OK---MBA Holdings Inc (MBAH.OB)
company website (www.mbadirect.com)
Quarterly Revenues remains steady (at about $5M per year) while operating expenses are dropping and net loss is in a steady trendline down which confirms what I was told by the company. In other words, they said they are moving towards profitability and if the quarterly trend continues it may be next quarter they start to book profits and send this stock much higher. Based on their increase in relationships with major insurance companies, the expectation is reasonable now that their client acquisition costs are dropping. Tapping into existing client pools of major companies is more cost efficient than trying to directly market yourself and that is what MBA is doing. Combined with their indication they are in serious negotiations to acquire another company with an already profitable bottom line they think will put them into an immediately profitable revenue position and you have a very cheap entry into an insurance company setting itself up for a growth spurt. They said this acquisition is on the table now, so that means if we hear news soon and they confirm that the numbers turns them profitable or very close to it, that means this quarter the stock will take a decisive turn upwards, probably above 0.20 for good.
I recommend reviewing the company website (www.mbadirect.com) once again since you will see they are highly operational. They have a load of customer testimonials that indicate they make timely payments on claims which is a good indication of liquidity and solvency. I say that, but I am not entirely certain if they provide the claimants their monies and then are reimbursed by the insurance carrier, so I will try to clarify that for the future. For a better grasp of their business model and how they are able to leverage their contractual relationships with the big insurance companies, read this excerpt from the 10Q:
"Revenue Recognition
The Company receives a single commission for the sale of each mechanical breakdown insurance policy ("MBI") that compensates it both for the effort in selling the policy, and for providing administrative claims services as required. The Company has no direct liability for claims losses on MBI. It acts as the issuing insurance company's agent in these transactions. The Company apportions the commissions received in a manner that it believes is proportionate to the values of the services provided. The revenues relating to policy sales are recorded in income when the policy information is received and approved by the Company. The revenues related to providing administrative claims services are deferred and recognized in income on a straight-line basis over the actual life of the policy.
A vehicle service contract ("VSC") is a contract for certain defined services between the Company and the purchaser. The Company reinsures its obligations by obtaining an insurance policy that guarantees its obligations under the contract. In accordance with Financial Accounting Standards Board Technical Bulletin 90-1, " Accounting for Separately Priced Extended Warranty and Product Maintenance Contracts", revenues and costs associated with the sales of these contracts are deferred and recognized in income on a straight-line basis over the actual life of the contracts."
It is definitely true that the company must continue to work hard for its income as it is a service administration type business. I've been told they are very actively working on building further income producing relationships in addition to the aforementioned acquisition. The 10Q definitely shows it is an active business with hurdles to clear to achieve profitability, but one of the items that struck me as a very good building block was:
"The Company does not have any outstanding debt or long-term receivables. Therefore, it is not subject to significant interest rate risk."
This is important to note as they are an OTC with significant revenues and they are not negatively leveraging themselves into a toxic debt situation like so many other companies. Whereas this is a bread and butter business, many OTC companies with the latest gee whiz idea hock themselves to bad financing deals in order to grow and most of them don't make it out of the pit of debt they dig for themselves. With MBAH, the situation seems more direct and and achievable on a real world basis in that they have a real income producing business and they can pay their bills while they groWW
(Voluntary Disclosure: Position- Long; ST Rating- Strong Buy; LT Rating- Strong Buy)
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