OCA (16)

Question
by: dongput 09/02/05 11:47 am
Msg: 37681 of 37781

I agree with you that Operation Cash Flow is good and positive. My two concerns, one is liquidation, which you have explained, the other one is the market. If the market goes down next year, how will the bear market impact OCA? During the bear market, the stock prices of lot of solid and sound companies with positive operating cash flow are decreaseing, how do you justify it?

Response
by: chfriend03 09/02/05 12:21 pm
Msg: 37682 of 37781

In a bear market, a stock worth $6 may trade at $5 or like (depending on how bearish investors get), unless there are more than average amount of negative news on the particular company.

As for OCA's business (Orthodontical practices), I do not expect a bear market.

OCA (15)

Why did the founder leave?
by: rainiereagle (29/M/WA) 09/01/05 09:10 pm
Msg: 37658 of 37781

The founder left the company and then set-up new ventures to compete with his old company. Not really a good sign. It's like seeing Bill Gates left MSFT.

Chfriend03, I agree with you that the legal trouble will eventually be over (in a year or so, or even faster), and this company appears to have the right infrastructure to come back at some point. But there are other fundamental problems we really need to discuss before commit any of our hard earned money to this thing.

1. Like I asked before, competition is actually catching up, OEC is one, others like Imagine Orthodontics cannot be simply ignored.

2. Any company internal problems??? Why did the founder leave? Why the insiders are selling huge shares even at $1.50 levels? Are the current management a group of dilligent ellite people that works for the maximum interests of shareholders with high level of integrity, or the other way around?

Actually, I have much much more concern on No. 2 than No. 1 - after all, the company can only be as good as its managers.

Response
by: chfriend03 09/01/05 09:53 pm
Msg: 37660 of 37781

The co-founders had some disagreements I guess. I do not know why the co-CEO was pushed out.

I am not worried about the competition. Besides, the two companies you mentioned have different concepts. OEC is a start-up and will be comparatively small. OCA has been around for almost 20 years. This business is capital intensive. It takes more than $350,000 to open a new office.

This is unlike technology --- where market share may shift quickly from one company to another. It takes years for an orthodontic practice to mature, as referral and word of mouth are important. There is no dominant "national brand", and State laws do not even allow such a brand.

Regarding "insider" selling, I think you are referring to the form 4 filing in June. These shareholders got in early this year. They are not really insiders (insiders mean directors, senior management or like).

I heard that any person or a fund that has 10% ownership of a company needs to file for form 4. They may not know more about the company than you or I. It is illegal for the company to feed any sensitive information to these big shareholders.

The main reason I post here is to communicate with other shareholders and to get more perspectives from doctors.

If you decide to invest in OCA, then you need to do your own due dilligence. I think everybody should.

OCA (14)

Competition to OCA
by: rainiereagle (29/M/WA) 09/01/05 02:13 pm
Msg: 37631 of 37781

Having read more than 100 msgs on this board, didn't see much discussion on the competition.

Who is the largest competitor to OCA? What are they doing right now to attract defecting/dissatisfying doctors to their network? What do they offer that OCA cannot offer (or vice versa)?

Response
by: chfriend03 09/01/05 02:22 pm
Msg: 37633 of 37781

There is no competition (in OCA's business model). These exiting doctors became independent.

Apple Orthodontix and OrthoAlliance were (smaller) competitors, but OCA acquired both of them (a big mistake).

OCA raised $200+ million (including that from IPO) to get to its presesnt stage.

OCA (13)

Question
by: vincent_sylvia2 (M/Switzerland) 09/01/05 02:55 am
Msg: 37606 of 37781

"Look at what the 3 million has already done to your viewpoint."

It seems I have an other expirience then you (but first hand as well).

Sometimes it happens that a CEO is believing in his company. Sometimes they are emotionally connected with a company. Sometimes they are to proud to give up.
However in the case of OCA the following points did influence my opinion:

I believe this company is in a liquidity crisis. I hope we agree on that?

I learnd from the last SEC filing that they try to refinance themself. I hope we agree on that as well?

