Small Cap Network Blog

With a handful of newer companies to cover now, it’s time to clean out the closet (so to speak) and officially drop coverage on some of our older names - just so we can stay focused. There are only two we feel we need to pare right now….Web2 Corporation (OTCBB: WBTO), and Siena Technologies (OTCBB: SIEN).

Web2, despite a nice run up to $2.47 in December, could never really draw an interested crowd. Since peaking then, the stock has walked all the way down to a recent low of $0.95. Granted, shares are currently trading at $1.27 - pushing off of that 95 cent level. Perhaps it’s support. We did, after all, use that level as a springboard in November before the December rally.

The thing is, we just don’t see enough gusto to say the buyers are interested again…..not that they ever really were. Perhaps it’s because they’re now several weeks behind on their annual filings. What’s up with that? We don’t know exactly, and we’d prefer not to find out what it is the hard way.

Note that we’re putting WBTO in our past while it’s still within our trading entry/exit parameters. Our target was/is $3.79, while we suggested a stop of 89 cents. We’ll leave it up to you to decide which of these is likely to be found first, though we’ll also mention you can adjust either as you see fit. 

Siena easily has one of the coolest race and sports book technologies any casino could ask for. Plus, the company can basically create any sort of audio/video technology you could imagine. More than that, we think eventually this company could be great. However, it just doesn’t seem like now is the right time.

One of the key issues we see is - despite being ultra-cool - the market for what they do might be fairly limited. And in Siena’s case, that problem is augmented by focusing almost exclusively on opportunities in Las Vegas, where they’re based. Maybe if they could branch out and do other things it would open a few more doors. Until then, we’re going to move on to other ideas, after having it on our radar since April of last year.

That said, if you have any final thoughts or parting comments/observations about these two stocks, please post them here. And, if anybody out there ever has any worthy news to share on WBTO or SIEN in the future, feel free to let us know.

Maybe you’ve already heard, but if not, Siena Technologies (OTCBB: SIEN) plans on restating its financial statements for the first three quarters of last year. Before you go jump to any conclusions usually associated with the ‘R’ word……

We don’t really think this is a big deal. And, it doesn’t look like the rest of the market does either - SIEN is flat for the day so far. It’s not a big deal because revenues and gross margins won’t be changing. The only thing that’s different will be the addition of a non-cash option expense.

It’s primarily one of those things where an issue didn’t become clear until after the fact. The company proactively addressed the issue, and wants to make sure they’re being fair by staying transparent.

For more details - and to get the specific dollar adjustments - click here.

Close followers of the Small Cap Network Newsletter may have already realized Siena Technologies (OTCBB: SIEN) traded under our suggested stop level of 21 cents last week. It hit 20 cents on Friday, March 16th.

So, do we give up on SIEN then? NO! Like we said in our most recent Market Wise column, never confuse a company with a stock. We still believe in the company’s potential, and we still think - eventually - the stock will reflect that potential. However, the chart simply said now is not the right time. We plan on keeping a very close eye on Siena’s shares, scouring for the point in time when the rest of the market sees what we see. Maybe it will be tomorrow, or maybe next month. Who knows? Either way, we still feel the idea deserves to stay on your radar.

And for the die-hard believers, this deep low may be the ideal time to scoop up some shares - when nobody else seems interested at all. Talk about a bargain! Interestingly, though we just hit 20 cents last wee, we also seem to be finding support AGAIN around 22 cents. Could that be a floor?

Siena Technologies (OTCBB: SIEN) announced this morning they were able to undergo a major restructuring of debt – a move that will save them nearly half of a million dollar in debt service payments this year. Aside from the time frames being extended on a handful of loans, lower interest rates were also negotiated.

The end result? Try about a $40,000 improvement in monthly cash flow. We don’t think the new financial flexibility could have come at a better time for shareholders…right as the company seems to be ‘turning the corner’. We suspect having a greater ability to make capital investments, hire talent, promote, or whatever, is going to have a profound effect in accelerating the company’s growth (not that it needed much help to begin with).

