Global Aircraft Solutions (fka GACFQ)

[MikeDDKing]

GACF tourniquet and amputation....

I sold all of my shares of GACF this morning. I think it was likely a wise move but time will tell. This stock was my biggest $ loser ever although far from my biggest percentage loser. Fortunately, I'm highly diversified so it was only a 1.3% hit to my portfolio.

I did some heavy looking last night to try and understand better what is going on. One thing that I couldn't understand in the PR from last night was the phrase "non-distribution of profit and equity by JetGlobal." This phrase appears in the paragraph talking about the loss in Q4. The word equity didn't make sense to me. As part of my research I decided to go back to the presentation that GACF did a couple of weeks ago. I found out in the presentation that they are trying to wind down BCI. I had listened to the presentation a few weeks ago but I didn't hear this part as it is quite subtly hidden in the presentation. Here are some links:

Powerpoint (see line 3 on slide entitled "2007 Goals and Initiatives") - http://yahoo.brand.edgar-online.com/fetchFilingFrameset.aspx?FilingID=5030758&Type=HTML
Audio (roughly 20 minutes into the call) - http://www.wsw.com/webcast/brileyco8/gasf/

So, what does this mean for GACF? First of all, it means that there isn't an aircraft trading business at present. They do have plans for a new trading business but there is no telling how long that will take to get together. Secondly, it appears that BCI Aircraft leasing is not cooperating with them. In addition to not performing accounting of JetGlobal in a timely matter, there also seems to be a disagreement on the shutdown and disbursement of funds. Furthermore BCI Aircraft Leasing is also not paying their bills in a timely fashion. I wonder how much this is a disagreement and how much it is a reflection of BCI Aircraft leasing's financial position.

I also find the receivable issue with Avolar to be very disturbing. Avolar is becoming a huge part of their business and is supposed to be a large part of their growth going forward. It is hard to tell from this PR whether this is just a minor A/R issue or whether this is something bigger.

The thing that really bothers me about what has happened is that during the third quarter conference call in mid November they were saying that huge amounts of business would come through in the quarter. Now, they are going to report a Q4 loss that is somewhere in the range of $1 to $2,411,949. They haven't narrowed it down more than that. I have a hard time understanding how things can change that much in six weeks. The only logical explanations that I can think of are either that they are going to have some sort of write down or that management is not watching very closely (or both). Their guidance in November led me to believe that they would post a profit of $2.1M to $3.5M so there has to be a huge hit somewhere.

I really hate the way that management has been communicating to shareholders. In my opinion, they shouldn't have hid the fact that they want to wind down JetGlobal. This hasn't appeared in any PR as I believe it should have. I find managements lack of straightforward communication very disturbing. I don't trust that the PR last night tells us even half of the story.

So, in the end I decided to sell all. It was a painful but I believe necessary decision. I apologize to all who end out losing money and do in part because of my assessment of GACF. I truly hope that this works out for the best for those that remain long but I decided that the risks of holding the stock outweigh any potential for recovery of losses. As always, do your own DD.

Mike