â
any new developements concerning getting the debt situation under control?
Editor: As soon as I know, you will know. So far, I don’t believe they have gotten the job done.Â
Today I tried to place a trade on etrade for BTYH and they said they were not accepting orders online, and I had to call….after holding for 10 minutes they said they were reviewing the stock because of the June 8th spinoff??? What’s that all about?
Editor: I have no idea. I know people who have bought and sold the stock no problem online. There was no June 8th spin off, and the problem is clearly with eTrade. I would talk to customer service and complain bitterly. That is just BS.Â
Well, still no spin off!
Very frustating.
What was the weird press relase they had about the purchase of Southland Health Service? It looked real strange!
Frank
Editor: I you are referring to the 8k, it relates to a discussion over the accounting treatment of the original acquisition with the SEC. It was just a clarification going back to when they first bought Southland. I am staying on top of this one because I am so frustrated with the stock’s performance.
Do you suggest accumulating BTYH at these levels?
Editor: I believe it is a hold. I would like to see the management make progess on several issues- mostly refinacing the debt and moving forward with the spin out. The high level of sales and profits make it easy to hold, but it needs a catalyst to get it moving.Â
Do you think they will be able to get the financing done? If not will this be cause for concern?
Editor: I think it is only a concern as far as the upside goes. It seems they can continue to exist in this state indefinately. However, if they really want to move this company both forward and up, they have to refinance both the back taxes to current and the defaulted debt with GE Capital. Neither problems were caused by the current management, but the current management has not solved them as of yet.Â
Any thoughts on the latest comments about the spinoff from 10/16?
Editor: They are moving forward with the plan as laid out. For this spin out to be effective, I still believe they have to refinance their debt for it to work as previously laid out. If they can pull it off, it has a real shot.Â
Can you comment on the company’s latest earnings results?
Editor: Already did: http://www.otcjournal.com/otcb/?p=210