Expectations of improving cash flow have been elusive for SLS over the past years. I recall some fairly rosy forcasts from so called financial experts from the Yahoo board claiming sales were headed to the $12 million and higher levels for third and fourth quarter 2006 as a result of the BBY deal. These turned out to be nothing but pure fantasy.
The trend that was obvious when the company was reporting, is that working capital levels were being depleted very rapidly. If and when the company ever starts reporting again, I think the number will show that SLS has been living on its inventory sales and has not been able to replace inventory enough to sustain any significant increase in sales volume. In fact, If I were betting, I would bet on the fact that SLS's working capital postion is now NEGATIVE, meaning total current liabilities exceed current assets, including inventory.
This is why they most likely did not have the money to pay for accounting/reporting. It also suggests that the company realizes that it is toast and is not going to be able to raise capital at all so why bother with the public reporting? Who is going to repay that $2.0 million dollar revolving line of credit they entered into last year? Once the defaults begin to happen, it is only a matter of time until the Series C preferreds and the debt holders begin to assert their claims.
This is likely to provide several more opportunities to average down for those looking to build their postion. Without any press release or guidance from the company, one would be prudent to assume that things have reached a stage of desperation.
The various forecasts that claim product is flying off the shelf have to proven to be factual.. Prudent investors may choose to be a bit skeptical.
