Wise Investments

[Linchuck]

Scrooge. RE: APOA

Revenues for the 3 months ending 6/30/03 were $17,367,339 which is an increase of $8,958,289 (over 106%) from the same quarter of 2002. Unfortunatly, their expenses also grew a great deal, so even with such great revenues they only netted $59K. So this is the 3rd consecutive quarter that the company is profitable which is rare for an OTC company, but they need to work on cutting some of the expenses. Their cash flow has gone from a positive $365K last year to a negative $425K this year, which isn't good. From what I can see, they are paying to much for the supplies and charging to little. The company is taking steps and has set goals for itself to make it closer to 50/50 wholesale/retail and once they can do that the gross margins will improve a great deal. This is an OTC company that has a low float, they are profitable, and they have great revenues (estimated at $70-80M annually based on the last 3 quarters), so IMO they are undervalued at .14 and should be trading at at least .30. With those kind of revenues, a very small increase in gross margin will add a substantial amount to the bottom line figures.
The filing also says that they recently terminated some consulting contracts in which they were paying cash and re-negotiated the terms so the consultants were paid in shares. This put over 5M shares in the hands of consultants which originally was to get cash and they are not restricted so they can dump the shares at any time, so that may explain some of the selling. I believe these shares were issued within the last month.
There is also a lawsuit going on right now and from what I can see it is pretty frivolous, but still a lawsuit none the less. Money is going towards paying the legal fees and any chances of mergers or buyouts are probably put on hold until the legal issues are dealt with. Everyone is hoping that the case will either just be thrown out or the courts will say the indemnity insurer is responsible if any payments that are to be made. But, if judgement would be decided against the company then it would be up to the court to decide the dollar amount. If the judgment is for a single violation the maximum dollar amount would be $1500.00, but if they find the company fully responsible for everything then the dollar amount could be much greater.
So, right now I think the gains in expenses, the consultants selling their shares, the looming lawsuit and the lack of PR's is what is making the price drop right now. Once the consultants get done selling and the lawsuit is out of the way and they can start merger talks again, then I think we will see this really take off.
I honestly think this company has huge potential and the low float, high revenues, and the fact that they are profitable makes it even more attractive. Right now they have some murky water they need to get through and then I think it will be clear sailing. They made the list of the top 100 companies in Long Island (number 62 on the list), so they are gaining respect for the work they do. This isn't your typical OTC company, they seem to have their priorities in order and strong goals set to become more profitable. Even the negatives here that are holding the price down right now ie: lawsuit, increased expenses etc. aren't the same BS problems that you find with so many OTC companies, like major dilution or outrages salaries and bonus's paid out with little or no revenue. The CEO is more focused on the company growing then just the shareprice, and that says alot to me. I think once the lawsuit is out of the way then we will be seeing more PR's regarding buyouts and mergers and then the PPS will start to go up. That is my opinion anyway.
Hope this helps.