Created: 11/02/2017 11:19:06 AM -
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Spectra Inc. (SSA.V) Due Diligence Report
Current Stock Price: $0.03
Common Shares: 60,509,971
Insider Holdings: 6,355,591 or 10.5%
Institutional Holdings: 18,133,000 or 30% - DVOF Debenture Holder
Key Notes For 2017:
- March News: Director Michael Faye left saving the company $90,000 in expenses
- DVOF interest of $187,500 extinguished (see March year end results)
- New US customer signed with over 250 locations (see July MD&A)
- Spectra Inc. total revenue, net income, asset/debt ratio at it’s best since inception
- Q3 2017 Results will be released Mid-End of November
- Specta Inc. CEO is paid on a commission structure rather than salary
Revenue/Profit Over Last Four Years
2014 - $1,440,000 - $45,000
2015 - $1,820,000 - $189,000
2016 - $1,550,000 - $152,000
2017 - $901,000 - $134,000 (Only 6 months and before new US deal)
Most Recent Financials + MD&A
Accounts Receivable: $225,784
Prepaid Expenses: $13,494
Total Assets: $514,502
Accounts Payable: $119,668
Loans Payable: $50,000
Royalty Debenture: $621,922 (owed to DVOF)
Convertible Debenture: $658,141 (owed to DVOF, due August 2019)
Total Liabilities: $1449,731
SSA Most Recent Quarter Breakdown
Gross Profit: $269,894
Net Income: $78,709
DVOF has worked with Spectra since 2004 and obviously does see value in the company going forward, especially over the last few years with growing sales and profitable quarters. The reason for their leniency is because DVOF knows there is a larger gain coming from share appreciation and sale down the road compared to making 6-7% interest on their debentures which is true. In the end, based on Spectra’s latest sales, they should be able to pay back DVOF their principal and give that fund a higher value for their shares. But in order for DVOF to sell, they will need to find one larger buyer or Spectra will need to sell itself to another company.
MD&A Company Highlights
About Spectra Inc:
Spectra Inc., (the “Company”), through its wholly owned subsidiary, Spectra Products Inc., supplies products to the transportation industry. The current product line includes a visual brake stroke indicator, Brake Safe®, that permits vehicle drivers and maintenance personnel to visually determine the brake adjustment condition of a truck, trailer or bus equipped with an air activated brake system. The Company’s electronic version of Brake Safe® is an air brake diagnostic system called Brake Inspector®. This product provides an in-cab display of air brake status and permits diagnosis of various existing and potential brake problems with the foundation brakes of trucks, trailers and buses. The Company also supplies an anticorrosion lubricant called Termin-8r® to the transportation industry and Zafety Lug Lock® a product that prevents wheel-end lug nuts from loosening leading to wheel damage or wheel loss. The Company’s product includes Hub Alert® a heat sensitive label that is applied to each wheel hub of trucks, trailers, buses and off road vehicles to provide an early warning of critical temperature threshold levels where safety and maintenance issues may be pending. The Company introduced in the fourth quarter of 2014 a new product, the Arrow Logger™. This system is designed to work in conjunction with the Brake Safe® product by providing enhanced brake monitoring.
The Company continues to focus its efforts on expanding the present market for its products while introducing those products into new markets as well as seeking out new products to complement our other offerings. The Company will continue to form strategic distribution alliances to accelerate its sales outside the Canadian marketplace. The Company recently signed a new distributor in the US that has over 250 locations and has access to a large fleet customer base.
The Company is marginally exposed to foreign currency fluctuations as certain revenues and expenses derived from sales activities in the United States and China are denominated in U.S. dollars. As at June 30, 2017, the Company had $95,344 of net current assets denominated in U.S. dollars. The Company’s sensitivity to foreign currency fluctuations is such that a 10% strengthening or weakening of the U.S. dollar would result in an $9,534 decrease or increase, respectively, to the Company’s loss before income taxes for the six months ended June 30, 2017.
Revenue for the six months ended June 30, 2017 increased by 4 percent to $900,406 compared to revenue of $864,617 for the six-month period ended June 30, 2016. The increase in revenue is attributable to increases in sales of Termin-8r® from $248,646 to $285,341; Hub Alert® from $13,686 to $18,005; and sundry income from $66,181 to $92,145; offset by decreases in sales of Brake Safe® from $398,013 to $390,324; Zafety Lug Lock® from $106,061 to $95,948; Brake Inspector® from $28,766 to $17,359 and Arrow Logger™ from $3,264 to $1,284.