Nighthawk Q2 - Soaring With Eagles and Scratching With Chickens
August 15, 2008 @ 10:09 am
I reviewed the Nighthawk Q2 quarterly filing late yesterday afternoon, and there’s some really great stuff and some information that is moderately troubling.
For starters- the top line growth was, as it continues to be, impressive on a percentage, year over year basis.
Here’s some comments in the same format as the Spicy Pickle review:
- Revenues: were $736,356, up 116% from Q2 ‘07, but down 10% from Q1 ‘08- in short, the company is continuing to grow admirably, but not in sequential quarters.
- Profts: NIHK lost $950k in the quarter, down about 10% from the losses in the same quarter in ‘07, and about the same as Q1 of ‘08. I estimate negative cash flow to really be in the $400k range. This is going to have to change in pretty short order.
- Balance Sheet: The balance sheet is a bit troubling, but far from fatal. On the last day of June, they only had $75k in cash, and receivables and payables more or less matched up. There is almost $500k in inventory, which could translate into $700k to $800k in revenues, but you can’t know exactly when.
Based on the cash levels, it’s tough to predict if the company will need to raise a little more capital to see them through. Doug Saathoff, in his letter to shareholders, notes they had an order for 4,000 set top boxes which will now fall into Q3. That’s great news. More importantly, and I know this from discussions I had with him some months ago, they have refined the manufacturing process to reduce the costs, and therefore will get much better margins on the order.
So, I think’s it’s a bit of a horse race on the cash vs order front. Clearly, the company is running on fumes. However, if Doug can deliver and collect on that 4,000 set top box, and get paid in Q3- it’s likely all problems likely go away.
Here’s today’s theme- NIHK is soaring with the eagles on the revenue side, but scratching with the chickens on the cash side.
I hope the company does not have to raise more capital in this market environment. Capital is scarce and very expensive right now. It would likely be highly dilutive, and the last thing they need is more dilution.
On the major good news side, the shares issues and outstanding didn’t even budge quarter over quarter- standing at 136 million. To me, this static number is a great technical indicator. It means the stock could move up quite easily if and when volume comes back.
My view- hold on for the last and strongest part of the year. NIHK- deliver those 4,000 set top boxes, get the cash in, and do a lot more in Q4. Hopefully, you won’t need to raise any more capital.
Comments and questions are welcome.
15 Comments
RSS feed for comments on this post.
Leave a comment
Line and paragraph breaks automatic, e-mail address never displayed, HTML allowed: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <code> <em> <i> <strike> <strong>
Hi again,
In your answer to Mark (9/17/2008) you say… a mild negative so far. Today Doug did send out an email.. business is growing but essentially non set-top boxes and concerning the ‘core’ business he mentioned no quantities at all. It used to be different.. ‘NIHK receives biggest order so far’… and that kind of stuff.
So, I guess this suggests we should consider things as at least a moderate negative (more negative than mild). Would you agree with that?
Kind regards, Bart
Editor: Bart- I think the information flow is going to pick up from here. It’s too early to call the set top box situation dead. Saathoff noted in his letter that an update on the set top boxes would be coming next.
Comment by Bart — 9/25/2008 @ 10:16 am
today’s release completely left out the set top boxes and Doug’s email barely acknowledges it. I can’t figure out the motivation behind that unless there’s something to hide. I will continue to hold but is it possible that the set top box business is not performing at all?
Editor: Actually, I believe the set top box business might be going all right as well. This is pretty welcome and encouraging news.
Comment by JD — 9/25/2008 @ 8:28 am
Hi Larry,
Just two question: (1) is your target for NIHK still 0.13 ? (2) If you put a target, what’s the time-frame you use? 0.13 within 6 months, a year, .. ?
thx
Editor: I would think once we get back to a bull market and microcaps come back in favor, that would be a reasonable price target. However, I am very concerned about the company’s total silence. The CEO does not check in with me, which could mean he has nothing to say. There has been no indication they are moving forward filling orders on the set top boxes, and very few announcements related to their legacy products. I hope their business isn’t at a stand still. I just don’t know what to make of it. If it doesn’t pick up by the end of October, I am going to suggest there could be problems.
Comment by Bart — 9/24/2008 @ 5:55 am
what You think about this sentence in Doug letter:
I didn’t write as many emails or put out as many releases during the summer as in earlier months, but we continued to grow the Company and make good progress. I look forward to being more active with my emails in the coming weeks and months, and look forward to sharing our accomplishments with you.
Editor: I have invited Doug Saathoff to call me anytime with an update on how things are going at the company. He responded by saying he would, but he has not taken the time to call me up to now. This invitation was open throughout the course of the summer. Hopefully, he hasn’t called because he’s too busy filling orders. However, I have to take his failure to respond as a mild negative so far. If he had something good to say, he probably would have done so.
Comment by mark — 9/17/2008 @ 7:34 am
Okay, I’m starting to get worried……. I know we are in a bear market, but should it be this low?? And should I get out now while I still have some capital left? I really don’t want to. Pease help me.
Editor: It could go to zero, so if you can’t handle the possibility, please do get out. It could turn around. I will make this comment- in bull markets, things are capable of going higher than you could imagine. Conversely, in Bear markets stocks can go lower than you could imagine. It is an easy trap to fall into- believing it is a bad company by the stock price, and it’s a good company if the stock trades well. However, it could go to zero. It is possible.
Comment by Verland — 9/16/2008 @ 12:29 pm
I fell NIHK is back on track again. I have had contact with Doug via email several times and it’s business as usual again. They updated their website and there is actually news out today.
Editor: He did respond to an email of mine by acknowledging he still exists. I don’t have time to reach out today. Let’s see where it goes.
