Ann: Appendix 4C - quarterly, page-13

For a $15m company, this is a solid result.  While this company continues to be utterly hopeless with shareholder communication (perhaps intentionally so – see below), it has adequate cash and (apparently) growing quarterly receipts.  All things considered, in terms of the raw numbers, I rate the December quarter as arguably the company's best since listing (keeping in mind it has constantly over promised and under delivered and had many terrible quarters).  As far as I can tell from past commentary, touchstone probably still accounts for close to 100% of the cash receipts.  However, non-touchstone customers likely to become material over next couple of quarters, which will accelerate growth.  US$450+$50 with production down in November.  Will the current quarter generate US$700K+?? 

Delisting unlikely to happen any time soon.  It is possible to list on nasdaq without shareholder approval, but CFO far too small to do that at the moment.  Needs to have a market cap of at least US$160m to list on Nasdaq.  Touchstone could offer to buyout shareholders, via a scheme of arrangement, but that would require 90% of shareholders agreeing to a price.  To get 90% shareholder agreement, price would need to be considerably higher than it is today.  Directors would not want to delist/privatize unless they thought the company was (1) going to be profitable within a reasonable timeframe, (2) worth a multiple of its current market cap, and (3) had alternative access to capital (most likely the WV state government).  The standard procedure for those who stand to benefit from a delisting (in this case touchstone and directors) is to actually downplay the merits of the company, and try and convince shareholders that the outlook is ok but not that great.  This way, gullible retail shareholders will be convinced that directors are 'doing them a favor' with the buyout and to accept a lower offer price.  The lack of commentary around the current 4c is consistent with this approach.   As a rough rule of thumb, if touchstone/directors offer shareholders 25c to delist in a SOA privatisation move, then the company is probably worth around 50c.  They never offer fair or full value or there is no point in delisting.  My guess is that the long term plan for touchstone and current directors is to try and buyout shareholders late this year or early next year, run the company as a private entity for a couple of years and establish a history of growing earnings, then list a $200m company on Nasdaq and make a killing.  Directors recently putting in $450k at 18c conversion price and getting rid of CEO was probably part of this strategy.