Nighthawk Awakens To A New Day

NIHK ended a long period of silence today with very significant news- the kind the market should embrace. Apparently, the set top box business is coming along very nicely, and can we start to think about NIHK finally turning profitable?- no, scratch that- cash flow positive in 2008?

In today’s news about the follow on order for 1500 desktops, Doug Saathoff predicts the company will generate $8 million plus in revenues in 2008- this from a company that was barely able to scratch out $1 million in revenues over the past several years.

$8 million in revs should generate about $3 million in gross profits- a number this little company that could has never seen.

Year end numbers will be quite interesting as we will get our first look at the new company balance sheet with the debt associated with the acquisition of the set top box business.

The stock is finally showing a little life today after a few months of very listless trading with a bias to the downside. Pretty much sounds like every microcap stock to me.

Here’s a chart:

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As you can see, the stock has been chopped in half going back to October, which is when the Bear Market really started.

Today’s move is very promising technically as it represents a break out above a pretty long term downtrend line.

However, I’m not seeing enough volume for this to really jell into any sort of big move. We’re just not in that kind of market.

For long term shareholders, this is great stuff. It’s faith time- do you have enough faith to believe the fundamentals will eventually turn into much greater volumes in other markets ahead?

If so, this is a great one to accumulate for the next bull market in micros, which might not be all that far out into the future.

Comments and questions are welcome.

Time Warner Calls Closed

For all those who are following the trade:

I closed out my Time Warner trade today with a quick $1,000 pre fees profit. Monday at the open, I picked up 100 March 16 calls at $.65- sold today for $.75 on a $6500 investment in less than two trading days.

I also closed out a position which I hadn’t published in this BLOG for short term trading ideas in the QQQQs. Last week, I picked up 50 QQQQ Mar 43 calls at $1.64-total investment about $8200- closed today at $1.98 for a pre trade fee profit of about $1700.

All in all, a good day with $2700 in trading profits on a couple of short term gambles.

I might have left some profits on the table over the next few days, but in light of market conditions I prefer to stay light on my feet.

Time Warner Trade

Decided to jump into my suggested Time Warner trade.

Bought 100 March 16′s- TWX.CQ- paid $.65- total investment of $6,500- looking for a reasonable market environment and a little price improvement.

Stop Loss- Options are a little different- I take my cue from the common. If the common trades down to $15.90, I’ll just sell the options wherever they are trading.

Titan Triple Header: Market Likes It

TTGLE is up big today on the heels of Friday’s triple header news releases, which for the most part bode well for shareholders.

If you have been following my suggestion of waiting for positive events to either fully or partially exit your position, today might be a good day to do so.

Big, spiky rises like today’s generally result in some sort of pullback or retraction before higher levels can be attained.

On the plus side, the technical picture could get interesting. If they have the cash, they just might buy back enough shares to make the stock extremely tight and volatile. If that becomes the case, it could trade with dramatic swings in either direction.

Here’s your chart:

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Nice rebound for those who had patience. Will probably quiet down from here. Long term, still way to early to call. Their plan to move forward seems reasonable on paper.

More to learn in today’s conference call.

Comments and questions are welcome.

Titan’s Triple Header Friday

Beleaguered and beaten down TTGLE hit the wires with three news items Friday post close. This is the first positive news in some time, so it’s a welcome relief. I knew the company had to move in a positive direction sooner or later, so perhaps the stock will start behaving a bit better from here forward.

Here’s the rundown, one by one.

First, TTGLE disclosed it had filed a law suit alleging RICO violations against one former employee of the Oblio Telecom division and a number of distributors and retailers. Furthermore, there’s another component I find very interesting. Apparently, the TTGLE is also going after individuals who allegedly were behind: “a series of disparaging postings about Oblio Telecom and its prepaid phone cards were made on various stock based chat rooms. These postings led to adverse advisory reports by firms that have followed Titan.” In essence, the company is suggesting the Oblio Telecom division was a victim of fraud, but there could have been a well orchestrated scheme to benefit from the stock’s collapse as well. Hmmm. I can’t wait to see how this will turn out. From my point of view, it wasn’t the postings that led to negative commentary from me- it was the company’s own failings which finally came out in their Q1 numbers.

