"1848 and
Beyond"
posted
August 4, 2005
"An
African Queen"
posted August 11, 2005
"Near Hit"
posted August 16, 2005
"Orko
Gold"
posted August 18, 2005
"Mr.
Smith Goes To Hungary"
posted September 1, 2005
"A
Letter To
President Bush"
posted September 8, 2005
"Mr
Clarke -
Call In The Boys"
posted September 12, 2005
"Orezone"
posted September 23, 2005
"U.S.
Gold Corp."
posted September 29, 2005
"Mr.
Prime Minister"
posted October 13, 2005
"The
Business of Hungary is Business!"
posted October 31, 2005
"Then
And Now"
posted November 9, 2005
"50
Relatives Worse Than Yours"
posted November 14, 2005
"Bunker
Hunt-Silver-China"
posted November 28, 2005
"The
Currency of Mass Destruction"
posted December 5, 2005
"Sonesta
International Hotels Corporation"
posted December 29, 2005
"Northern
Star Mining"
posted January 16, 2006
"Other
People's Money -Enron & Martin Siegel, Esq."
posted January 28, 2006
"Your
Money Is Not Yours"
-Enron & Martin Siegel, Esq.
posted February 9, 2006
"A
Tribute to
Rudy Giuliani"
posted February 15, 2006
"Interview
with
Robert McEwen-
U.S. Gold Corporation"
posted February 22, 2006
"Sparton
Resources"
posted March 1, 2006
"Harvest
Gold"
posted March 2, 2006
"Midway
Gold
Corporation"
posted March 23, 2006
"Pocketful
Of
Miracles"
posted April 8, 2006
"J.P.
Morgan Offers Advice To Ken Lay"
posted April 11, 2006
"The
Principal Guest Was Missing"
posted April 25, 2006
"Ken
Lay's Legacy"
posted May 8, 2006
"Gateway
Gold:
It's A Gold Story"
posted May 15, 2006
"Northern
Star
Mining Corp."
posted May 19, 2006
"I
Am An Immigrant!"
posted June 7, 2006
"Oil
& Gas
Energy Crisis Solution"
posted July 3, 2006
"Let
There Be Sunshine" -
Kirk Kerkorian
posted July 12, 2006
"The
Age of Mediocrity"
posted July 19, 2006
"Silver
In The
Twenty-First Century"
posted August 16, 2006
"Silver
Wheaton - SLW"
posted August 28, 2006
"A
Matter of Reasonable Doubt"
Ken Lay - Enron
posted August 30, 2006
"Brilliant
Mining Corp."
posted September 17, 2006
"The
Kennedy-Nixon debate revisited"
posted October 4, 2006
"The
Arrival of the
Nickel Billionaires"
posted October 18, 2006
"Global
Options
Group, Inc."
posted November 1, 2006
"This
Year I'm Voting For Dick Nixon"
posted November 7, 2006 |
|
BERAL,
INC.
Andrew G. Racz
Director of Research
300 East 54 Street, Suite 26C
New York, New York 10022
Telephone: (212) 319-6949
Fax: (212) 753-1944
E-mail:
mlikar@aol.com
November
17, 2006
Aero Mechanical Services, Ltd.
(AMA - V)
|
| Price:
C. 40 |
Earnings
per share |
| |
|
| Price
range 2006: 16 - 62 |
2006 |
|
| |
2008 |
|
| |
|
|
Capital
Structure
(as of September 30, 2006) |
| Current
Assets |
$5,000,000 |
Current
Liabilities
and long-term debt
|
$1,450,000 |
| Stockholder
Equity |
$4,700,000 |
FINANCIAL
POSITION
Net
Debt and Working Capital as of September 30,
2006
W/C - $4,671,000
Debt - $ 425,000
Capitalization:
Shares Outstanding
Basic - 58.35 million
FD - 78.76 million
Management, Directors, and
Officers – 12%
Listed
on the TSX Venture Exchange: March 2003
Incorporated in 1998
|
| Capital
Structure |
|
| |
|
| Basic
Outstanding Shares |
58,354,693 |
| |
|
| Outstanding
Warrants: |
17,136.016 |
| Priced
from $0.26 - $0.60 (weighted average $0.51) |
|
| Expiring
through September 2008 |
|
| Potential
Proceeds: $10,104,774.66 |
|
| |
|
| Outstanding
Options |
2,677,220 |
| Priced
from $0.21 - $0.75 weighted average $0.34 |
|
| Expiring
through December 2009 |
|
| Potential
Proceeds: $917,793.80 |
|
| |
|
| Fully
Diluted Outstanding Shares |
78,763,533 |
|
| |
|
The
following is an interview with Mr. Bill Tempany,
CEO of Aeromechanical Services Ltd.