It seems without reporting it is difficult to lend new money? Got this impression by watching the banks.

Some of the new lenders are experts in refinancing companies in truble. So they maybe can refinance OCA in the near future.

If the company is illiquid then they have to file C11/BK.

The CEO is able to give OCA some liquidity to come over this time until they can refinance.

He made his desision.

I guess I regard OCA rather from the finacial side. For me it looks you regard OCA rather from the legal side. And I agree with you there are risks on both side.

I believe the motivation of the CEO to lend money to OCA is rather a business motivation then a legal motivation.

Response
by: chfriend03 09/01/05 03:13 am
Msg: 37607 of 37781

OCA was making good cash flow up until the last filing (Q3, 2004). (Yes, they probably overinflated the account receivable or "intangible" or like, but not on amount of debt on credit line).

The CEO is only legally responsible for OCA's financials up til that point.

If a lot more doctors' exodus occured after Q3, 2004 as to make OCA's survival questionable, then I do not think the CEO is legally responsible for anything (because the company did not file anything for the period after Q3, 2004).

So the shorts' argument is not reasonable.

The CEO might be emotionally attached to the company. But, even that, putting $3 million of one's own money (even though he is rich) into a falling company is rare. I bet he's having confidence in the company. At least, in the CEO's view, the affiliates' exodus is not serious enough as to threaten OCA's survival.

OCA (12)

Question
by: hasta_la_vista_oca 08/31/05 10:45 pm
Msg: 37595 of 37781

<>

You really ought to take a business course before proposing deals. Shares of a publically traded U.S. corporation are not assessable. That means you can't call up the stockholders and tell them to send in $1 per share. It can't happen.

Now do you understand why everybody is throwing up all over your financial analysis of OCA? You have as much chance of understanding OCA as a frog sitting on a lilypad does of understanding the nature of the universe.

Response
by: chfriend03 09/01/05 12:35 am
Msg: 37601 of 37781

You are really childish! But I do not take your offenses seriously.

Issuing stock warrants to existing share holders is easy. It is like distributing dividend! OCA board can authorize it, or in some cases, this may need majority approval by shareholders (and it will be approved as such plan will give an immediate boost to stock price).

Stock warrants are the rights to purchase the shares (usually at below market price). More than 98-99% investors will excercise them.

These who do not have money to excercise can sell part of their shares in advance to raise the fund. As I said above, an announcement of such plan (of stock warrant issuance) would bring up the stock price by a good percentage. That is because most investors shy away from OCA because of the liquidity problem which can be cured by stock warrants' issue.

This has happened to another company that trades in US market. The company lined up a strategic investor to take up the warrants that were not excercised by (1-2% of) shareholders. Its stock price rose quickly right after the announcement of the board decision.

OCA (11)

Question
by: YRdoc 08/31/05 08:47 pm
Msg: 37589 of 37781

After OCA lost the Hobson case, other docs began piling on, alleging similar overcharges. I know that in an Ohio case, a Motion for Summary Judgment was awarded to the doc. The court found that OCA had not only overcharged, but that they breached their Fiduciary Duty in doing so. I believe that case settled shortly after without going to trial, which would have basically to figure out and award damages. I believe other suits based on overcharges have also settled in the doc's favor short of trial.

By OCA's own admission, further De Novo expansion is now dead, due to the banks' unwillingness to pour any more money into the situation.

Other than blind faith and a lot of hope, I don't see much positive on the horizon. But I'll also admit my biases, which are not exactly pro-OCA.

Response
by: chfriend03 08/31/05 10:32 pm
Msg: 37594 of 37781

The openning of "de novo" offices stopped in the second quarter, because OCA could not file timely financials (and this resulted in a default on the credit line).

The term loan was in the amount of $25 million, and OCA paid down $2.1 million every quarter since Jan 2003 (when the loan was awarded).

If OCA resolves the liquidity crisis, then it will continue opening of "de novo" offices.

Of course, the (new or old) lenders need to see OCA's financials before a decision is made.

Before the financials, one can only study OCA's past cash flow.

