Why I am voting yes to the A/S increase.
Information I used to make my decision.
1) Management team- I think everyone on this board agrees that Phot has assembled a great management team. Sterling and Rob have years of experience in the industry. Marco is an ex Microsoft and Yahoo executive with experience in growing startup companies. Just added 3 board members with a lot of experience with high profile companies.
2) Hired a very reputable law firm to help them navigate the laws in this new industry.
3) in the first three quarters of the year phot had approximately 2.9MM in sales, which is huge year over year growth, but isn't enough to support the current market cap of the company.
4) in the third quarter phot had about 1.3 mm in sales and lost about 1mm dollars.
5) after the third quarter earnings miss the stock dropped from about .10 to .065.
6) when phot announced the JV with CANX the stock price quickly rebounded and proceeded to move higher.
7) it takes a lot of time to put together a JV of this nature, and it was probably negotiated around the time that the stock was at .03, which is why CANX has access to shares at .033. Would you be willing to give $40 MM to a company that is this small without it being a good deal?
8) the stock market is forward looking and not backward looking, which is why you see a lot of high growth potential stocks trade at high multiples- NFLX, CRM, FB, and Twitter are a few that I can think of off the top of my head.
9) Rob Hunt interview with AB- mentioned the following things. A few Gift contracts were imminent and there were somewhere on the order of a dozen potential in the near term. Rob mentioned that the gift contracts would be very lucrative and would overshadow any potential share dilution. Rob mentioned that the gift contracts would be announced once a number of them were signed and they would not release news on a piecemeal basis.
10) phot is an equipment company in a market where the demand far outstrips the product supply- i am a salesman and was in a similar market back in 2000, and the company that is able to sign contracts and supply product the quickest will be the winner- need money to be able to do that.
So, with that information why vote yes?
1) after the JV was announced the stock price quickly turned around, which meant the market sees the potential of the gift program.
2) the company would not look nearly as strong without access to capital for the gift program. Just take a look at Q3 results. You wouldn't be investing for long in a company with a 1 mm dollar loss on 1.3 mm in sales.
3) there have been a lot of backseat posters on this site that think that phot could raise money in a different manner that would be more shareholder friendly. I disagree because I don't think that the stock price would be anywhere near where it is now without the potential of the gift program.
4) This market has been referred to as the green rush, and that is true, because the company that is capable of signing products and getting equipment installed and operating quickly will be the winner. A no vote would delay phot's access to capital and may cause them to lose very valuable contracts.
5) I believe (my opinion) is that there is a very good reason why phot hasn't issued a press release about the gift program yet. The reason is that they have signed a bunch of contracts and currently would not have the finances to go through with them if it weren't for the CANX JV. They haven't announced them because the CANX deal doesn't go through without the a/s raise. They are a shareholder friendly company, so they are giving the shareholders an opportunity to vote on the A/S raise, but they assumed that it would be a foregone conclusion that it would pass.
6) Just because the JV is for $40mm in return for about 1.3 billion in shares doesn't mean that phot needs to use all that money and issue all of those shares. If the deals are as lucrative as they say they will be then they may not need to use all that money.
So, it is my opinion that it is imperative that we vote yes on the A/S increase. I know that we are taking a little bit of a leap of faith, because we have yet to see the structure of a gift contract and how lucrative it will actually be, but at this point management has given us no reason not to trust them on the best way to run the business.
A yes vote may drop the pps a bit, as those who are not familiar with the situation will sell, because they think it will mean dilution without a benefit to shareholders. I think that drop will be short-lived because phot will then be able to deliver gift news that will be bigger than anyone is imagining.
A no vote means photo has to go back to the drawing board to secure financing. I think this will be far more detrimental to the phot pps, because as I have outlined above it is not a very interesting company without the gift program. It may also cause them to lose very lucrative contracts that will help grow the company and grow the pps. It would also mean they would not be able to release the details about gift contracts, because they wouldn't have the finances to support them.
Therefore, IMO it is a much better scenario for both the company and shareholders to vote yes on the A/S increase. Don't be emotional and let the recent pps drop or the fact that we haven't had gift news yet affect your decision.