|
|
AR: Mr. Tempany,
in the course of a long life, I have visited many high-tech
companies and they have a common denominator: everything is
upside down like a Hungarian Kitchen. And nobody could figure
out what the company and individuals are doing. You were kind
enough to take me around and what I’ve seen is an organized
assembly line and structure of entity. How did this happen?
BT: Well, it wasn’t an accident.. This
is the third company I’ve built and through that process
I’ve learned that if you put proper infrastructure in
place, the proper procedures, checks and balances, people
work as a team.
AR: Now, what do you think the basic underlying
trend of the company, could you describe what Aero Mechanical
is about today, what you have accomplished, and what you would
like to see two years from now.
BT: Well, we’ve taken it from a concept
to a realistic, revenue-generating company, with proven products,
successful customers and the ability to expand into new markets
through hiring the right people in the right areas. Where
I see this in two to three years is AMS being a major force
in aviation communication and data delivery. One of the unique
things that we’ve done is we are becoming the data repository
for aviation customers for their in-flight data. Our data
affects how aircraft are flown, how fuel is used, passenger
comfort data that with large masses of data from a lot of
aircraft. You can get invaluable information that helps companies
operate their businesses better; helps people with manufacturing
aircraft build a better products, and at the end of the day,
help the customer enjoy the experience of air travel.
AR: In a single sentence, what is it that
you do for the airline industry?
Customers are in a position to do the following:
• Break-even on investment in 9 months
• Return on investment of 45:1 over 10 years
• Eliminates errors and biases in reporting
• Saves on costs of crew and fleet operation
• Decrease delays and improves logistics
• Effective manage and monitor fuel consumption
BT: We provide the necessary
tools to gather and get the information that operators in
all departments in the airline, that allows them to improve
the efficiency of the airline. Our motto is “Data that
you want; where you need it when you need it”.
AR: Now, Bill, this is 2006. It is sixty
years that Howard Hughes has flown around the globe. Now,
Howard Hughes did not see your products. How did the airline
industry survive without him?
BT: The airline industry survived like every
other industry in the world: on cheap fuel. Oil, in thee last
thirty years has been a commodity that has been undervalued
and underappreciated by everyone and the airline business
survived because they could get people from point A to point
B quickly and cheaply. That’s not happening anymore.
Fuel costs are rising, maintenance costs are rising, and the
industry is in the middle of a metamorphosis to have to become
a lean, mean machine to survive like every other industry
in the world.
AR: So in other words, automation, electronics,
modified Microsoft type of programming, all this together
has descended on the airline industry?
BT: The airline industry has to change its
practices from the 1970s. We are in the 21st Century. They
also have to change, much like the oil companies did from
being run by geologists and engineers to the airlines being
run by pilots and maintenance people. Financial people are
starting to take over the airlines and they need information
to improve the performance of the airline, which isn’t
readily available today in today’s technology, particularly
where you need it and when you need it.
AR: I flew from London to Kennedy in a 707
jet airline. The year was 1964. In 1968 when life was easy,
and the only disturbance America had was Abby Hoffman in the
streets and burning down a few cities, the new element came
into being, namely, Sheik Yamani in ’73 on nationwide
television, “Gentleman, the cheap energy is over.
BT: Yes. That’s true. And it continues
from 1973 to today, it’s continued to escalate. We are
in a declining reserve for oil and gas globally, and it becomes
a scarcer and scarcer commodity. The airline industry is a
huge consumer of oil and gas. It’s one of the things
there isn’t a ready solution for. Biodiesel isn’t
an option; coal isn’t an option; electricity isn’t
an option to fly aircraft today.