OCA (10)

Question
by: YRdoc 08/31/05 05:57 pm
Msg: 37577 of 37781

One of the two Texas suits involves 16 or so centers. The other involves 3 - 4 additional affiliates, and an unknown number of centers. I don't think OCA is going to let go of these situations without a fight. Unless, of course, the banks refuse to let them keep funding the litigations.

The simple solution would be to provide excellent service and charge a fair fee. In my experience, OCA would prefer to provide little service, overcharge, and then attempt to force docs who become satisfied into submission via the legal process. I've heard rumors of legal bills for OCA running $1 million plus per month. (They tried to stiff Jones Day alone for about $2.5 mil.) That money could go a long way toward helping the bottom line, as well as providing an exemplary level of management services.

But compared to mental giants like those in OCA's senior management ranks, what I do know? After all, I'm just a dumb orthodontist - a statement I'm sure would find wide agreement in their Metairie headquarters.

All MHO, of course.

Response
by: chfriend03 08/31/05 06:32 pm
Msg: 37580 of 37781

Of course, the 2 cases in Texas would settle, along the same lines of previous settlement in Texas. What is the difference between these two cases and the one on "Pen.. vs. OCA"? Any reason for any party to not settle?

As for the rumour of legal fees, that is way out of line. In fact, after the May settlement, by far the most of the innactive affiliates are not in litigation at all. I guess OCA should be talking to them on settelement before any lawsuit is filed.

I read from OCA's annual reports that:

OCA had 360 centers (not affiliates) at end of 1997.

By the end of 2000, OCA had 592 centers (after Apple Orthontix acquisition, but before OrthoAlliance acquisition).

From early 2001 to the end of 2004, OCA basically acquired and then lost the OrthoAlliance affiliates. I believe OrthoAlliance had 200+ centers, but from day 1 of acquisition, many affiliate were not onboard and they were innactive. The OrthoAlliance affiliates are usually mature and bigger compared with the other affiliates of OCA.

The OrthoAlliance acquistion was the biggest mistake made by OCA.

Here is a basic question to the shorts: If the affiliates were deserting as to threaten the company's survival, then why would the CEO put another $1 of his personal money (unsecured loan to OCA, in addition to the $2 million unsecured loan made in June) into the business?

I wouldn't if the business will be failing. I am sure that he is not doing charity.

OCA (9)

Question
by: tanqueray_tonic 08/31/05 01:26 pm
Msg: 37548 of 37781

>>The case vs. Hobson is ended.

No, it is not. Perhaps you need to keep abreast of it.

>>The States in which judges have ruled OCA's
>>agreements ilegal are very very few.

Yeah, only two of the three largest states in the union. (Oh yeah, Oregon as well.....) I take it you are a "size does not matter" type of guy....

>>And as the lawsuits settled in May 2005, you
>>will probably not hear too many more.

Again wrong. Granted that the Texas suit settled, but other groups are seeking the same (already decided) finding. Once that finding is (re)done, then OCA CANNOT operate in Texas as a matter of law. (I guess that is one reason why not many others would be filed, but you neglect that odd "nuance"....)

>>it is not OK if one cannot learn from its >>mistakes.

In Texas, one affiliate's contract was deemed illegal, and a finding of illegality was indicated for the core OCA contract. Yet, OCA continues to bully the doctors in TX. Is this an example of "not learning" that you talk about?

>>but it has corrected these problems.

Again, wrong. See above. Also refer to the Jone Day case where OCA has trouble not running afoul of legal sanctions by yhe court. My best guess is that OCA is one or two horseshit moves away from getting its pleading struck. (Does that fit into your "cannot learn" slot as well?)

My opinion, is that you fail to appreciate the legal ramifications of the cases, and you broad brush OCA's ham handed litigation stance as being productive.


Response
by: chfriend03 08/31/05 02:12 pm
Msg: 37553 of 37781

The Hobson case was ruled in Hobson's favor to get reimbursed for his attorney fees since OCA refused the doctor's offer to pay back OCA hundreds of thousands of dollars to OCA to exit OCA. There was also this corporate expense "overcharge" issue we have discussed more than enough.

