Aida Pharmaceuticals (AIDA)

[PaperProphet]

10Q out.

http://www.sec.gov/Archives/edgar/data/1220286/000107878208001163/aida063008q.htm

Significant increase in revenues this quarter. Both revenues and gross margins were the largest in the company's history. This was offset by the $7,045,123 payment to make good on Nanwang's loan default this past April and by a $1,032,141 payment to Jiangyin Hi-tech Development Co. for business development apparently through 2007.

I don't know whether to buy or sell. On one hand, the growth is phenominal. Barring any problems, it looks like an extremely good deal based on its current business. On the other hand, they seem to be in the nebulous business of making loan guarantees on the side which could be costly. The company even guarantees a loan of a company controlled by a director.

Now on this quarter there was a new liability for channel development which I don't remember ever seeing before. Hopefully that's only a one-time payment but these costs keep popping up.

That revenue and margin growth was amazing, though, especially for the second quarter. Had they not had those two expenses, earnings for the quarter would have been about $0.06 and the two historically good quarters are coming next.

I'll probably hold what I have. I think it's a good risk for the potential reward but I don't like the risk part. I'm guessing either they'll hit really big or loan defaults on loans they guarantee will have a domino effect. Unfortunately there's no way I can easily assess the risk of the loans guaranteed by the company to make a better judgement.