Obn Holdings Inc (OTC BB:OBNI)

On January 20, 2010 we coded OBNI as low tier GeoSpecial at $0.10. The company just turned profitable and as in banking that its business model centered on creating a portfolio of profitable companies will build on this trend.

The company’s roots originated from its satellite broadcasting operations, a business segment it later abandoned. It replaced those operations with an internet broadcasting and television/film production business that targets the Japanese market. However, this endeavor is still not a significant contributor to OBN Holding's business.

In order to fuel growth, OBN Holdings set out to use minimal investment to acquire companies that required the management skill and business relationships possessed by OBNI. This “Buffet-inspired" strategy has led to the purchase of three companies:

Near-Term Emphasis

1. Export trading business. In June 2008, OBNI acquired Kyodo USA Inc., a profitable exporter of pork to Japan. OBNI felt that its relationships established with its prior dealings in Japan, China and the Caribbean could provide additional growth drivers for Kyodo. To that end, it is in the midst of expanding its food product lines to include more consumer oriented items, as well as grow its customer base in Japan and other markets. Kyodo is just beginning to experience an uptick in business that was negatively impacted by the swine flu pandemic.

The entry into the export business has also spawned other initiatives unrelated to Kyodo, such as bottle water, nutraceutical, wine and batteries. This division is expected to be the main driver of growth for the near future.

Longer-Term Emphasis

2. Traffic violation information. In February 2008, OBNI acquired the United States rights, from a Chinese entity, to proprietary technology that captures traffic violation information on video and still media. Its goal is to monetize this technology by selling sub licenses or acquiring a company that can utilize this technology.

3. Plastics recylcing. In February 2008, OBNI entered the plastics recycling industry by purchasing the exclusive North American rights, from Foshan Plastics to a Chinese proprietary "green" technology that allows "unrecyclable plastics" to be recycled. In return, OBNI will provide the raw material, equipment and labor costs to Foshan to manufacture products for OBNI's customers. In North America, OBNI plans to acquire a company that will utilize this technology.

Caveats:

• We are assuming that the company will require additional capital to implement its long-term strategy.   
• We generally shy away from firms that are involved in many different endeavors
• Current ratio is below 1.
• Working capital deficit of $988,000.

We are taking somewhat of a chance here, as we normally would wait for the resolution of liquidity problems before coding a stock as a GeoSpecial. However, positive company comments and the following statement from its filings could indicate that OBN Holdings liquidity problems may be on the path to a recovery, possibly giving investors a reason to push shares to book:

"Management's believes that the acquisition of Kyodo USA in June 2008 addresses any future liquidity issues because of its strong cash flow and cash balances in its bank accounts."

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We are coding Obn Holdings Inc. as low tier GeoSpecial at $0.10 based on the following:

• November 11, 2009 (Business Wire)

Excerpt from the CEO's letter to shareholders - "The remainder of 2009 and all of 2010 will be an extremely active time for your company. We have developed a very aggressive plan to increase OBN’s value and profitability by acquiring and developing profitable companies. OBN is currently developing in the regions that we have entered, and are planning to enter into new regions."

• November 22, 2009 (Business Wire)

From Press release - "OBN Holdings, Inc. (Pink Sheets:OBNI) today announces the filing of its Q1, 2010 10-Q, and that the company posted a profit for the period." The statements reveal that the company posted net income of $178,000, or $0.01 per share, on sales that exceeded $2.7 million for the period. “We are very pleased with the results,” stated Roger Neal Smith, OBN Holdings President and CEO. “We expect OBN profits to continue increasing in future quarters as we continue developing our business model."

• December 1, 2009 (Business Wire)

From Press release - "OBN Holdings, Inc. (OTCBB:OBNI) today announces that, as of November 25, 2009, its common stock has commenced trading on the Over-The-Counter Bulletin Board."

• At $0.10 the stock is trading below its book value per share of $0.21.

Caveats:

• We have yet to interview the company about its growth plans and liquidity needs.
• We generally shy away from firms that are involved in many different endeavors
• Current ratio is below 1.
• Working capital deficit of $988,000.

We are taking somewhat of a chance here, as we normally would wait for the resolution of liquidity problems before coding a stock as a GeoSpecial. But positive company comments and the following statement from its filings could indicate that Obn Holdings liquidity problems may be on the path to a recovery, possibly giving investors a reason to push shares to book:

"Management's believes that the acquisition of Kyodo USA in June 2008 addresses any future liquidity issues because of its strong cash flow and cash balances in its bank accounts."