It was a loss (in terms of attorney fee compensation) for OCA. Period. End of story as far as I am concerned. Well, OCA certainly could appeal, but as a conservative investor, I take it as a final verdict.

In California, the ruling was not exactly what you characterized. Besides, OCA does not have a big number of lawsuits in California.

OCA's operations did not stop in Texas after it settled the case (in which the judge made an unfavourable ruling). As for the other innactive practices, OCA could settle with the doctors. Again, there is no reason for the doctors not to return the cash they received from OCA. I have not read any case in which the doctors can refuse to repay back OCA's loan and cash received.

At the May 2005 settlement with 60 innactive affiliates, the loss to OCA's balance sheet was $6.1 million in "noncash charge" (charge to write off "intangible" etc.). However, the dollar amount of assets for (100 or so) innactive practices (as presented in OCA's balance sheet) was 30.+ millions as of Sept 30, 2004.


Say the assets of these 60 innactive practices have a value of $18 million (60% of 30.+ million) in OCA's balance sheet (rough estimates). As result of the settlement, OCA lost $6.1 million of this asset, but recovered the rest.

That means, OCA should have received some compensation (that could be future installment payments, or like, instead of upfront cash payment ---- very few people, even doctors, are expected to have that much cash upfront).

OCA (8)

Question
by: YRdoc 08/31/05 01:37 pm
Msg: 37550 of 37781

Yahoo has statistics on OCA, though I didn't notice a date - presumably it's September, 2004. Revenue was $401 million. I believe the corporate expense was supposed to run about 6 - 8% of income revenue in an office. OCA has only a very small amount of income from non-patient-revenue sources. Six percent of $401 million is $24 million. That's treated as a "center expense" which means the affiliate bears 60% or 50% or whatever his percentage is. But if I'm anwhere close, that's about $10 million of lost revenue to OCA. Those same statistics show a $14 million profit. And to me, that's a major dent in any profit they may manage to earn BEFORE the accounting restatement, which will almost certainly create a further decrease in profitability!

According to my information, your $7 million estimate for corporate expenses is 'way low!

Response
by: chfriend03 08/31/05 01:47 pm
Msg: 37551 of 37784

I got the figure of $4+ million from OCA's documents, and I believe it to be accurate. Besides, in making the decision to waive this expense (instead of just reducing it by a safety margin), OCA certainly believe the expense was not essential to its survival.

$24 million to run a corporate office is way out of line. I bet not every employee (including the secretaries) at corporate gets $100,000+ a year? What is the average wage there?

OCA (7)

Question
by: YRdoc 08/31/05 11:39 am
Msg: 37543 of 37781

The "facts" that appear on this board depend a great deal on a poster's point of view. I think OCA management truly believes that their problems are due to greedy, uncoooperative doctors. Many past and present affiliates truly believe that they were getting shafted by OCA. About the only people approaching objectivity are judges and juries, where OCA hasn't done really well as of late.

One item which has been largely ignored was the phase out of corporate allocations over 4 quarters, starting (as I remember) in quarter 4 of 2003. Under the old arrangement, the docs payed OCA's entire cost of running the corporate offices, including salaries, rent, and even corporate income tax. Losing this money has to be a huge hit to their bottom line, which we haven't seen since the end of Sept., 2004. Can they return a profit relying only on their 60/40 split of net operating profits now that they also have to shoulder their corporate overhead? (The arrangements with each office are different, but 60/40 is what they've presented in model contracts in the past.) That, combined with profit enhancing but overly aggressive accounting practices which inflate the paper profits, are going to have have an effect on whether or not they're truly profitable.

Oh, and there's the write down of assets acquired in the OrthAlliance deal which are now presumably at -0- following the settlement. Those who know the details of that settlement can't talk about it. But I'd be willing to bet that OCA's book value on those assets was a lot more than any settlement money received. In any case, there's no way to know until (or even if) they release accounting numbers.

If you believe in OCA, and want to invest, go for it! Personally, I'd be betting on the short side, which I understand isn't possible at present due to low share price.

