Tant,
Copied below is a note from the fianncials:
9. LOAN RECEIVABLE
During the fiscal year ended September 30, 2009, the Company entered into a loan agreement with another
company. Under the agreement, the Company agreed to loan that company a total of up to $6,000,000. The
money loaned bears interest at Prime plus 4% per annum, compounded daily. Both principal and interest are
payable upon demand. The borrower granted the Company a general security over all of its present and after
acquired personal property. On September 30, 2009, the borrower had drawn down $722,331 on that lending
agreement.
Looks OK on the surface. However, the effect on the economic life of ISM bothers me. It looks like ISM has a burn rate of about $1,000,000 per month. With about $24M in current assets, this loan ties up about 25%, and in effect shortens the economic life by about 6 months.
At some point potential buyers are going to decide to wait for distress to set in.
Wild