Comment by Rob A — 9/15/2008 @ 6:40 am
What did you do to piss Doug off? I got an e-mail from him yesterday.Do you think it had to do with Dutchess? Try calling him he is there. You said this stock was a great buy at .08 an option that wont expire so I listened and now at .035 you are sounding like you havent a clue. Man you need to stop flip flopping.
Editor: This is not a political campaign. I told everyone it was worth a look at $.08- I also have been PREACHING that if you’re not long term, get out. This is not for you. This is a recession and a bear market. What do you think that means? You don’t get that you should have gotten out if you weren’t prepared to tough it out? You need to stop selectively picking out the stuff you hang your hat on and start taking personal responsibility for your decisions. I wrote a complete review of the last quarterly numbers. You read it. Make your decision, stick with it, and stop whining. If you can’t take it, sell the stock and get out.
Comment by Anonymous — 9/11/2008 @ 8:57 am
Well, it looks like people are starting to bail out of NIHK. Do you think the lack of info is because our worst fears are probably true? They need to raise capital to continue? If they made stratiegic moves to improve th company why are they so quiet? When ido they report again?
Editor: I can’t answer any of your questions because Saathoff no longer communicates. I’ll check the SEC filings to see if they raised any money, but their silence seems to be shouting volumes.
Comment by Bret — 9/10/2008 @ 12:31 pm
Have you considered a new entry point for NIHK now that we’re below .04? Is below .03 possible or do we stay away from this one? Thanks.
Editor: Until there is some communication flow, I wouldn’t go into it. Also, I am looking outside the US recession plagued companies for my new ideas until the market improves. Check it out this weekend. I am sitting on a lot, and haven’t been much of a seller, but I wouldn’t be a buyer either.
Comment by JD — 9/10/2008 @ 6:32 am
I have quite a few questions here. I know lack of communication has been a general theme and most everyone’s biggest worry from this company. I realize you are asked this all the time and I do apologize, but have you heard anything from the company yet? My next question is about the set-top which I believe you said you actually saw the unit at the Wynn in Vegas (Just from my memory). I would find it hard to believe that Wynn would make a huge order from a company without first making sure they are legit and will be around, right? Also, if they had placed such a big order, then how come they have not made the order for all their rooms? Can it be that they have had deals that they aren’t reporting? I would imagine if they made a set-top deal that they would announce it, but is it possible that maybe they wanted to keep the stock price low for a reason? Finally, for the financing of the set-top they borrowed money from duchess which is convertible later this year I believe. When can duchess sell those options and am I right to assume that it would spiral the price? Thank you so much for your time. Keep up the good work with the new site.
Editor: With regard to the Wynn- the set top boxes in Wynn were purchased and installed before NIHK bought the company. However, from a practical point of view- I have stayed in many hotels with hi def tvs- it was the only place I ever stayed that had a hi def signal. What a difference. That was nearly two years ago. It demonstrates how big the market is for these boxes. The recesssion can’t be helping. I’m sure hotels are not anxious to spend money- they also need to stay competitive- it would be nice to hear something from these guys. I have reached out- there’s nothing more I can do.
Comment by Ed — 9/3/2008 @ 9:54 am
I have basically had it with this company. I am actually getting nervous because I not only have emailed Doug I emailed technical support and sales too about updating their website. They have news from June 16 on there and there has been other news since then. Not one person has responded to any of my emails. Is this company a scam? I am not really sure what to think anymore.
Editor: I don’t think anyone would blame you if you went ahead and sold. There has not only been a news vacuum from NIHK, there has been a communication vacuum as well. There’s really no excuse for it that I can think of.
Comment by Rob A — 8/28/2008 @ 12:35 pm
Dear Editor,
When reading the Condensed Consolidated Statements of operations of NIHK, I see that stockholder equity/common issued stock has a value of 0,270 end dec.07 and a value of 0,165 end june 08. That’s precise what the stock has done (0,165/0,270 x 0,07 stock end dec. = 0, 0428 at end june 08). Now I ask myself the question if NIHK does just perform the same way, stock value end dec.08 should be 0,026 !!!! So I do wonder, should I sell stock now and buy them back later on the year somewhere around that 0,026 value? Or is my reasoning fundamentally unsound in that I miss some essential parts?
kind regards,
Bart
Editor: Your thinking is a bit flawed. Those numbers are simply reflective of the movement in stock price. What if it’s higher at the end of the year? Then, the number goes up. I’m not saying it won’t be there- I don’t know. I’m just saying the two issues are unrelated.
Comment by Bart — 8/20/2008 @ 8:54 am
Larry,
If it’s really slow this time of year, I can’t understand why Doug doesn’t respond to emails. He told me months ago he was going to replace the company’s website and it never happened? Also there’s news all the way from June which is really puzzling.
Editor: I don’t know what to tell you. I am not him. Several times he has responded to me by saying he would call, but has not done so. Hopefully, it’s because he’s so busy he doesn’t have time.
Comment by Rob A — 8/19/2008 @ 5:05 pm
Dear Larry,
At this point, I agree to hold on to your shares. What bothers me is that there has been no news of any deals in quite some time. I’m hoping that is because it is summer, but what do you think at this point?
Editor: Mark- for the past three years this company has said nothing over the course of the summer, then got really busy in Q4- traditionally their best quarter. Therefore, I think it’s a good time of year to just hang on and see where you end up Jan 1.
Comment by Mark — 8/18/2008 @ 6:51 am
At these prices $0.045, do you see it as an opourtunity to accumulate or to much risk givin the economic situation.
Editor: in light of the share count staying stable, and the orders the company has in hand, I would say the main issue is “when” it trades better, not if. However, that comment stands as long as there are no more financings. If they raise cash in another dilutive financing, all bets are off.
Comment by Bret — 8/18/2008 @ 5:49 am