• Airlines taking extreme measures
to reduce weight to mitigate fuel costs
•
After labor, jet fuel + the 2nd largest operating expense
for airlines.
• One Airline estimates it will save 14 million liters
of jet fuel anally through enhanced logistical
planning with AFIRS technology.
•
AFIRS System weighs 10 lbs; systems currently used weigh
up to 150 lbs.
•
100 lbs of extra weight adds $1.00 in fuel costs per flight
hour.
AR: Some people are taking
over to make flying practical and information about other
electronics is handled efficiently and cheaply so business
can continue?
BT: The airline business is no different
than anything else. You have to provide an affordable product
to your end user. To get an affordable product you have to
improve efficiencies and the best way to improve efficiencies
is to group the information flow so that the people that are
providing the service can provide it in the best and cheapest
possible way.
AR: Now, if Bill Gates heard you, he would
be very happy. This is exactly his theory. Now, there is something
else that happened. Because of political changes today, we
have seven billion working people in the world and the seven
billion is basically working for a better life. There are
still some 150 million, what I call the “lunatic freaks”
who choose. But the seven billion people in Shanghai, in Moscow,
in New Delhi, they want to live the way people like you in
Calgary live. Correct?
BT: No, they like the warm weather better
than living in Calgary with the snow and everything. But the
biggest growing markets in the world for the airline manufacturers
are the Far East, India and South America. That’s because
there’s an upwardly mobile middle-class emerging because
of the changes in their economy and they want to travel, want
to see friends, want to see family.
AR: So in other words, there is a huge increase
for the number of jet aircrafts that are needed in this world?
BT: There’s a need for more aircraft,
more efficient aircraft. Brazil adds more people to the middle
class every year than Canada has in their entire middle class.
AR: That means more energy?
BT: It means more aircraft, but it also means
flying full aircraft; it means making more effective use of
the aircraft that exist today. It’s more time in the
air and the airline industry is measured on revenue-per-seat
miles and that’s the biggest measure for regional airlines
and we have to improve the effectiveness of the airline businesses
by adding more people on the aircraft and flying all the aircraft
for less money than they spent two years ago and ten years
ago.
• The only existing real-time data
technology with a global reach for airlines.
• Designed to help airlines:
o
Stay informed;
o Stay on schedule;
o Save money;
o Improve safety
standards
o Create revenue
opportunities (SkyMalls, text messaging, email, etc.)
• 10 lb “shoe box”
size (12”x5”x5”)
o Fuel savings;
o Cargo space
savings and
o State-of-the
art technology.
AR: For every merchant, there
is one question. How many more customers can you get?
BT: That’s correct, yes.
AR: So in other words, if you take 2006 as
your first year of meaningful deliveries, you can foresee
five or ten years of increased demand in terms of numbers,
airlines, that you can service?
BT: That’s correct. The growth in the
AMS’s business is going to be because we have retrofits
for the most of the aircraft on the planet today. Most of
the Boeing, most of the Airbus, most of the Bombardier fleet,
we are already certified for. The future is with making sure
that we’re installed by the OEMs before the aircraft
leaves the factory. We’re working with five OEMs today
to make that happen.
AR: Okay. Describe to me one deal, simple
deal, one particular airline, what you provide, how much,
how do you get income and what happens after the first delivery?
BT: It is our estimate that there are 40,000
on the planet that can make use of our technology. Recent
statistics from one of the major industrial-based data provision
organizations say that there are about 15,000 of these equipped
with data gathering of which slightly higher than ½
of them transmit data so it looks to me that roughly 90% of
its market does not have a viable solution. Our projected
sales anticipate fairly broad acceptance of our technologies
by that 90%. We have in excess of 50 installed of that pipeline
of over 1,000 aircraft. With an initial fee and remaining
revenue from these 1200 aircraft the recovery revenues are
in excess of 35mm/year once install. Installations occur over
a 2 to 2 ½ year window with new airlines. A simple
airline would be an airline that has fifteen Dash-8 aircraft
flying in the Caribbean. What their requirements were, is
they needed information on the aircraft, about where it was
and when it was going to land because the VHF capabilities
in the Caribbean are very spotty because of sunspots. They
had a requirement by their government to have an alternate
means of communication so they could talk to the aircraft.