And the "JMHO" is because OCA likes to sue people who point out negative things - factual or not - on the Yahoo board.


Response
by: chfriend03 08/31/05 12:14 pm
Msg: 37544 of 37781

As I wrote earlier, the phasing out of corporate expenses cost the company $4+ million a year. Remember phasing out of this expense will increase the profitability of affiliates, and doctors got 60% of the new (higher) profit and OCA gets the remainder. From $4+ million figure, you can in fact calculate the rough corporate expense per year ($4+ million divided by 0.60).

I certainly took it into my considerations. You are right, the process (of phasing out) started in late 2003, so it already affected OCA in 2003 and 2004.

When facing these kinds of (unprecedented) lawsuits, nobody can be sure until a verdict is read. OCA spent a lot of money in these lawsuits, and it is much more experienced now on how to deal with these "innactive" practices.

If one knows the outcome of a lawsuit for sure, then it would settle the case. If the law suit is unprecedented, then one would never know the outcome until it goes for trial. In this sense, OCA spent a few millions to learn a lesson.

In other words, the doctors had shouldered 60% of corporate expenses before 2003.

I think the total corporate expense is a little over $7 million a year, and doctors had shouldered $4+ million (in reduced profit at their respective affiliates).

The complete phasing out of this expense cost OCA $4+ million a year.

OCA (6)

Question
by: tanqueray_tonic 08/31/05 01:07 am
Msg: 37511 of 37781

What is your opinion on the summary judgement in California finding that the OCA contract violates the business and professions code?

Or, perhaps you would like to impress us with your analysis of the ND Texas case that found that the OCA contract violated the Texas Dental Practices Act? Do you think that the judge in the current set of suits in Federal Court in Texas will follow that case?

Or, what do you think of the Hobson case where the court found that OCA breached the contract when they "misjudged" the extra money that they applied to corporate expenses, above and beyond?

Or, what do you think of the hundreds of thousands of dollars that Hobson was awarded for attorney's fees? What chances do you see for that being vacated.

Just want to tell you, my "chfriend", there are a lot of things that you casually overlook in your analysis. Would you not agree that your pithy post detailing the "pay down" does not reflect any of those salient points?

>>I have spent some time in the past few weeks
>>in digesting OCA's financials

Are you also going to spend some time digesting news accounts of the opening of the 2004 NFL season as well, since your financial news is that old as well? Perhaps you may want to look into the upcoming Kerry-Bush election as well, especially since you are so keen on researchin year old facts.....

Btw, what do you think of the company's inability to put out numbers for a year? Do you find that as impressive as I do? Do you realize that every number and fact that you quoted is at least a year old?


Response
by: chfriend03 08/31/05 01:26 am
Msg: 37513 of 37781

Indeed, I am old style investor, and would go back to a few years before making a judgement. I do not invest in a company based on a few months' history.

I read all these judgements you referred to. My opinion is the same: the lawsuits have a few aftershocks. No big deal. Most of these who do not like to stay as OCA affiliate have by now become innactive with OCA. It is crowd mentality: if many file lawsuits then you would file too. A few more affiliates may want to buy out or to settle, then they would pay back the cash they received.

The States in which judges have ruled OCA's agreements ilegal are very very few. And as the lawsuits settled in May 2005, you will probably not hear too many more.

The case vs. Hobson is ended. OCA now settles lawsuits instead. Didn't we all know that it has settled with 60 affiliates in MAY 2005? I believe that OCA should have taken the buy-out offer by the doctor instead of pushing for the extreme in the case you mentioned.

My opinion is that, it is OK to make some mistakes, but it is not OK if one cannot learn from its mistakes. OCA suffered in courts due to a few problems, but it has corrected these problems.

What I pay attention here is, whether there is any value in OCA stock, and I have stated my opinion.

(By the way, most of these "innactive" affiliates were already innactive in 2001 and 2002.)

YOu might bring a few more cases of "innactive affiliates" or new lawsuits, but you will not see a substantial number of these. That will be the case.

