A group of unhappy investors in Kintera Inc. are demanding the resignation of Chairman and Chief Executive Officer Harry Gruber.
In a letter to the company’s eight board members dated Jan. 26, Steven R. Becker, president of Greenway Capital, a Dallas private equity firm, argued for ousting Gruber, founder of the company that makes software to help nonprofits manage their fund-raising activities.
Becker said the disgruntled shareholders who own 5.8 percent of Kintera’s stock, “have become increasing troubled by Kintera’s pattern of losses, progressively diluting financings, inaccurate guidance, and plunging credibility within the investor community.”
Becker said his letter shouldn’t be construed as a personal broadside on Gruber, who has an exceptional track record of launching new businesses.
“Isn’t it time for Mr. Gruber to step aside from day to day management and allow a seasoned operator to run Kintera as a profitable business?” Becker said.
A copy of the letter was also sent to the Securities and Exchange Commission.
Gruber declined to comment on the letter. And Becker declined to comment beyond the letter’s content.
Kintera, founded in 2000, has yet to turn a profit in its history. For its most recent quarter, Kintera posted a net loss of $6.9 million on revenue of $11.7 million.
For the full year, one estimate has Kintera sustaining a net loss of $29.1 million on revenue of $46.9 million, compared with 2005, when it lost $42 million on revenue of $41 million.
Kintera has accumulated a deficit of $118 million.
The stock, traded on Nasdaq under KNTA, has taken a beating. After a short run-up soon after its initial public offering to around $17, shares have steadily declined, and were trading at about $1.25 as of Jan. 29.
Becker said the company is spending too much on administrative costs. He points to two competitors that generate twice Kintera’s revenues but boast similar levels of administrative expenses.
Becker claimed Gruber’s tendency to provide less than accurate guidance has caused many investors to lose confidence in his statements.
On four occasions dating to early 2005 he incorrectly forecast that the company would turn a profit in a specific quarter. As of the last several quarters, Gruber no longer provides any financial guidance.
Perhaps even more frustrating to existing Kintera shareholders has been Gruber’s continued strategy of issuing new stock, and then buying up a good portion of it.
Because of four separate stock financings, the amount of Kintera’s outstanding shares had increased to 40 million as of Dec. 31 from 12 million when the company first went public, severely diluting its value.
As of late last year, Gruber held more than 4 million shares, or 10 percent.
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Mitek Pulls Out Of Merger:
Mitek Systems Inc., a San Diego maker of image analytic software for the financial services industry, terminated its proposed merger with Parascript, a Colorado firm that makes similar software.
In a Jan. 23 filing with the SEC, Mitek said it “has accrued a variety of fees and expenses in contemplation of the merger, including certain fees and expenses, which are owed to the lender which was to provide financing for the merger.”
President and Chief Executive Officer James DeBello did not return phone calls seeking comment.
Chief Financial Officer Tesfaye Hailemichael said costs aren’t related to the termination, but would not say what the reason was, citing a confidentiality agreement.
According to a regulatory filing Nov. 8, Mitek said estimated costs associated with the merger would total $9 million.
Company headquarters would have been moved to Boulder, Colo., if the merger had been completed. But Mitek said it would have kept its Kearny Mesa office.
DeBello would have been the new CEO of the combined company. Jeff Gibb would have been named chief operating officer.
The complex transaction that included financing from a Connecticut-based investment bank would have resulted in Mitek shareholders owning just 22 percent of the new company.
Looking at Mitek’s latest annual results has to make one wonder why Parascript was so interested. For the fiscal year ended Sept. 30, net sales decreased 10 percent to $6 million, while its net loss declined to $717,000, compared with the prior year’s net loss of $l million.
Traded on the OTC Bulletin Board under MITK, shares closed at 74 cents Jan. 30, and have ranged from 70 cents to $1.75 in the past 52 weeks.
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Advanced Marketing Sets New Meeting:
Advanced Marketing Services, a financially troubled San Diego book distribution firm, rescheduled its annual shareholders meeting to Feb. 23 from Jan. 24.
AMS attempted to hold a meeting on that date but was unable to do so because less than a majority of the company’s outstanding shares were represented.
AMS filed Chapter 11 papers Dec. 29, and has been haggling with its creditors about its reorganization. Some creditors are apparently pushing for the company to liquidate its assets.
A proxy fight by New York investor Robert Robotti led to his appointment to the board in November, but he resigned in January.
On Jan. 29, AMS said it appointed Marc Ravitz as a director. Ravitz is executive vice president of Grace & White Inc., a New York-based investment advisory firm, which, together with other affiliated shareholders, controls 12 percent of the company’s stock, AMS said.
Since news that the meeting was postponed was released, AMS shares, traded on the Pink Sheets exchange, actually rose nearly a dime to close at 28 cents on Jan. 29.
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RF Industries Hits Record:
RF Industries Ltd., a San Diego-based distributor of radio frequency coaxial connectors and cable assemblies, reported record revenue of $4.1 million for its fourth quarter ended Oct. 31, up 20 percent from the like period of the prior year. Net income for the period was $473,000, also a record, and compared with the net loss of $119,000 for the fourth quarter of 2005.
For the full fiscal year, RFI reported net profit of $1.5 million on revenue of $15.2 million, compared with a net profit of $445,000 on revenue of $13.1 million for FY 2005.
Traded on Nasdaq under RFIL, shares closed at $8.57 on Jan. 29, and have ranged from $4.56 to $9.57 in the past 52 weeks.
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Accredited Closes On $760M In Notes:
Accredited Home Lenders Holding Co., a San Diego mortgage lender specializing in sub-prime loans, said it closed a securitization containing $760 million in first and second lien residential mortgage loans through its real estate investment trust subsidiary, Accredited Mortgage Loan REIT Trust.
Accredited said it used the proceeds of the securitization mostly to repay warehouse financing for the mortgage loans.
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