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Sagient Finds the Public Markets Too Difficult

Another small San Diego public company decided to call it quits and went back to operating as a private company.

Sagient Research Systems, which provides financial data to mutual funds and investment companies, conducted a reverse stock split last month, effectively reducing the number of shareholders to below 100, and deregistered its stock from the public markets.

Sagient CEO Brian Overstreet said the costs of reporting and complying with Sarbanes-Oxley requirements as a public company grew to the point where it made no sense to maintain the public status.

“Once Sarbanes-Oxley kicked in it just didn’t make any sense for us to try to stay on top of all this stuff,” Overstreet said.

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Overstreet said complying with the public reporting requirements was costing Sagient about $150,000 annually.

By conducting a 1-for-101 reverse split Jan. 11, the firm reduced the number of shareholders from about 500 to fewer than 100. Companies with fewer than 300 shareholders aren’t required to file financial reports with the Securities and Exchange Commission. Its stock is also removed from the Over the Counter Bulletin Board exchange.

Founded in 1983 by Overstreet, the company , formerly called Direct Placement Inc. , did fairly well in terms of growth and profits last year.

For the third quarter ended Sept. 30, Sagient reported net income of $109,000 on revenues of $864,167. Overstreet said while the final year tally won’t be reported, the approximated net income was $250,000 on revenues of $3.5 million. The company has 20 employees at its University Towne Centre office.

Looking back, the decision to go public in June 2001 wasn’t a good one, Overstreet said.

The company conducted a reverse merger into an existing and dormant public company to gain access to the public markets and acquire other businesses, he said.

The strategy worked for a little while and it did acquire a broker dealer with its stock, but the transaction went sour, and Sagient ended up selling the firm back, he said.

Even though Sagient is no longer on the Over the Counter Bulletin Board, its shares were still trading on the Pink Sheets as of Jan. 30 at 14 cents.

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The Fight Continues:

Relational Investors LLC, the San Diego-based money management firm that’s opposing a sale of stock of a Philadelphia bank it has a stake in, received good and bad news last month.

The good involved a court ruling denying Sovereign Bancorp’s attempt to dismiss a suit Relational filed against the bank for a proposed sale of Sovereign’s stock to a Spanish bank, Banco Santander Central Hispanico SA. Sovereign claims the sale doesn’t require approval of shareholders because it’s less than 20 percent of all shares. Relational, which owns 8 percent of Sovereign stock, said the number of shares involved in the transaction is greater than 20 percent, and that Sovereign is receiving less than fair value for the stock.

Relational also was permitted by a federal court in New York to proceed with another suit against Sovereign that would allow permit shareholders to remove all of Sovereign’s current board of directors.

On the negative side, shareholders for Independence Community Bank approved the sale of their bank to Sovereign, a move Relational opposed.

Sovereign CEO Jay Sidu told shareholders in a letter that Relational is using negative tactics to assault the bank, including hiring a well-known political operative who has waged past contentious political campaigns.

A call to Relational for comment was not returned.

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A Delay:

Ashworth Inc., a Carlsbad-based maker of sportswear, said it asked for an extension on filing its annual report with the SEC last month for its fiscal year ended Oct. 31.

Ashworth has been in negotiations with its lender, Union Bank of California, on a line of credit , a process that has delayed the completion of its annual audit.

Ashworth turned in losing numbers last year, but it did improve overall revenues from $173 million to $205 million.

The net loss for the year was $729,000, compared with a net profit of $8.2 million for the 2004 fiscal year.

The company said its gross margins and profits were hurt by lower sales of higher margin products, and the reduction of inventory in the fourth quarter that was built up in the third quarter.

For its 2006 year, Ashworth predicted revenues would come in from $210 million to $220 million, while earnings should finish between 48 to 56 cents per share.

As of Jan. 30, the company, which uses the ticker symbol ASHW, closed at $8.47, and ranged from $5.95 to $12.38 in the past 52 weeks.

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Another Delay:

RF Industries, a San Diego based distributor of coaxial cables, is another firm that said it would file its annual audited results late because it needs to obtain financial information regarding the operations of two acquired companies. In the SEC report requesting the extension, RFI said net income for the 2005 fiscal year ended Oct. 31 was $445,000, compared to $1.2 million in the prior fiscal year due in part to one-time Sarbanes-Oxley expenses of about $400,000, and a one-time compensation expense of $551,000 related to the purchase of stock options held by CEO Howard Hill.


Send any news about local public companies to Mike Allen via e-mail at mallen@sdbj.com. He can be reached at (858) 277-6359

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