US Energy posted its numbers early today for the June quarter, and they were pretty much as expected. The 10Q is that of a development stage company making the transition to a commercially viable entity.

The top line was a fledgling $1/4 million in revs- not much to talk about. The company boasts that top line improved by 624% over the previous year, but it still does not amount to much of anything.

USEI has notched about $2 million in losses through the first six months of the year, and most of it is non-cash.

Numbers should improve dramatically in coming quarters as the company begins to deliver on the numerous major contracts it has landed over the last few months. They start delivering on 1500 systems to GreenGas in Thailand in September. 2000 systems for Truckgas in Europe are slated to being delivery early next year. The GM OEM arrangement kicks off in December.

Furthermore, I don’t believe there was any contribution for acquisition Automated Engineering corp in Q2. The transaction closed on June 15, so there would have been little or no contribution to the top line numbers.

Here’s a current chart:

The stock has bounced off an extremely and absurdly oversold condition. I’ve circled what I call the “easy money rally”- the move off that level was just an oversold bounce.

As usual, the stock pulled back to the standard 61.8% retracement level, and climbed again.

With the market becoming more favorable everyday, higher levels seem likely. Gains from here will probably be won with corporate developments, many of which I believe are still ahead. Once this consolidation phase ends, the next volume surge should take us to a higher level than the last surge.
This one is a great speculation that should keep improving for the forseeable future. Continue to accumulate.

Comments and questions are welcome.

For those who are still following the TLPE situation, quarterly numbers came out today, and they were hardly what the company forecast last year, but nevertheless quite healthy.

TLPE, like NWKI, has also entered into a debt restructuring that is favorable to shareholders. However, unlike NWKI- there’s still has a conversion feature.

Revenues for the quarter were $6.5 million, up from $563k the previous year. Earnings from operations were about $250k, so they continue to run a profitable operation.

The number of shares I&O increased from 86 million to 110.5 million during the quarter. If the financier has been converting debt to equity and selling the shares, that would help explain both the additional shares I&O, and the recent swoon in the stock price.

According to the 10Q filing, about 1.85 million shares have been converted from debt to equity in the last six months. If it has been done over the last two months, it would help explain the consistent selling pressure on the stock.

This has proven to be another easy money situation- the stock has bounced from the new all time low of $.14 to about $.20 this week.

I don’t have a relationship with management on this one, so I can’t get answers to questions. However, comments and questions are welcome. I’ll try to give accurate answers.

NWKI bounced off a severely oversold level in conjunction with the latest quarterly earnings report. I don’t know if the market felt the company was headed for problems, but the latest quarterly report suggests the numbers are definately headed in the right direction.

NWKI delivered $5 million in revenues and about $1 million in gross profits Q2. This suggests the company is now delivering at a $20 million top line run rate.

The $1 million gross profit was not quite enough to cover the overhead. Total operating expenses were about $1.1- there was a net loss of about $100k for the quarter.

Other operating expenses were over $600k, and no doubt there were some non cash items included in that category. Therefore, it is probably safe to assume that the company probably functions at a cash flow break even or slight positive at the current level.

Here’s the good news: Revenues improved from virtually nill to the current $20 million annual run rate. Furthermore, over $9 million in convertible debt was restructured into $7.5 million in non-convertible debt. Therefore, the threat of massive dillution from financing no longer exists for shareholders. There are about 30 million shares I&O, and that number should remain static.

Therefore any growth from this level should turn the company profitable if there are no major increases in SG&A, and the margins remain about the same.

For those who own or are considering owning the stock: The current market cap at about $.35 is about $10 million- Enterprise value (add in the debt) is $17.5 million. Against a backdrop of $20 million in annual sales and closing in on profitability, it seems there is significant upside from the current oversold level.

Here’s the chart as of 9:00 Pacific today:

This is what I have been talking about concerning the August buying opportunities. This is easy money. These stocks can drift down for months on very light volume, and then rebound quite rapidly. Unlike the end of May when I suggested selling, August is the time to accumulate.

I love this one for higher levels. Comments and questions are welcome.

I thought it would be useful to look at a chart in the action of US Energy today, as the stock is enjoying a strong week of renewed interest as demostrated by the volume.

Last week USEI only traded above 100,000 one day during a five trading day week. So far this week here are your volume totals: Monday- 84,000; Tuesday- 232,000; Wednesday- 863,000; Thursday (11:00 Pacific)- 441,000. As you can see, based on these volume numbers interest is return to the stock as it climbs from an absurdly oversold level.

Yesterday $.24 was big resistance. There seemed to be an unlimited supply coming from two market makers.

In checking with the insider trading tables, it became evident where the likely supply was coming from. Back in June two different entities filed to sell about 1 million shares. I spoke directly to the CEO and learned that both parties were shareholders going back over three years ago- long before his involvement. Neither are true “insiders”- just outside investors who have nothing to do with management.

If those filings were the source of the selling, my guess is the last couple of days volume cleaned them out, and the stock could now be positioned to make another move up.

Here’s a look at the chart:

Although it is not easy to see as I have put up a multi month chart, I circled the recent surge in volume on the lower right. As you can see from the price movement on top, the stock has kind of stalled at the $.24 to $.25 level.

However, it appears to me that the sellers are about exhausted, and we could see the next leg up if the volume holds up for a few days more. If it doesn’t, the stock is likely to pull back a penny or two. We will see.

Regardless, I believe there will be more fundamental developments coming down the pike which could fuel higher levels. Clearly, the worst of the summer sell off is behind on this one, and the company is earning shareholder loyalty with performance.

Comments and questions are welcome.