Two of the loans, totaling a little over a million bucks, had their last payment date extended from September of 2008 to September of 2010. The monthly obligation from those two loans was reduced by $31,000. The other loan - $a 319,000 note - was going to cost $10,000 per month in debt service this year, and $15,000 in debt service next year. Now the debt service has been fully delayed until September of 2008, when a balloon payment will be made to pay off the loan.

We think this is a big deal, particularly for shareholders. While the net cost of the debt won’t go away, this is a big step towards quarterly profitability.

For perspective, through their third quarter, Siena had pulled in $15.8 million in revenue, and had lost $2.5 million - so far - for the year. Both figures were drastic improvements over the previous quarter as well as the same quarter a year earlier. No word yet on Q4 results, but assuming they stay on this pace, we’d say 2006’s official sales of roughly $21 million and perhaps a $3.2 million loss will be vastly improved - the restructure will essentially shrink a $3.2 million loss by 15%. Not bad, but when you pair that up with the company’s sustained top line growth and diminishing (relatively) expenses, what we feel you have is a light at the end of the tunnel.

From our point of view, one of the best times to own a company is the point in time when they become viable - not after the fact. It may not happen tomorrow for Siena, but we do think it’s in their future. The uncanny part is how nobody else seems to have taken notice…yet. Oh well, that’s just one of the benefits we offer our readers by staying intimate with a company over time - we can pinpoint when we feel the stock is ripe. We think this may well be one of those times.

For more on the debt restructure, click here.

What’s one of the best ways to get some serious high-quality publicity? We think associating with a high-profile name like Panasonic would sure be one good way. That’s exactly what Siena Technologies (OTCBB: SIEN) will be doing in a couple of weeks. In late February through early March, when the Panasonic Company of North America plans to promote their latest DLP and LCD projectors in Las Vegas, Nevada, they’ll be using Siena’s Race & Sports Book system as the test subject, so to speak. 

It’s Panasonic’s show; they’re fronting for their own products…..large-venue projectors, to be specific. However, we actually see Siena being the bigger beneficiary here. See, Panasonic is putting on the display in Las Vegas, presumably to open a few doors in the quickly-growing sports betting segment of the casino business. However, they chose to use Siena over anyone else. You think that speaks highly of Siena? We do, considering there were plenty of other options.

The reason we think Siena could really benefit, though, is that Sony may be able to attract a few more eyeballs that Siena may not be able to get in front of otherwise.

By the way, these systems are pretty cool. If you want to see a couple of shots, be sure to cllick here and review our December 18th edition when we featured the system’s potential in detail.

And the potential numbers? We can’t really say, but if only a couple more complete systems are sold as a result (which isn’t out of the question), we’d call it a windfall for Siena. These are big Race & Sports Book setups, each to the tune of $2 to $3 million dollars. For perspective, Siena sold four last year, raking in $11.6 million in the process. If Sony can only spark a sale of one or two extra systems in 2007, you’re looking at a major improvement in the top line.

By the way, Siena just raised another $1.2 million in financing….through the sale of stock….to company management. Needless to say, we think that’s a pretty strong endorsement from the folks in the know (we like management that eats their own cooking). So, if you’re looking for a strong-potential idea, we feel SIEN is a good one.

For more details behind today’s news, click here.

Yesterday afternoon we learned Siena Technologies (OTCBB: SIEN) has put another $1.2 million in its war chest. The funds were raised via a private placement among senior managers and qualified investors. The terms of the deal were for every share of common stock sold, there was also a warrant included to buy another share. No specifics were released on the issue price or warrant strike, but we’re assuming it’s something at least close to the current trading level of 28 cents.

As far as we’re concerned, it’s money well spent…..or it will be anyway. Back on December 18th we highlighted the new success Siena was enjoying, suggesting their efforts may also end up benefiting shareholders. That opinion hasn’t changed. The company is really starting to put up some bigger numbers, and we think the stock may be in the ’sweet spot’…..the time between the re-invention and profitability.

By the way, CEO Jeff Hultman will be interviewed by MN1.com on Thursday (Feb. 1st) at 11:30 AM CST. We suspect he’ll be talking about the company’s past, and current/future initiatives. It may be a good chance to learn some things outside the normal media-tweaked fare. The interview can be accessed at www.mn1.com.

