As to the Beits and why their inaction last year, I consider that to be a pivotal question. Their stake in the company dwarfs Ira’s, as does their avg cost (approx $9/shr). In my view, the connection between their resumed buying last summer and LENS’s strategic initiatives program launched at about the same time has become inescapable. They didn’t oust Ira because they liked what he was doing.

Granted, the Beits and OnGuard may be a non-issue @ $5-$6, but as LENS rises closer to its book value, these questions will rapidly take on greater significance. Properly identifying LENS as either asset play or growth/turnaround story will spell the difference between holding the stock closer to fair value versus selling out way prematurely. Odds are we won’t see OnGuard really start “producing” till LENS’s 1st or 2nd fiscal qtr of 2008.

I probably wouldn’t value inventory at 30 cents on the dollar (I’d more realistically value it at around 70 or so), but better to err on the conservative side. The firesale liquidation doesn’t really apply since it’s unlikely to happen, but it’s a hypothetical exercise to determine the minimum value of the company, assuming that net assets remain relatively constant and management doesn’t throw it away.

I do wonder why the Beits didn’t pursue ousting Lampert, but at this point it’s a non-issue, since it’s unlikely to happen given the Lamperts stake in the company, Ira’s ability to cite successful cost cutting for shareholders (a tactic he can use to argue that he deserves his pig pay package), and the apparent disinterest the Beits have in doing this.

Why would you value inventory at 30% of cost, when it’s known to be generating positive gross margins? How does any sort of fire sale liquidation scenario apply here? I don’t get it.

As to the need to “get rid of Ira Lampert”, am I the only one who wonders why the Beits didn’t move more aggressively on that issue last year? Do you have any idea what the cost is for a proxy contest at this level? (hint: it ain’t much.)

I’m certainly not investing for any miracle in OnGuard (I agree it’s a crappy product), and I do agree that the Lamperts may not be the very best for the job. However, they have done pretty well reducing cash burn, Ira’s been scooping up shares en masse, and I’m betting that 1) they keep this up, and 2) that they don’t screw up big time.

re: assets –As of Sept 30th, company reported working capital of $46.4 million. If, however, you subtract the $2.4 Mill. already committed in Prepaid Expenses & assume Inventory –in a liquidation–would fetch 30 cents on the dollar [76 cents of each dollar in inventory is for finished goods], inv. value shrinks by about $15 million. So working capital is actually $29.4 million. Looking at company’s balance sheet–more conservatively–you are correct in that the company does have “wiggle-room” to execute on a new business strategy.

Additional Concerns: (1) History has not proven that Lampert & his brother are the ones to do the job, for they have taken more out of the Company than given back to ordinary shareholders! (2) OnGuard Safety watch –at $39.95 is no more than an expensive flashlight with a whistle attached (The watch does not have GPS functionality or any kind of tracking capability). (3). Company currently sells 75.4% of all its goods to WalGreens & WalMart [notorious for pressuring selling margins of its manufacturers] –ego, having WalMart as a distributor is akin to making a deal with the devil!

I DO AGREE with you that LENS looks attractive for its assets–but can Company get rid of Ira Lampert? Who is slowly bleeding the Company of its ‘attractive’ assets!

Best-
David J Phillips, Publisher
www.10qdetective.blogspot.com

Also, while its nothing too special, Lampert has agreed to take a pay cut. In their 10-K, they write:

“Mr. Lampert voluntarily reduced his base salary from $900,000 to $800,000 per annum for the period from July 1, 2004 to June 30, 2005 and also voluntarily reduced the Company’s $500,000 annual SERP contribution to $350,000 beginning with the payment that was due on January 1, 2005.”

He’s still overpaid, but it’s something…

http://10qdetective.blogspot.com/2006/11/nothing-to-smile-about-at-concord_02.html

Regards,
David J Phillips, Publisher