Our device happens to include the ability to have a satellite
phone in the cockpit, text messaging to the cockpit as well
as collecting the data that the airline needs. What we’ve
done is the first install was done on the Dash-8, about two
weeks after we signed the contract, we went down, we installed
it. We were doing the second one and they started getting
messages. Within fourteen seconds of the aircraft turning
on, they started getting messages. When the aircraft took
off, there were several messages that came, saying there’s
been a problem on this take-off. Engine torque parameters
had been exceeded. The manufacturer’s recommended level
had been exceeded. They managed to catch that in time to train
pilots to stop that happening and save thousands and thousands
of dollars of warranty expiration because of over-torque on
engines.
| Average
Regional Flight |
50
Minutes |
| |
|
| Inaccuracy
|
2.5
Minutes Per Flight |
| |
|
| Cost
Percentage |
2.5/50
+ 5% |
| |
|
Cost
of Major Overhaul
@5,000 hours (1.5 Years)
|
$1
– 1.5 Million |
| |
|
Overhaul
Savings for over reported
Usage due to inaccuracy above
|
$50,000
to $75,000 OH |
| |
|
| 10%
Efficiency Savings |
$50,000
- $125,000 |
| |
|
| Annualized
Savings |
$100,000
- $200,000 |
| |
|
AR: Now, you mention this
fifteen airline aircraft company. What can you sell them today?
BT: Well, today we’ve sold them the
unit, the phone service, the data service.
AR: And how much – what is the contract?
BT: What we do is we sell our service on
a per-flight hour or per-flight cycle basis. For each airline,
it’s different because of usage and because of the kind
of information they want. That airline is being it’s
serviced for 1800 to $2000 US a month per aircraft. The main
saving for the airline is during take-off and landing. So
people who fly short flights, it costs a little more per hour
than those who fly long flights.
AR: An actual unit, you sell to the aircraft?
BT: We don’t sell the unit to the aircraft.
It’s part of the service that’s provided. They
do pay a network access fee to get everything set up and running
but we don’t sell the box. The reason we don’t
sell the box is because we want to control the technology
to ensure all of our customers have access to the latest technologies.
AR: You get a certain amount of money when
you install their equipment?
BT: We receive about $24,000 US per aircraft,
depending on whether they want phone sets and other options.
AR: And then approximately $2,000 a month?
BT: Yes.
2007
300 Aircraft
Installation: 7.2M
380 monthly 1.7400
8.670,000 |
|
ACARS |
AFIRS |
Coverage |
VHF
Ground Infrastructure
Coverage limited outside
N. America & Europe |
Plane
& Ground in
Constant Contact |
Supplies |
Multiple
Suppliers |
One
Supplier |
Technology |
1971 |
2006 |
Ground
Base
Software for data
Distribution
|
No |
Yes |
Management
|
Reactive |
Proactive |
System
Weight on |
Up
to 150 lbs |
10 lbs |
Total
Operational
and Amortized
Capital Costs |
$3,500
to $3,800 per
month/aircraft |
$1,500
to $2,200
per month |
|
AR: So I will set up a date
for that.
BT: Well, if you look at the number of airlines
in the world, there’s over 300 airlines in the world
today. 85% of them are less than twenty aircraft. This means
6,000 potential aircraft. We focus particularly on the regional
and low-cost carriers, because for them, this is a very easy
implementation. I can go after a major airline like United
or American Airlines that has three-hundred aircraft, but
the changes they have to make in their operating procedures
are expensive
AR: You are not going after the major?
BT: Well, we go after the people who can
take advantage of the product early. We have twelve airlines
signed today. Aloha, LIAT, Sky Services, there’s a couple
we can’t name because they’re flying sensitive
missions for the U.N. They’ve asked us not to use their
name.