Here’s a link to the full press release.

We got a very good question from one of our readers a moment ago regarding float and outstanding shares information about our profiled companies. For the sake of brevity we tend to not add that data to the newsletters, as it can be cumbersome to read - as well as write - if it’s not part of your analysis (and we’re not saying it necessarily has to be). All the same, we completely agree it could be good stuff to know if you’re mulling over a major stake in the stock. In any case, here’s the question……

I will consider your recommendations if you will reveal, for each recommendation, number of shares outstanding, number in the float, and therefore current market cap. These do not normally show up on ticker data from Yahoo and others on these very small cap issues.

The e-mailed request was in response to Monday’s Siena Technologies (OTCBB: SIEN) profile, so we’re assuming that’s the issue this reader is most interested in. In response to the question, Siena’s float is 17.67 million shares, with 34.48 million shares outstanding.

In this case, the information was posted on the Yahoo Finance site…..on the ‘Key Statistics’ page for Siena (look in the ‘Share Statistics’ column on the right hand side). A spot check of some of our profiled companies reveals that most of our stocks do indeed display their float and outstanding shares data there.

That being said, we also agree with the reader that the data may or may not always be there, particularly for a small company. Of course, the companies we present are also scrutinized by is pretty well…..and the ones that make the cut generally have pretty strong reporting standards. So, we’re not entirely surprised to see it on the Yahoo Finance site (although Yahoo is the party going out and gathering the data if it’s available).

The only caveat is simply that Yahoo’s data might be at least one quarter old. That’s not a big deal though, unless there’s been some sort of major new public offering, split, or repurchase. Otherwise, the data should be plenty accurate enough to use.

As for adding the information in future editions of our newsletter for our other companies, we’ll definitely think about it. if it doesn’t appear directly in the e-mail newsletter, we’ll try and blog the data as it becomes relevant. Thanks for the suggestion!

Not that they desperately needed it, but Siena technologies (OTCBB: SIEN) just garnered a million bucks worth of working capital. Procedurally speaking, it’s no big deal - small companies sell stock to raise money all the time. And with Siena doing as well as they’ve been doing in their post-Kelley-acquisition world, it’s not really a concern to us at all. What we found interesting - in a good way - was where these investors came from. Apparently, they were all accredited investors, and already shareholders. Although it’s not ‘institutional’ in the traditional sense, it’s still a subtle endorsement by so-called ’smart money’. If they already own some of the stock, and are willing to come back for another big chunk of more, then they probably see something they like. That’s a good sign. 

For the full details, click here. 

Siena Technologies (OTCBB: SIEN) - the company we used to know as Network Installation - announced yesterday they had raked in $4.1 million in sales during their last quarter. Siena only posted $221,000 in sales during the same quarter (Q3) last year. Year-to-date, that brings the total revenue up to $15.9 million. Just for the sake of comparison, Siena only saw $5.9 million in revenue for all of last year. So yeah, the acquisition of Kelley Technologies seems to be working out pretty well.

Of course, the proof of the pudding is at the bottom line - earnings. How’d that go? Well, we think the company is on the right track. The quarterly net loss shrank to $627,000 - a vast improvement on the $1.9 million loss incurred for Q3 of 2005. The year-to-date (nine month) net loss is only $2.5 million….also a vast improvement on the $10.1 million dip into the red that Siena was sitting on at this time last year.

Our take? We think it’s an outstanding achievement. All too often we see a company make an acquisition which will add top line sales, but ends up expanding the bottom line loss (kind of like spending $2 to make $1). Not so with Siena. The Kelley acquisition has allowed this company to do more with less…relatively.

For complete details, click here.

As for the chart, from our point of view, the current trend is different than the rather bearish one we were facing last year and most of this year. Shares are back above the 50 day moving average line, and are also above a key long-term resistance line. And, this recent upward move follows the first instance in a long time where SIEN didn’t make a lower low. In August shares hit 20 cents before rallying back up to 50 cents. The following pullback only saw shares reach 25 cents before they started an apparent recovery effort. Getting past that recent peak of 50 cents is the next major milestone.

