KIK..SCKT..4th Q and beyond
A few important things first about 3Q:
1. This Q finally showed everyone that they can carry a lot of money to the bottom line when revenues ramp up. Their expenses are more fixed than people realize. They are very aware of the need to keep overall expenses flat even as revenue rises-----long term shareholders nag them about it constantly! You even heard it on the cc call when someone asked about the new hire, Brian Lopez, and if that was really necessary. (I think it was a very good hire myself. They need someone smarter than the rest of them there and it sounds like this guy is it. I know they are very excited about him).
2. Of the income in 3Q, $300K came from an OEM deal with the Somo. That won't repeat in 4th Q, however, in 2015 when that company gets FDA approval, that level of income should start to become consistent each quarter. No one knows who this company is though. I've tried to get the info but have not been successful. When they get FDA approval I may be able to determine who it is.
3. I don't want to go into the trouble with Hudson Bay---that's a whole story itself. They had 1.0M in warrants available at $1.25. In the cc call it's now down to just 280K. Hudson Bay does not give a darn about Socket at all. They are pure vultures. However, they have not sold 720K shares. That's obvious from daily trading. Also, Socket's balance sheet didn't get 720K shares x $1.25 per warrant received. I need to check with the CFO today, but most likely they are exercising and paying for their warrants with other warrants, i.e. rather than give Socket $1.25 per warrant, they give up a warrant in exchange. As such, they get 500K warrants at $0, but give up the other 500K warrants in return. The negative is no $0 to Socket, the plus is less dilution. If this is true, than the total full dilution (all warrants, all options, all conversion loans combined) puts total diluted shares at 8.4M that will come into play as the stock price goes up and they are all exercised.
I'm almost certain that Hudson Bay will be selling the rest of their 280K in the near future. It'll hold the price down (though they aren't going to take it under $2 most likely).
4th Q:
1. First thing you need to know---they are being conservative on the cc calls from now on. They burned everyone for so many years being optimistic that their motto is under promise and over perform. So don't take 4th Q too negatively though it's obvious there will be reduction in revenue. Without the OEM deal, it would be $4.6M if everything is flat.
2. I'm not going to name him (but you can figure out who he is). The analyst and first caller on the cc call, sends me his letter to his customers on all his updates for the company. He sent one out yesterday afternoon. He's putting 4th Q conservatively at $4.6M and 4 cents/share with the real growth starting again in 2015. He has the best connection to Socket of anyone having owned the stock on/off (himself and his clients) for 15+ years. He also owns part of the loan conversion debt. A wild card in 4th Q is the van line deal with United. It still exists and is supposed to play out in late 2014. The company will acknowledge they talk with the van lines, but they have no control on when it plays out. If it does, it alone will make the Q match 3Q (or better).
3. It's too early for me to make a prediction for 4th Q, but I track inventory and it has showed Oct down slightly from previous months. What's odd was it took off again this week and is catching up to where I expected rather quickly. The cc call makes sense in that it slowed down with the iPad and is now picking up after it's come out. This is actually what I would of expected in Sept from year's past and it's played out more in October. They can make up sales faster than people realize. In the last 2-3 months they have had some monster sales days that I've seen. I'll know more as Oct finishes up and Nov plays out.
4. I'll reach out the the CFO for more info to write a better analysis. I do know this.....2015 is expected to be a year when the whole tablet POS system explodes. I have no worry that they will be $5.5-$6M/qtr in 2015, I just want them to get to $10M/qtr and make this a very nice investment. $5 for this stock is one thing, I want $20+ and they need to grow faster than they are to do that. It's one reason I believe the Brian Lopez hiring was wise even though it will cause expenses to creep up.
I'll post more as I get things verified and get more info.
