Up Up and Away

This market is doing extremely well right now. I feel like everyone is going to be wrong about the Fed though and the market will be dead by March. In the meantime, I have a short term idea. Tomorrow at some point in time during the day I am going to short CAMD. When I wake up on Friday I am more than likely going to cover that stock assuming it acts accordingly. CAMD is not a good company. It has a mid quarter update in which I suspect it will say something to the effect of: "We are not a good company." Then the stock will go down. This is a trade. Keep it that way. Cover no matter what.

People evidently are very attached to CTT. Here are a few reasons why I would never own the stock looking purely at their press release.

Technologies, Inc. (AMEX: CTT - News) today announced a net loss of $0.3 million, or $0.04 per share, for the first fiscal quarter ended October 31, 2005, compared to net income of $1.0 million, or $0.14 per diluted share, for the quarter ended October 31, 2004.

The company doesn't make any money. Which always isn't a bad thing except they used to make money. Not a sign you want to see in any company you own. There are too many good companies out there to worry about crap like this one.

Total revenues for the quarter ended October 31, 2005, were $1.4 million, compared to $2.4 million in the same period of the prior year, a decrease of 1.0 million, or 44%.

Yes I love accelerating revenue growth. However, in this case its accelerating the wrong way.

Prior year results included $0.9 million for a legal award, including interest, and $0.7 million from a stock dividend received from one of CTT's investments.

OK OK maybe I was a bit too harsh on them with the revenue comment. Apparently none of last years revenue was legitimate.

The increase in expenses occurred principally as a result of $0.2 million of legal expenses incurred to defend the Company against two complaints filed against CTT by the Company's former President and Chief Executive Officer.

A history of shady executives is never a good sign. It is often too hard to change the culture of the company. Look at Nortel. Also look at the amount they spend, that's nearly 10% of revenue. Litigation of this sort is a clear signal to stay away.

The stock has a 30 mil market cap. Why touch something so illiquid? Wait for at least 100 mil market cap companies to hit your screens.

Look at this though: Cash & Equiv - 13,681,685 - Well at least you only have a 50% downside from here. Retained revenue growth is good though. SG&A skyrocketed. Poor cash flow this Q but normally strong, that's a good sign. The company can play with their earnings (if they had any) due to the structure of the business. To be honest I don't think they actually make any money. Its all settlements or "interest" from settlements. Good lawyers though. Look at the list of lawsuits this company is involved in. Do they even have a core business that they focus or is this a law firm?

Here is a lesson for you all:

We earn revenues primarily from licensing our clientsÂ’ and our own Technologies to our customers (licensees). Our customers pay us royalties based on their use of each Technology, and we share the fees with our clients. We determine the amount of royalty revenue to record when we can estimate the amount of royalties we have earned for a period, which usually occurs when we receive periodic royalty reports from our customers listing their sales of licensed products and the royalties we earned in the period. We receive these reports monthly, quarterly, or semi-annually. Since reports are not received on the same frequency, revenues will fluctuate from one quarter to another. In addition, revenues will fluctuate from quarter to quarter due to normal fluctuations in revenues of our customers, the granting of new licenses and the expiration of existing licenses, as in the normal course of our business, patents expire and revenues generated one year may not recur in the following year.

This is a text book loop hole for a company to manage earnings. Its called aggressive revenue recognition. Tough to prove but this company seems like it would have no problems using tactics like that.

Directors fees and expenses increased $78,000 due to an increase in the annual premium for our director and officers liability insurance, an increase in directors fees due to an increase in the number of meetings held, and an increase in the annual stipend paid to the Chairman of our Board of Directors to recognize the additional responsibilities and time demands of the position.

Do they really deserve that for driving the stock price into the ground?

Related Party Transactions
#1
Our board of directors has determined that when a director's services are outside the normal duties of a director, we should compensate the director at the rate of $1,000 per day, plus expenses (which is the same amount that we pay a director for attending a one-day board meeting).
#2
During the three months ended October 31, 2005, we incurred $1,147 of costs, including expenses, (principally travel, reported in personnel and other direct expenses relating to revenues) related to consulting services provided by one of our directors.


#1 = Bad
#2 = Not so Bad

OK I am stopping there because I am tired. Sorry about not proofreading this. I couldn't stand to go back over it. But in conclusion: I just tried to outline my takeaways from the press release and the Q. I could do much more. This is not a good company although I am convinced thatthis isntt more than 30% risk to the downside. Although I fail to see positive catalysts. Would I own it here: NO, at $3.00 its worth a look. At $2.00 its a screaming BUY (it wont get there though...damn).