Don’t forget, SmallCap Digest offers free stock ideas and market commentary through our e-newsletter. Be sure to sign up today using the link in the top right corner…and don’t forget to respond to the confirmation e-mail. Or, add us to your RSS feed using the link in the left-hand column.

We first mentioned Network Installation (OTCBB: SIEN) was changing their name to Siena Technologies in a blog entry from last Thursday. At the time we didn’t know of any new ticker in the works, but we’ve now learned the ticker has indeed been changed….to SIEN. You may find that both (or neither) tickers work for your particular quote service. Be sure to give it a couple of days for all the data to propagate. We’ll get our website updated soon as well.

As for trading this company’s stock, nothing has changed - the company is still doing well, but the stock is still struggling. However, it’s also worth noting the downturn that plagued shares last year has at least turned into a flattened consolidation….perhaps this is a base that SIEN shares could build a rally on.

As part of a total corporate makeover - the one we’ve been logging here at the SmallCap Digest recently - Network Installation (OTCBB: NWKI) has decided to change their name to Siena Technologies. The company feels the old name is no longer descriptive of the new company, now that Kelley Technologies has been acquired, and after several of the old divisions have been dropped.

And, it may not be a bad idea. A rose by any other name may smell just as sweet, but in the market, a new name can be a clean slate - at least in investor’s heads. So in that light, we think the reinvented company will probably be better served by a completely different moniker.

And, since we haven’t looked at it in a while, here’s a chance to update you on what the new company is doing……

The new focus is two-fold. One arm is going to build and install sports book technology, primarily for casinos. And of course, being located in Las Vegas makes that business much easier to operate…where most of their customers are likely to be. The other arm is going to continue providing video, telephone, and data (broadband) technological and installation services to multiple dwelling buildings (i.e. condos and hotels).

How are the two division doing? Very well, thank you. As we reported in a September 7th blog entry, the sports book side of the company just completed $9.5 million worth of work for two major casinos. And, there’s another $6 million worth of business - via two giant contracts - scheduled to be booked in December of this year. Network/Siena also has completed (or will complete by the end of next year) at least $1 million worth of work for their voice/data/video business. So yeah, things are going very well.

If you missed the detailed look from August 15th, we encourage you to go back and read it….this turn-around story is getting really interesting.

No word yet on any ticker symbol change. It’s not required by the exchanges, although we would expect to see the company drop the old ‘NWKI’ ticker, since it’s a remnant of the old name. Switching tickers, however, can require a little more red tape than a name change. We’ll let you know if it does.

Don’t forget, SmallCap Digest offers free stock ideas and market commentary through our e-newsletter. Be sure to sign up today using the link in the top left corner…and don’t forget to respond to the confirmation e-mail.

If you’re not a believer yet, then we don’t know what it’s gonna’ take. Network Installation (OTCBB: NWKI) just released an update on the success of its wholly-owned subsidiary Kelley Technologies. Without getting into the details, just know that Kelley completed two contracts worth a total of $9.5 million. For perspective, last quarter’s revenues totaled $4.9 million, and the six-month revenue total as of the end of last quarter was $11.6 million. More than that, two more installations worth a total of $6 million are slated for later this month. Get the idea? Network Installation is back in business…big-time.

So, the turn-around picture we painted in our August 15th edition of the newsletter? Yeah, it’s pretty much shaping up like we thought it would for the company…and its stock. if you’re not familiar with Network and its story, be sure to go back and read our mid-August update. Also, be sure to keep the dollar figures above in mind as you read the story - it’s getting very exciting out there in Las Vegas.

For the whole press release, click here.

As for the stock, what’s not to like? NWKI broke free of a long-term drought, and has established a new base on the upper side of some key moving average lines. Right now 40 to 44 cents is the upper edge of the range, but you can sense this one is just aching to run now that it’s out of its rut.

Don’t forget, SmallCap Digest offers free stock ideas and market commentary through our e-newsletter. Be sure to sign up today using the link in the top left corner…and don’t forget to respond to the confirmation e-mail.

Back on August 15th we were singing a pretty positive tune about Network Installation (OTCBB: NWKI). After all, the company had just made a giant improvement in earnings and revenue, and a major debt restructure virtually eliminated all of the company’s potential share dilution. Better yet, Network was on track to repeat that performance in the future…what wasn’t to like?

