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Sunday, Dec 10, 2023

The Cost of Being Public Takes Its Toll

Yet another small, publicly traded company decided it can’t afford to stay public any longer.

Nexprise Inc., a Carlsbad-based maker of software that helps large manufacturers automate and manage their business process more effectively, filed a Form 15 with the Securities and Exchange Commission on March 28, informing the agency that it will voluntarily deregister its common stock, a process that should be completed in 90 days.

The company shares are thinly traded on the over-the-counter bulletin board under the symbol NXPS.OB for fractions of a penny.

“We’re a small public company, and the cost of maintaining all of the SEC requirements, and the Sarbanes-Oxley requirements is prohibitive,” said Chief Executive Officer Ted Drysdale. “We’ve been thinking about this (going private) for about a year.”

Drysdale said the 25-person firm should be able to save between $1.5 million and $1.75 million annually once the change is implemented.

That’s a lot, considering Nexprise has average annual revenues of about $3.5 million in the last three years. Among its 35 customers, Nexprise counts some of the giants in the aerospace industry, including Boeing, Lockheed Martin and helicopter maker Sikorsky.

Beyond the escalating costs for preparing quarterly, annual and special financial reports, Nexprise also had to spend $250,000 last year to comply with provisions of the Sarbanes-Oxley Act, the accounting reform law passed in 2002 after major corporate scandals such as Enron and WorldCom.

Also contributing to rising costs are the higher fees for directors’ and officers’ insurance.

Nexprise joins a growing list of small and mid-sized firms that are finding the increased costs to comply with the regulatory hoops associated with their public status too high.

Last year, Anacomp, a San Diego-based provider of document storage and data management services, delisted its stock. In February, PriceSmart, an international warehouse store operator, said it was considering delisting its stock because of increasing reporting costs, particularly those associated with Sarbanes-Oxley.

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Making A Restatement:

Taking no chances with regulators, Maxwell Technologies Inc. opted to restate its fiscal 2002 results, increasing its expenses by $1.9 million due to a change in the way it books stock compensation paid to employees at two subsidiaries it acquired that year.

The higher expenses resulted in the company amending its net loss for 2002 to $42.1 million from the previously reported $40.2 million net loss.

Maxwell, a maker of industrial equipment called ultra capacitors used to store and release power, said some two years ago that it expected to return to profitability in 2004, but it appears to be going in the opposite direction.

For 2004, it reported a net loss of $9.1 million on revenues of $32.3 million compared with a net loss of $6.3 million on revenues of $35.2 million for 2003.

Traded on Nasdaq under MXWL, it closed at $9.25 on March 29, and ranged from $8.10 to $17.64 in the last 52 weeks.

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More Losses:

NTN Communications, Inc., a Carlsbad-based maker of interactive communications and entertainment products for the home and hospitality industry, is another small public company reporting greater net losses this year, but higher revenues.

For 2004, NTN reported a net loss of $4.98 million on revenues of $35.3 million, compared with a net loss of $2.71 million on revenues of $29.3 million in 2003.

Both of NTN’s subsidiaries posted losses. One subsidiary, Buzztime, which makes interactive content for cable TV programs and live sports prediction games, generated $3.69 million of the total loss.

NTN Chief Executive Officer Stanley Kinsey said he was pleased with the results, and its Buzztime product, which it called “one of the most widely deployed applications in the emerging iTV space.”

Contributing to the company’s net loss was the first time expense of $369,000 related to complying with Sarbanes-Oxley.

Traded as NTN on the American Stock Exchange, it closed at $2.87 on March 29, and ranged from $1.62 to $3.65 in the last 52 weeks.

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Locking Horns:

PriceSmart and its 34 percent partner in its Guatemalan subsidiary have been engaged in a legal dispute in Guatemalan courts, the company revealed.

The company said it was able to thwart an effort by the partner to terminate the subsidiary’s general manager and other employees at the company’s office in Guatemala City.

But the partner, who wasn’t named, was successful in getting the court to appoint a receiver who just happens to be an employee of the partner, PriceSmart said in an SEC filing March 24.

The order requires the subsidiary to deposit daily receipts totaling about $80,000 into a strictly controlled bank account. PriceSmart said the appointed receiver isn’t paying on shipments of products that exceed $2.6 million.

In response, PriceSmart has filed civil and criminal charges against the receivership, and the minority shareholder.

The dispute echoes another legal battle between PriceSmart and a partner in its Filipino subsidiary over money issues that have spilled into the local courts.

PriceSmart owns and operates 26 warehouse club stores in 26 countries and one U.S. territory, primarily in the Caribbean.

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Open For Business:

Sony Electronics opened a retail outlet for its products last month in Fashion Valley, bringing the number of Sony Style stores to 15. The stores provide customers with a chance to try a range of products, including digital televisions, computers, cameras and music players.

Sony Electronics moved its headquarters from Park Ridge, N.J., to San Diego last year, and has about 2,500 employees at its center in Rancho Bernardo. The company first set up operations here in 1972.

Sony Corp. also operates two other subsidiaries in San Diego, Sony Online Entertainment, a maker of online computer games, and 989 Sports, a developer of console video games.

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Growing Sales , And Losses: SpaceDev, the Poway-based designer and maker of space satellites and other space equipment, reported a net loss of $3 million on revenues of $4.9 million for 2004, compared with a net loss of $1.3 million on sales of $2.9 million in 2003.

The company made world headlines last year when equipment it helped develop powered SpaceShipOne, a privately funded, manned spacecraft launched into space.

Despite overall net losses, SpaceDev noted it had four consecutive quarters of operating profits.

Send any news of locally based public companies to Mike Allen at mallen@sdbj.com. He can be reached at (858) 277-6359.


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