AR: How about overseas airlines?
BT: We have several overseas airlines, including
China Eastern signed, which is a 200 aircraft company; China
Southern, Hanan Airways are signing this year and we are negotiating
right now with four carriers in India. Negotiating with about
six carriers in Europe.
AR: Let me ask you this. If we take 2007,
give me a range, just a number, roughly how many do you expect
to deliver?
BT: We expect to deliver between 250 and
350 aircraft in 2007.
AR: And 2008?
BT: We expect to deliver 400 to 500 in 2008
as a minimum.
AR: So by then, you will have over a thousand
aircraft using the AFIRS technology. And naming the international
aircraft industry, so it’s a possibility in 2009 and
2010, each of the years, you will deliver anywhere between
300 to 1,000 per year.
BT: That’s exactly true. 2006 is the
first year we’ve generated any real revenue and it hasn’t
kicked in because most of the installs have been in the second
half of the year.
AR: Meanwhile, in the year 2006, you managed
to raise about 6.5 million dollars?
BT: That’s right.
AR: And you raised it from royalties and
sophisticated Canadian investors?
BT: That’s correct.
AR: So in other words, sophisticated securities
analysts have gone through your program, your numbers, projections,
markets, and they said yes. And the end total, your 6.5 million
dollars, without which your company today would be at a deficit?
BT: That’s correct.
AR: Now, people give money to a company if
they have supreme confidence that money is safe for them.
BT: That’s correct.
AR: So this has been achieved?
BT: Yes.
AR: Now, we go to 2007, 2008. Each of these
years are going to be cash-flow positive?
AFIRS
Existing Customers |
Fleet |
Installed |
Aloha
Airlines |
28 |
27 |
Canadian
North |
6 |
3 |
Hawkair |
3 |
3 |
Alberta
Gov. Air Services |
1 |
1 |
LIAT |
14 |
6 |
China
Eastern |
*65 |
1 |
Skyservice |
26 |
3 |
DAC
Aviation |
10 |
3 |
Sunwing |
10 |
2 |
Air
Astana |
1 |
0 |
Voyageur |
13 |
5 |
| |
|
|
TOTAL |
177 |
54 |
| |
*Global Voice Only
|
|
| Committed/Near
term Clients |
#
of Aircraft |
| North America/Caribbean |
179 |
| Europe/Middle
East |
223 |
| Europe/CIS |
22 |
| Asia/China
|
530 |
| |
|
| TOTAL
|
1,081 |
BT: As far as we know today,
they will be cash-flow positive. The one thing that is at
risk to us is when the airlines can put these on their aircraft,
they have to be set up for sea check. As far as we know, everything
within our control, we will be cash-flow positive, 2007 and
2008.
AR: I’m looking from the point of stockholders
– future stockholders. We have just over 70 million
shares. Our problem is options and balance outstanding, cash,
instead of being five million will be seven million dollars.
Seven will be eight million dollars. And stockholders’
equities accordingly.
BT: Yes, sir.
AR: Now, seventy million is the current price
of, let’s say market cap, is at 20 million dollars.
Okay?
BT: Yes.
AR: What is financially unique, that your
company in the next two years, can have the chance to establish
itself as a more or less unique modern product of vital importance
in one of the most important industries in the world, and
end up with probably 20 million cash and product line, an
organized product line that can deliver a thousand aircraft
a year; correct?
BT: Correct. Absolutely.
AR: So now, if you take that hypothetical,
if you open your office, which I see you are doing, you have
a streamlined operation to deliver 1,000 aircraft with your
equipment, which I understand you are improving constantly
this modern programming, which is normal. If we have 1,000
aircraft at the original cost of 20 million dollar revenue,
monthly income of 2,000 times 12 times a thousand, another
thousand to twenty million plus the previously installed equipment,
you are really having up to 50 million dollars revenue per
year?