The second press release really laid out the company’s plans for the future. In a move I believe makes a lot of sense, TTGLE disclosed it plans to break into a number of different public companies. The telecom division and PCB manufacturing division will be spun out into separate pub cos. The energy division will remain with the parent. Possibilities are being explored for the Apparel company, and USA Detergents, a flawed acquisition which never operated, will be sold.

I can’t say for sure if the sum of the parts will become worth a lot more than the whole, but at least shareholders will have the opportunity to invest in clearly defined, single purposed companies as they choose.

Titan also disclosed it plans to apply for a NASDAQ listing for the remaining entity- the energy division which delivered $90 million in revs last quarter. This seems a bit of a stretch as TTGLE is still carrying the “E” because it has been delinquent in its filings three times- typically, this means the stock will more likely be relegated to the pink sheets for a period of one year- however, you never know what’s going to happen.

Press release number 3 disclosed Titan is resuming operations of its phone card division, with network services provided by former partner SmarTalk. I have no idea how much damage the interruption did to their brand, and no idea if the division will be profitable again from here forward. I believe we can assume they wouldn’t have reincarnated the division if they didn’t believe they could make money again.

So- what’s this all add up to? Well, for starters, it’s an indication the management is back in control with a plan to move forward. It suggests the stock is probably worth a lot more than where it is trading, but realizing that value could be some ways down the road.

I suspect the company could have difficulty maintaining its Bulletin Board listing as the late filings are definitely a problem. However, even if the stock were to drop to the pink sheets, it might not effect the price much at this point.

According to press release #2, CEO Bryan Chance will be holding an investors conference call tomorrow – February 19th, to discuss the reorganization plans.

At this point, the stock is probably more of a buy for high risk oriented investors. If you are interested, I strongly recommend you tune in to the conference call and formulate your own opinion. No details have been published yet on how to tune in.

Comments and questions on this ongoing soap opera are welcome.

Titan Files 8K- More Disturbing News

Titan filed an 8k today that had more, slightly distressing news. However, as I wrote over the weekend, this bad news is probably already fully priced into the stock.

They gave more information about the massive write downs the company took in its Q1 numbers for impairment of business. It’s simply amazing to me how rapidly a company can sabotage its own success through blunders.

I don’t know exactly how it all happened, but apparently they have closed down the entire telecom division, and plan to reopen it at a point in the future.

According to the filing, they stopped paying the distributors. The filing does not make it clear as to why or what happened, but nevertheless, there you have it.

As a result, they took some major impairment charges- while these were non-cash, the fact is they don’t have a functioning telecom business at this time, and therefore have given up about $30 million in formerly quarterly profitable business. It must have been some mess, and continues to be one.

They allude to a restart of the business with a major telecom company providing the minutes- who knows where that is going. However, it seems like someone might want this business if there is still indeed any business to be had.

On a further distressing note, the 8K disclosed the company received notice it would be delisted from the Bulletin Board as they have now been delinquent in the financial filings 3 times in the past two years.

The haven’t lost their listing yet, and the stock is still trading with an “E” on the symbol. They are going to have a hearing to make an argument that they still deserve their listing. If they lose, it is down to the obscurity of the pink sheets. Makes their former boasts about a NASDAQ listing just one big joke. They are barely hanging on to their BB listing now. It probably won’t happen for a month or so.
Last piece of news- Titan also disclosed it is suing the formers owners and management for USA Detergent for fraud in their disclosures related to the company’s performance. When you’re the victim of fraud it can be tough. However, this is more evidence that this management team simply isn’t capable of understanding what they are buying. I don’t believe anything of these guys are going to be recruited away by Warren Buffet’s Berkshire Hathaway in the near future.

So, now the company is Appalachian Oil- huge revenues- no profits, and this new shoe manufacturer they recently bought in Southern Cal.

The market cap is still an anemic $30 million, so all this bad news is probably already priced into the stock.

Any kind of good news break should send the stock a bit higher. I’m standing by with my fingers crossed. If you are a believer in buying when there’s blood running down the streets and no one wants to participate, this situation is tailor made for you.

I still believe it is a hold for now, pending more disclosure.

