JMIH.ob. Just some things to be aware of that I found buried in the 10Q:
Two separate instances of huge stock payouts given to the CEO and CFO:
On December 6, 2005, the Board of Directors approved the issuance of
1,405,547 shares of the Company's common stock, in lieu of cash, to its chief
executive officer and chief financial officer and six other management employees
as payment of bonuses earned during fiscal year ended July 30, 2005 at $.11 per
share, which includes a 33% discount to market reflecting the three year
restriction placed on the common stock on December 6, 2005. Such bonuses had
been accrued at July 30, 2005. The bonus payable to the company's chief
executive officer was $41,350 and the bonus payable to the company's chief
financial officer was $20,675. The transaction was exempt from registration
under Section 4(2) of the Securities Act. The shares were issued with legends
restricting their transferability absent registration or applicable exemption.
The employees received information regarding the Company or had knowledge of the
Company's operations and business. Furthermore, the employees had the
opportunity to ask questions about the Company.
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New shares continued to be issued:
In March 2006 the Company negotiated an increase of its line of credit
with a financial institution, from $500,000 to $750,000, and extended the due
date of the line of credit to February 28, 2007. On March 14, 2006 the Company
issued its chief executive officer 562,219 shares of its common stock in
consideration for providing personal guarantees for the Company, which were
required to secure the line of credit. On March 14, 2006 the Company also issued
an aggregate of 360,049 shares of its common stock to its chief executive
officer and chief financial officer in consideration for extending the due date
on their note payable to February 28, 2008. The shares issued for the guarantees
and extension were issued with legends restricting their transferability absent
registration or applicable exemption.
These shares may be locked up, but they will still impact fds count.
Two, I found this statement which always makes me nervous about companies who are thinking about going private:
"As disclosed above, the effects of higher fuel prices, higher interest
rates, increases in cost of other raw material and lower consumer confidence may
contribute to a slow down of the economy which may temper our sales growth.
While we have had limited success in controlling our operational expenses and we
continue to examine ways to reduce costs on a going-forward basis, as a public
company we are constantly faced with increasing costs and expenses to comply
with SEC reporting obligations. We will be required in fiscal 2007 to comply
with the new annual internal control certification pursuant to Section 404 of
the Sarbanes-Oxley Act of 2002 and the related SEC rules. We expect that these
and other compliance costs of a public company will increase significantly. In
addition, our stock has historically been, and continues to be, relatively
thinly traded, providing little liquidity for our shareholders. As a result of
the foregoing, we have, from time-to-time considered, and expect from
time-to-time to continue to consider strategic alternatives to maximize
shareholder value.
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Sounds like a substantial risk of going private.
AI
