At the risk of totally embarrassing myself, I think I'll take a shot at figuring out what the stock price might look like if:
1. Next fiscal year's sales really will be on the order of $10 million; and
2. The company is successful in its endeavor to attract (I'll use the full amount)$5 million in an infusion of equity capital.
Let's say that the cost of good sold will be about 2/3 of sales, so that would leave a gross margin of roughly $3.3 million. Let's say that general and administrative expenses would rise to about $700,000 per quarter, up about 25% from the experience of the most recent quarter, reflecting mostly annualization of the costs of new marketing programs initiated in the most recent quarter. So that would be $2.8 million in these costs for the year, leaving $500,000 in net income before interest and taxes.
Let me assume - just pulling numbers out of my Tochas - that the $5 million in equity infusion will be 125 million newly issued common shares at 4 cents per share (really, who knows?), and that the $5 million is used in part to rid the company of: March 31 debt of about $1.1 million (just adding the relevant numbers on the balance sheet - Typenex, Gotama, officer loans, BofI); any new Typenex tranches since then; and any financing needs from now through the end of the coming fiscal year.
Accordingly, I won't reduce the $500,000 above by any interest expense. I'll assume an effective tax rate of 40% (just picked out of thin air), so that will leave $300,000 as the bottom line. The number of shares will be the sum of 68 million currently issued plus 125 million newly-issued shares. For today's purpose, let's round off to 200 million shares. And all of these calculations lead us to per-share earnings of $.0015 per common share. Let me assign a price/earnings multiple of 40,given that the company would be a real growth stock due to its zooming sales. So that takes me to a target stock price of 6 cents per share, or more than 50% above where the stock closed yesterday.
However, I've missed one thing in this analysis. I assigned at most $2 million of the $5 million of the funds infusion to obliterating/obviating debt, so that would leave $3 million available for expansion of the company. If there would be only a 5% return on those funds, that's another $150,000 to the bottom line, which would represent a 50% increase to the $300,000 number I've calculated above. Running that all the way through the analysis takes the stock price target up to 9 cents per share.
I realize that by the time some of the readership pokes holes in every assumption, my 9 cent target for the stock will look like Swiss cheese. But someone had to do a first pass at this, and since I'm neither a share-holder here nor thin-skinned by nature, it might as well be me. It does fascinate me, though, whether commenters will suggest changes to the assumptions that would raise or lower the price target for the stock.