PNWIF Reports Year End Numbers: Lots To Chew On

At long last- PNWIF reported its year end numbers- pretty timely you say? Already out just one month into the calender year? Not so fast.

PNWIF’s fiscal year ends at the end of Sept- therefore, we are finally seeing the audited numbers from Sept ’06 to Sept ’07. If they were a US reporting company, they would have had until the end of December- since their primary domicile is Canada, they follow Canadian Regs, which as a small company gives them an extra 30 days to get their filing in front of investors. I believe this length of time is a weakness of the company- they should get better at reporting in a more timely manner.

On to some major pluses. First and foremost, today’s press release notes PNWIF has landed Sam’s Club as a customer. This is big stuff, and I’ll explain why. Costco was the first, and now Sam’s Club is the second defection from the Hewlett Packard (NYSE: HP) platform, to tiny, unknown PhotoChannel’s platform. The bottom line- little PNWIF has now pirated both Costco and Sam’s Club away from HP- that’s a huge coup, and suggests several positives.

1. I believe we can assume the PNWIF solution simply works better than HP’s- which is really saying something with HP’s huge resources

2. The addition of both of these customers will have a major impact on PNWIF’s future- once implemented, the top line should grow quite dramatically

3. Could other HP customers be far behind? The first two had to be the hardest.

There are a few other highlights very favorable for shareholders in the results. Top line revenues grew very strongly- up 84% over the previous year to $7.5 million- these results only include 2 months post Pixology acquisition.

Secondly, PNWIF migrated transactional revenue- anotherwords the revenues they generate from photofinishing orders- from 41% of revs in 2006 to 64% in 2007- this is a major positive for the cash flow, as transactional revenues have a far higher margin for the company.

The company also booked losses of $6 million. Digging in a little, you can make some adjustments to evaluate the over all health of the business. $1 million was one time acquisition costs- $1.4 million was non cash dep and amort- $1.8 million was absorbed from the dollar loses value against the Canadian dollar- $600k was non cash stock related- Operationally, the company really lost about $1.2 million, which is acceptable considering the level of growth and corporate activity.

Looking out over the coming months- here’s some game changing events which could have a major impact on the stock:

Q1 numbers should be out before the end of February- Q1 is their best quarter of the year as consumers engage in lots of photofinishing.

PNWIF is now in the process of migrating all the data for both Sam’s Club and Costco to their servers. Here’s how it works- say you have a photo album you have uploaded to the web at Costco. In the past, your digital images would have been stored on HP servers- they now have to move over the PNWIF servers- as the consumer, you don’t see it, but it is happening in the background.

Costco and Sam’s Club will start generating revs for PNWIF sometime in the April to June quarters. My guess- jointly, they will generate about $10 million in annual revenues for PNWIF- this will be very high margin business- all transactional. As Online to Retail photofinishing grows (this is where you upload your photos online, order prints, and go into the store to pick them up in 1 hour), that $10 million number will grow as well.

So- look for a strong Q1, followed by a traditionally weak Q2 and some expenses associated with implementing the two new clients, and lots of hoopla around flipping the switch for Costco and Sam’s Club sometime in April or May.

I suspect PNWIF will turn profitable in fiscal 2008 and stay that way on an ongoing basis. I believe the top line numbers will at least double again. As they make the turn into fiscal 2009, they should be able to achieve annual revs in the $20 million range, and be very profitable.

Here’s a chart to show how the stock is behaving:

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This is a very similar chart to SPKL- this one is an ascending wedge, which suggests the stock will grind higher to the point in the wedge before breaking out or breaking down. This is a weekly chart going back to early ’06, and showing where the OTC Journal starting covering this idea at $1.80 in October of 2006.

In this lower volume environment, there are probably a lot of charts that look just like this, particularly if the company is delivering. Investors are reluctant to part with their shares, but new shareholders are a scarce commodity.

This is another one that should have its day once volume returns to these smaller stocks. I would love to see it grind up to $4, as then it would have a real shot at a NASDAQ listing.

Here’s the wild card- there are two horses left in the HP stable- Wal Mart USA and Walgreens. They are now in Sam’s Club- could WalMart- the largest company in the world- be the next to defect? The have WalMart Canada already. NASDAQ listing? A number of strong possibilities could effect the stock price to the positive.