ST Systems [NEX: SYT.H] has largely caught up with the filing of its financial statements, and there has been lots of catching up to do for the company. The annual report for fiscal years 2002 to 2005 [PDF file] has been filed, as has the annual report for FY 2006 [PDF file]; one Management Discussion and Analysis filing [PDF file] covers these annual reports. The reports, which were audited, received unqualified opinions from the auditors.
The four-years-in-one report shows a slow but steady drain in cash, which continued in FY 2006. Thanks mostly to a large issue of convertible debentures, ST Systems had a working capital deficiency of more than 2 million dollars for each of those years; it increased at a faster rate than the decrease of the cash due to increases in both the current part of the debentures outstanding and accounts payable. Book value was below zero and shrinking steadily too. The per-share loss for all five years was 2 cents. The number of shares outstanding did not change at all in those five years. The increase in the amount of the convertible debentures is explained in Note 3 of both annual reports as being caused by accrued interest on them as a result of ST being in default upon maturity. Those debentues are secured "against all of the present and after acquired property of the Company," with respect to both interest and principal payments.
The M D & A begins by recounting the history of a company whose only revenue generator, wholly-owned subsidiary Sable Systems, went bankrupt in 2001. ST has been suspended since the first of two cease-trading orders were issued against it in June 12th, 2002. (The second was issued on July 19th of '02.)
Two interim and unaudited statements, for the first and second quarters of FY '07, have also been filed, along with accompanying M D & As for each. The financial statements for the first quarter, ended March 31st [PDF file], show that the cash drain has largely been staunched. ST Systems had cash and cash equivalents of $134,751 as of March 31st as compared with $136,910 as of December 31/06. Accounts payable and accrued liabilities increased, though, as did the current amount of those convertible debentures, which expanded the working capital deficiency from $3,176,030 to $3,261,781. Book value kept shrinking, from -19.3 cents/share to -19.8 cents/share. The net loss for 1Q '07 increased to $85,751, or 0.521 cents/share, from $77,190, or 0.469 cents/share for 1Q '06. The cash flow statement explains that the decrease in cash is all due to operating activities. As the M D & A for 1Q '07 [PDF file] makes evident, the company has been kept afloat largely through accruing laibilities to its officers.
The cash kept going down, at a somewhat greater rate year-to-year, in 2Q '07 according to the interim unaudited financial statements for that quarter [PDF file.] Cash went down to $117,968 as compared with $136,910. The working capital deficit stood at $3,342,509, as compared with $3,176,030 as of 2Q '06. Book value decreased to -20.9 cents/share, as compared to -19.3 cents/share in 2Q '06. Even though the net loss for 2Q '07 shrunk to $80,728 (0.491 cents/share) from $97,190 (0.591 cents/share) in 2Q '06, a decrease of $3,943 in accounts payable and accrued liabilities caused the cash to shrink at that greater rate. Despite the shrinking in cash, interest income increased from $1,112 in 2Q '06 to $2,194 in 2Q '07. There was no revenue except for that interest income. According to the M D & A [PDF file], ST Systems is "currently undergoing a financial restructuring plan, upon the completion of which it will actively pursue new business opportunities." With regard to the quarterly loss, it states: "As the Company had no active operations and was in the process of being restructured during the period between 2005 and the second quarter of 2007, the losses are mainly attributable to accumulating interest on outstanding liabilities."
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