OCA (5)

Financial insights on OCA (2)
by: chfriend03 08/31/05 12:53 am
Msg: 37510 of 37781

OCA had experienced a lot of bad news (if we also include the hurricane). Short of another hurricane, I would say all bad news is out by now. I will explain my reasoning now.

The first bad thing that happened to OCA was its acquisition of Apple Orthodontix (before 2001) and OrthoAlliance in 2001. We all know that the acquisition resulted in a lot of lawsuits.

Apple Orthodontix was relatively small. In case of OrthoAlliance acquisition, OCA assumed a long term debt of $71.644 million, including $59.5 million of credit line debt, in addition to spending millions and millions of cash to purchase management agreements from OrthoAlliance affiliates. The acquisition was very costly for OCA. The following exodus of OrthoAlliance affiliates cost OCA a big fortune.

OCA in May 2005 settled with 60 OrthoALliance affiliates at a loss to the balance sheet. The issue is almost at end although we should expect a few aftershocks. Since OCA has by 2004 phased out the corporate expenses (total $4+ million per year) from the affilates, the argument on OCA's breach of agreement due to its "overcharge" can no longer be valid. The best argument is that OCA's management agreement violates state law, and this is probably a valid argument in Texas. Even in Texas, I believe doctors will be expected to repay OCA the loans and its initial expenses in the affiliates. If OCA paid cash to "purchase" the management agreements, then I would expect the doctors to pay back a portion of such cash (depending on how long the affiliates stayed with OCA).

OCA has also mis stated its accounting. The issue is unearthed, and investors have good reason to shy away from OCA's stock because there is no reliable financials.

Now comes the hurricane. I expect OCA will have further delay in its financial filing, and refinancing.


All these bad news are out. How worse can it get??

OCA also reminds of HealthSouth, although the latter also cheated the government (in addition to investors).

It is clear that by putting $3 million of his personal money into the company, the CEO (who owns about 3 million OCA shares) is clearly betting on the positive outcome of OCA. This is just one more justification for me to invest in this stock.

Conclusion: I would not have much problem in putting 10-20% of liquid assets in this stock. ---- end for now

OCA (4)

Financial insights on OCA (1)
by: chfriend03 08/31/05 12:12 am
Msg: 37508 of 37781

From its press release in June, we learned that OCA misreported on its financials in the past. Clearly, the account receivable was probably grossly misstated, and they also messed up on depreciations and write-down on assets of closed offices, etc.

The question to investors is the following? Is there any value in OCA? If yes, how much?

I have spent some time in the past few weeks in digesting OCA's financials, as well as its press releases during the past few years.

I have come to the conclusion that OCA's stock is worth $6 (or more). It has the ability to make $0.40 per share profit once everything is straightened out. A few facts on OCA's financials from end of 2001 to end of 2004:

1. OCA added 55 "de novo" offices in 2004. (It added another 15 "de novo" offices in first quarter 2005, and stopped afterwards due to the loan default caused by its failure in filing timely financial reports.) OCA needs to use cash for the lease improvement, equipment and supplies, operating loss in the first 12 to 18 months (doctors always get their full salary, even during the initial period). OCA stated that it would take an average of $375,000 to open a single "de novo" office. I believe this is probably about right.

The cash used in openning these "de novo" offices came from OCA's operations.

2. Since late 2001, OCA has (year after year) paid down on its loan, and has reduced its debt owed to doctors and other parties. The rate: at about $10+ million a year. I think the loan amount reported in the balance sheet of its filed financials should be reliable (whereas the account receivable or "intangible" might not). The cash used in the debt reduction over the past 3 years came from OCA's operations.

3. OCA has repurchased its shares back from open market. The total spending was about $15+ million. On the other hand, it has issued new shares (thru stock options, stock warrants, etc.) and collected less than $2 million. So the net cash used in stock repurchase subtracted by the collection from stock issue was more than $13 million. This $13+ million cash came from OCA's operations.

