CSG Inc. (fka CYSG)

[nbear]

I sent this out to a group of guys I trade with, thought some may find it useful. IMHO....

First, just a reminder with a few links about the fundamentals. CYSG released unaudited financials on 9/22 stating:

http://ih.advfn.com/p.php?pid=nmona&cb=1257716234&article=39580665&symbol=NO%5ECYSG

SOUTH PLAINFIELD, N.J., Sept. 22 /PRNewswire-FirstCall/ -- CAPE Systems Group, Inc., (Pink Sheets: CYSG) a leading provider of software technology for packaging design, pallet optimization, RFID Asset Tracking, inventory and warehouse management, supply chain execution and order fulfillment, today announced preliminary unaudited financial results for the fiscal years ending September 30, 2007 and 2008, and the three months and nine months ended June 30, 2009.
Cape Systems Group, Inc. reported revenues of $0.5 million and $1.6 million for the three and nine month periods ended June 30, 2009, respectively. The Company also reported a $15.3 million non-cash profit (unaudited) for its third quarter ending June 30, 2009 based on anticipated settlements within the next 60 days of $8 million in liabilities related to the closing of its European operations back in 2003 and $8.4 million in liabilities related to the closing of three domestic operations in 2004. Existing operations during the same quarter had a $1.1 million loss after a $0.7 million beneficial conversion charge for the conversion of accrued interest into notes to its bondholders. The same period for the prior year had a $0.8 million loss after a $0.5 million beneficial conversion charge also for the conversion of accrued interest into notes to its bondholders. Excluding the beneficial conversion charges each year, the net operating loss for the third quarter was $0.4 million vs. $0.3 million in 2008 caused by a $0.3 million decrease in gross profit that was offset by $0.2 million in reduced S, G & A expenses based on a cost savings strategy initiated in FY2009.
Based on the third quarter's $16.4 million gain in settlement the profit for the nine months ending June 30, 2009 was $14.5 million after absorbing an operating loss of $1.9 million that included $1.2 million in beneficial conversion charges. This compares to a $1.4 million loss for the nine months ending June 30, 2008 that included $0.5 million in beneficial conversion charges. Excluding the beneficial conversion charges each year 2009's net operating loss for the nine months ending June 30 was $0.7 million vs. a $0.9 million loss in 2008. This $0.2 million improvement is the result of $0.6 million in reduced S, G & A expenses offset by a $.4 million decrease in gross profit.
For the fiscal year ended September 30, 2008, the Company reported preliminary unaudited revenues of $3.5 million. The unaudited net loss for the last fiscal year ending September 30, 2008 was $1.7 million that included $0.7 million in beneficial conversion charges vs. the prior year's unaudited net loss that ended September 30, 2007 of $3.0 million (including $1.3 million in beneficial conversion charges). Excluding the beneficial conversion charges each year 2008's net operating loss for the twelve months ending September 30, 2008 was $1.0 million vs. a $1.7 million loss in 2007. This $0.7 million improvement is the result of $1.0 million in reduced S, G & A expenses (mainly intangible amortization that finished in 2007) plus a $0.3 million increase in gross profit, which was offset by a $0.6 million decrease in gains on settlement that were realized in 2007.
Currently, the share structure for CYSG is:

Outstanding Shares: 1,172,576,592
Authorized Shares: 2,000,000,000

http://www.pinksheets.com/pink/quote/quote.jsp?symbol=cysg

Now just for fun, let’s assume the worst. Let’s say that CYSG has issued all the shares possible and since 9/30/2009 has brought the outstanding shares up to 2,000,000,000 (not at all likely).

So, with the revenues reported through the quarter 2009:

YTD Revenue: $14,500,000
Hypothetical Outstanding Shares: 2,000,000,000

So, the ‘worst case’ share price for this company should be:

$14,500,500 (profit) / 2,000,000,000 (shares) = $.00725 share price

Remember this is the worst case scenario. If we assume that the company has not increased the Outstanding Shares since 9/30/2009, the numbers look even better.

$14,500,000 (profit) / 1,172,576,592 (shares) = $.0124 share price

CYSG closed on Friday at $.0019.

What we don’t know is the exact number of outstanding shares, and most likely, they are somewhere between 1.2 billion and 2 billion. So, to summarize the financials:

Worst Case: $.00725 SP, $.0019 close, %382 rise in SP when audited #’s are released
Best Case: $.0124 SP, $.0019 close, %653 rise in SP when audited #’s are released

Now let’s take a look at an updated daily chart to see what’s going on.