$UNIS - A New Shilling errr Seeking Alpha Article $UNIS - What is amazingly apparent from the articles that have come out from Seeking Alpha is that they have become simply a tool for shorting groups to scare the bejeezus out of individual investors. While there are a lot of stocks that deserve that type of negative attention, these shorting groups don't care. Seeking Alpha won't let compensated IR people post articles on companies they represent, but they clearly don't have a problem with shorting funds paying for articles to third parties. Not sure where the distinction lies as long as the information is disclosed, but clearly the shorts have used this medium to its best advantage. The worst part is that these articles continue to get legitimized because they are posted to stock symbols by Yahoo Finance and other sites. Giving these guys credibility potentially damages the shareholders and the company.
So it is no surprise that this latest Seeking Alpha hatchet job is appearing this morning. Based on the 4C filing, which shows a significant increase in cash receipts for the quarter, very significantly, yes redundant, reduced negative cash flow, and the likelihood of a 10Q, being released today, that will show a significantly reduced loss as well, based on my observations of the 4C, it will be the last time Shorters have a chance to discredit the Company in any way and get out of their positions. The latest commentary show how easily these guys will manipulate facts to support their case. For example:
The author states, "Before I get into the extremely generous assumptions I've used, the model, and the outputs, I have to address something that no one seems (to want) to talk about. In the notes to the firm's financial statements from the last 10-k, we can see that the firm has (clearly) generated operating losses for the past many years, which generally creates a deferred tax asset. Without getting into the nitty gritty details, accounting standards require management determine if there is >50% chance that some or all of these deferred tax assets will be able to be used before expiring (20yrs for carryforwards). If so, the firm has to reduce the value of the DTAs with a valuation allowance by the amount (or %) they think will be realizable. Unilife management has determined that not only is there >50% chance some of the operating losses/deferred tax assets will not be utilized, but that exactly zero % will be. For those who were wondering, this is why a firm with persistent losses has no deferred tax asset on the balance sheet. UNIS management itself has determined that they will not be able to generate future pre-tax income to take advantage of ANY of the losses generated thus far. Let me restate: UNIS management may tout current and soon-to-be announced revenue generating deals all they want, but when push comes to shove, they don't expect to generate operating profits in the future. The question that immediately comes to mind is, "if management doesn't expect the company to earn profits, why should I expect it to?" The answer is simple: You shouldn't.
I highlighted this particular section because lets face it, nitty gritty details are something you and I just wouldn't understand would we? Well if you really want to know why Unilife has chosen to handle their DTAs this way, snce the Company has a twelve year history of losses, they are taking a very conservative accounting approach by not recording a deferred asset for the potential recovery of loss carry forwards. Any recording of such an asset would essentially represent a projection of future income that shareholders or potential shareholders may choose to rely upon in making investment decisions. By not recording this asset, the Company avoids that projection for now and the potential liability it might create if shareholders or potential shareholders relied upon it and it were incorrect in value or timing. Most smart companies won't record this asset until they record their first profitable year when the potential for liability goes down substantially and use of the asset is far more likely and predictable and the actual timing of the use more predictable.
Furthermore, I asked an accountant and I got the following response: I would suggest that the explanation is even more simple than that. Under the accounting rules you need verifiable objective evidence to recognize a deferred tax asset. In this case the verifiable objective evidence have been incurred significant historical losses. The projections of future income are by definition subjective and not verifiable. You cannot overcome verifiable objective “negative” evidence (losses) with subjective “positive” evidence (future income). There is not an accountant/auditor that would recognize this as a deferred tax assets. It’s not so much about being conservative as it is just correctly applying the accounting rules. The disclosure language that the Seeking Alpha author is referring to is the required language that every company with losses has to use because nobody can “guarantee” future profits so again by definition it is less than 50% likely.
Once again the shorts are desperate and if you realize that they will say pretty much anything to help them out of their situation, you should wait to hear what the company says in the next conference call before making a decision. Its coming up so you won't have to wait long. Posted 1 hour ago by Stuart Fine
UNS Price at posting:
90.5¢ Sentiment: ST Buy Disclosure: Held
