Chanticleer Advisors Q4 Letter

[valuecfa]

Hi Value,

I believe that The Marketing Alliance provides audited financial statements to their shareholders, but because they are pink-sheet listed, aren't required to file those statements on EDGAR.  Matt and Joe can probably confirm this or not, but as far as I know, the NAIC requires all insurers...listed or not...to provide audited financial statements to the commission and to shareholders.  Cheers!

Hi Parsad. They definitely don't file any statements with the SEC, and I don't believe that they file audited statements period. At least the filings at the pink sheet site doesn't show them as audited. No auditor's acknowledgment, signature, or opinion anywhere. Ditto at their corporate website. The pink sheet system has multi-tier levels for companies that provide them with audited statements that is different from the one they are currently listed at, which is much lower.

The annual report itself is only 5 pages long (including the financial statements, which is missing a cash flow statement) . Correct me if I am wrong, but I don't believe they are actually an "insurance company" (and just provide back office support, etc. to insurance companies) and therefore don't fall under NAIC guidelines.

EDIT: I just searched the NAIC filings database and nothing came up under Marketing Alliance.

[Parsad]

Hmmm...Matt, any comments on their financial statements?  Cheers!

[mmiller]

As to Bexil...

The drop in BV that people see is due to the previously mentioned loan that was agreed to for the exercise of options.  Per GAAP, this increases the shares outstanding while at the same time provides no credit on the asset side of the balance sheet for the monies owed.  If you look back, it was only until the most recent 12-15 months when treasury rates got so low that Bexil began to report small losses each quarter.  I am not concerned about the burn rate and believe BV has not really declined as much as it would appear. While the last 12 months would have seemed like an opportune time to deploy that capital, I have no problem waiting for the company to find a fat pitch.

As to Marketing Alliance...

This is one of those types of situations where it really takes some detective work.  I have met with Tim Klusas, President of MAAL, and his team on multiple occassions.  I speak to him at least once a quarter.  I believe he is a great manager.  Of course he is unknown and at a small company, but he is great nonetheless.  The company will provide to shareholders audited statements upon request.  I have personally reviewed audited statements for the past several years.  I think anyone wondering about the accuracy of the statements out to consider, as one data point, the company's track record of dividend payments.  The company has paid a dividend every year since 1999.  These are significant dividends which didn't require additional capital raising to provide.  Also, by my count there are only 37 non-bank companies traded on the Pink Sheets that currently have a dividend yield.  This company is part of a select group of Pink Sheet companies.


MAAL is not an insurance company so they do not have to provide statements to a state regulatory comission.  The company provides back office and pooling production services to life insurance agents across the country.  While this is slighly beyond the scope of the question asked, I believe MAAL is one of the very best businessses I have every studied. I would be happy to provide a more detailed opinion as to why that is if it would interest the board.

mmiller

[benhacker]

Matt,

Love the few pieces of analysis I've seen by you, you seem level headed and sharp.

With that said, I've got to jab you for this comment (all in fun) because it made me giggle.

This company is part of a select group of Pink Sheet companies.

I for one would love to see an analysis on MAAL... I"m interested.

Ben

[Grenville]

Matt,

Love the few pieces of analysis I've seen by you, you seem level headed and sharp.

With that said, I've got to jab you for this comment (all in fun) because it made me giggle.

This company is part of a select group of Pink Sheet companies.

I for one would love to see an analysis on MAAL... I"m interested.

Ben

I second that!

Thanks!

[Parsad]

Thanks Matt!  Cheers!

[farnamstreet]

You can find out more about MAAL and Matt's and Joe's thoughts on Joe's blog:
http://valueinvestingworld.blogspot.com/2009/04/marketing-alliance-micro-cap-with_22.html

[mmiller]

As per MAAL...

You might like to read:

http://www.chanticleeradvisors.com/files/107293/Interview%20with%20Tim%20Klusas%20President%20The%20Marketing%20Alliance.pdf

http://www.chanticleeradvisors.com/files/757505/Marketing%20Alliance%20Inc%20-%20Buffet%20Group%20Presentation.pdf