4. OCA's cash position did not change much. OCA settled with some orthodontits and got a few million dollars from affiliates' buy-out (as of Dec. 2004). But it also paid for attorney fees, and paid for lawsuit losses. So all these cancelled out up to a couple of million. Note: I am not sure about the amount of May 2005 settlement with more than 60 OrthoAlliance affiliates. I guess OCA did not receive much cash from the settlement.

Summary: OCA's operations had made good money from end of 2001 to end of 2004.

I like to talk about OCA's problems, and why I think its worst news are out by now.

I like to compare OCA with UHAL that experienced liquidity problems in 2003.
Here are some of my old posts on UHAL board in 2003 when UHAL was trading at single digit. I was fighting the shorts and negative posters. There were a couple of hedge funds that had shorted 1+ million shares of UHAL at $4-5 a share, and eventually covered in a single day in September 2003 at $20+ (a big short squeeze on that date as UHAL's normal trading volume was under 80,000 shares).

OCA (3)

Question: OCA to turn around?
by: emilyqtang 08/29/05 01:47 pm
Msg: 37426 of 37781

How big the chance is? Chfriend03?

It seems that you are pretty positive. Do you have shares? Or just watch & post for fun?

Response

I got quite some shares but I would not put more than 10-20% of my cash in this stock, just in case. If I lose, then it will just take a big chunk of the growth out of my porfolio (whose growth since December 1st 2004 is 30% largely thanks to UHAL), and I will still end up with 10+% growth for the year.

I think there is some good chance that OCA would survive the liquidity crisis. The CEO seeems to be fighting against dilution by putting $3 million of his own money. He owns about 3 million shares of OCA.

In fact, instead of putting his own money into the stock, he could have asked all shareholders to put up some money into the company. OCA can issue stock warrants to shareholders (1 stock warrant for every share) to buy its shares at say $1 per share (or like).

Its stock price will rise instantly to a more reasonable level if this is done, as investors will no longer fear the liquidity problem.

I believe the stock as of today is worth about $6 (or a little more). After warrants excercise, every two shares would be worth $6+$1. That is, every share would be worth $3.5.

OCA (2)

Question: Does OCA have any flexibility?
by: dc8409
Long-Term Sentiment: Hold 08/29/05 05:25 pm
Msg: 37447 of 37781

I saw a post where they might issue warrants. Can they issue anything without filing their financials with the SEC? Where is that at? How did their investigation come out? I have not been to this board in a while. Any help would be appreciated.

Response
I am the one who suggested issuing warrants. I am not sure if the company will do it or not.

The board can simply issue stock warrants to existing shareholders --- 1 warrant for every share --- that is fair for all. The total funds raised would be $50 million that might be used to pay off most of the existing loan, and leaving some money for future growth.

After warrant excercise, existing shareholders will own the same percentage of the company --- there is no dilution for them. For these who do not have additional money to excercise the warrants, they can sell part of their OCA shares at higher price (price will adjust fast to a reasonable level after the announcement of company's intentions), and use it to excercise the stock warrants that go with the remaining shares. They would own a lesser percentage of OCA (that, with the additiona fund infusion, would be much more financially secure).

I think filing would be needed but not the kind for IPOs or for issuing additional shares or options to the public.

The company is required to file the annual reports and quarterly reports. I guess we need to wait for several more weeks for OCA to complete them.

The idea of issuing warrants will be conditioned on the following ---
1. the businiess still makes sense; i.e., there is value to the stock before warrants are issued). I believe this is the case. By putting up $3 million personal money into OCA, the CEO clearly thinks there would be value to the company;
2. the company could not obtain a $90 million new loan (to pay off the older loan that expires in next January).

OCA (1)

What happened to the term loan?
by: chfriend03 08/25/05 02:15 pm
Msg: 37334 of 37783

As of early July, OCA owed $4.2 million "term loan", plus $85.6 million debt under the credit line.

Now, it owes $86.215 debt under the new credit line (as of August 19th agreement signing date).

There was no mention of the $4.2 million "term loan". Was it paid off? Any information on it?

The CEO gave $1 (unsecured) million loan to the company, in addition to $2 million given in early June.