| |
First
Year
2006 |
Second
Year
2007 |
Third
Year
2008 |
2009 |
Aircraft
Fitted and
Billed
|
100 |
400 |
500 |
500
- 1000 |
| |
|
|
(New
& Cumulative) |
| |
|
|
|
|
| Cumulative
|
100 |
500 |
1000 |
1500 |
| |
|
|
|
|
| Installation
Fee |
2.4M
|
10M
|
12M
|
12M
|
| |
|
|
|
|
| Monthly
Fee |
0.6M*
|
6M
|
24.0
|
36.0
|
| |
|
|
|
|
| TOTAL |
3.0 |
16.0 |
40.0 |
48.0 |
| *
x 3 months |
|
|
|
|
|
BT: 50 million dollars a year
is very attainable. I see that very easily. The beauty of
this business is that at 50 million dollars a year, we can
do it with less than 50 people. There’s very few businesses
in the world that can have 1 million dollars revenue per employee.
AR: And furthermore, what is interesting
is that you service one of the absolutely most vital industries
in the world?
BT: Correct.
AR: It means that the whole market of some
3,000 airlines, servicing the 7 billion working population
of the universe connecting continents of Africa, Asia, Siberia
and in between.
BT: We fly over it every day with our people
talking to customers and prospects.
AR: I thought so. And Eastern Europe, with
electronic gadgetry whose principle importance is the programming
of how the various communications take place. And thereby
become an integral part of one of the major industries in
the world, which despite the oil crisis, is likely to perform
one of the important functions in the world’s economy?
BT: True. Correct.
AR: One last question. If you take 2009 times
the thousand the cash-flow comes in, what do you intend to
do with the cash flow? Is it dedicated or surplus?
BT: The majority of it is surplus. We want
to continue to improve and keep the product up-to-date. There’s
changes happening every day in technology and communications
and we want to take advantage of those. The reason we don’t
sell hardware to the airlines is we want to be able to keep
a common communication platform and a small part of that cash-flow
is going to go into product development.
AR: Let me make this comparison. When I was
a child, the end of the Second World War, the only toy I had
was a few soldiers. My two children had various toys, but
by the time the oldest was 16, the youngest 11, we had a Macintosh
Apple Computer and – it went out of business –
BT: Atari?
AR: Atari.
BT: Same as my kids had.
AR: If I go to my grandson’s room,
it’s filled up with electronics, half of which I don’t
know how to program myself. He’s four and a half. He
knows everything.
BT: No fear.
AR: So even by your word, what people are
talking about, to remake the internal structure of an airline,
transfer it from a place of total boredom, will you have electronic
entertainment, too?
BT: We’re working with two of our customers
today to provide on-board services for people that have electronic
devices to be able to do all the things they can do on the
ground on the internet, without having to spend the money
and effort and the technology that’s very, very expensive
today to hook into the internet from here.
AR: Thank you, sir. I hope you succeed. I
don’t know why I stopped yet.
Looking at the 20 million dollar market cap that in the next
6, 7 years you provide a vital electronic service, communication
service to the airline, that may become a household name all
over the world, has the cash-flow, by the way and the entry
and the clientele to recreate an industry which almost disappeared
a few years ago and is still flooded with bankruptcies, to
recreate an industry which people use daily, enjoy it and
consider their time spent creatively as well as counting the
minutes when the torture is over?
BT: Yes, sir.
AR: Good. Thank you.
Andrew Racz

(Article
42 - posted November 17, 2006)
DISCLAIMER
Information
contained herein is based on data obtained from
recognized statistical services, issuers reports
or communications or other sources believed
to be reliable. However, such information has
not been verified by us and we do not make any
representation to its accuracy or completeness.
Any statement non-factual in nature constitutes
only current opinions which are subject to change.
BERAL INC. or their officers, directors, analysts
or employees may have positions in the securities
or commodities referred to herein, and may as
principal or agent buy and sell such securities
or commodities. An employee, analyst, officer
or a director of BERAL INC. may serve as a director
for companies mentioned in this report. Neither
the information nor any comment expressed shall
constitute an offer to sell or a solicitation
of an offer to buy any securities or commodities
mentioned herein. There may be instances when
fundamental, technical and competitive opinions
may not be in concert. This firm may from time
to time perform investment banking or other
services for or which investment banking or
other businesses from any company mentioned
in this report |
|
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