Of course, if you were in a stock position before any of the news was released, then you’re probably still a little sea-sick. On the 11th, shares closed at 22 cents. On the 17th, they closed at 42 cents. On the 23rd, they closed at 32 cents. As of right now, they’re trading at 42 cents. That’s a heck of a lot of traveling for just a 19 day trip.

For those who can stomach the volatility - and even trade it - then congratulations…you did well. For anybody who is (understandably) hesitant to buy into volatility, or is worried the biggest piece of the potential gain was already reaped by someone else, then here’s your second chance. The stock has settled down now. All the would-be profit-takers, scalpers, swing traders, and nervous Nellie’s are pretty much done with their business, as the news has become a little stale. The volatility they tend to create is much less of a factor now. 

Left behind are the logical, rationale investors…which includes us to a large extent. And what do we see now? Just look at the chart. The stock survived all those wild swings, and has established a base around 33 cents. Back above the key moving average lines, and well above some significant resistance levels, we’d say it’s safe to get back in the water here. However, there’s still a little bit of lingering volatility, so you still want to be smart about your entry point.

On Friday, Network Installation (OTCBB: NWKI) released news of a major re-structuring of its debt - for the better. All we knew then was the convertible debentures and 5.7 million warrants owned by Dutchess were being cancelled, and replaced with a straight-forward, low interest rate loan. Of course, it was good news for shareholders even without any more details.

Today, however, the company released those details…and the new deal looks even sweeter for NWKI owners. While we’d love to be able to tell the story ourselves, this part of the press release sums it up about as nicely as anything could…

According to Hultman (Network’s CEO), highlights of the restructuring plan include:

• Removes potential for up to 50% shareholder dilution.
• $9.1 million in debt converted into $7.5 million.
• 5.7 million warrants retired.
• $900,000 payment due in September 2006 has been reduced to $780,000 at
  7% interest termed out over two years beginning in January 2007.
• All debt reduction was achieved without use of any cash.

Could you ask for anything better? A large piece of the debt was literally just wiped away, and the potential for a major share dilution was cancelled. And the cash cost for all this? Zilch. We had to read it twice to make sure we didn’t miss anything…and we didn’t. It’s just a great deal.

Click here to read the full press release.

As for the stock, the news is being well received. Shares are up 18% today (so far) on very strong volume, which has the potential to lay the groundwork for a longer-term breakout. Obviously now would be a good time to add - or add more - shares of Network Installation to your portfolio.

By the way, be sure to closely read the linked press release above. Jeff Hultman makes a subtle mention of strong 2nd quarter results, and a record-breaking first half of the year. The official Q2 results are not yet out, but the recent revenue and earnings trend for NWKI has been very positive. 

Don’t forget, SmallCap Digest offers free stock ideas and market commentary through our e-newsletter. Be sure to sign up today using the link in the top right corner…and don’t forget to respond to the confirmation e-mail.

As mentioned in yesterday’s SmallCap piece, here are some comments on NWKI. From Tuesday’s release: “Network Installation Corp. announced record revenue of $5,932,064 for the twelve month period ended December 31, 2005, a significant increase vs. $1,889,739 for the same period in 2004″. For all you math challenged types, that’s more than a threefold increase year over year. As well the Company’s order backlog hit $13 million. Nice. There was also a large non-cash charge taken but it’s apparent the forward growth is in place. Here’s the Chart: NWKI is trying to set up a double repo of the 3×3 DMA, but only the first leg has been confirmed with a recent break and close above the 3×3. Entry at this points favor the risk/reward scenario, especially if that second leg of the double repo completes soon. I would be remiss by not mentioning that the double repo has been attempted on a few other ocassions and has failed to confirm. We need a close back below the 3×3 and one more close back above to have confirmation. I’ll watch for it and report unless I miss it…. All in all, appears a reasonable accumulation at these levels and on dips as the biz plan executes and the revenues grow. The recent moves by the Company seem to be gaining traction quickly and the shares looked poised for higher ground. Trade Safely…