Southern Products Inc (OTC:SNPD) Changed the Channel

A couple of weeks ago a promotional campaign started on Southern Products Inc (OTC:SNPD). A few emails hit our database and we were quite eager to find out what all the fuss is about. We did the research and we found that SNPD‘s financial situation right now is horrible compared to the state of affairs a few years ago. They are determined, however, to return to their former days of huge revenues.

That being said, these days weren’t all sunshine and blue skies. From their financial statements we can see that during the quarter that ended in November 2011 they had a total of $1.3 million in revenue but, unfortunately, the low retail prices of their consumer electronic products meant that the losses were quite substantial as well.

Then things got worse. There were some disagreements with the Chinese supplier, a lawsuit and, at one point, even SNPD themselves were named as defendants. Luckily, they are no longer part of the dispute, but the trouble is that they were left without a manufacturer for their cheap television sets.

As a result, the revenues that they registered during the second half of 2012 were dismal and we were struggling to see why did the pumpers choose this particular time to promote them. Our questions received their answers when some news started flying out of SNPD‘s HQ giving investors all sorts of promises of bright future.

First, they said that they have appointed a new officer who will deal with the operations. Then came out a second release which states that the CEO, Mr. Edward Meadows, will soon be in China signing contracts with new suppliers and manufacturers as well as fixing the mess with the old ones. A few days later, a third headline hit the websites stating that they are going to expand the range of products that they offer by including the ever-so-fashionable tablets in their portfolio.

It’s fair to say that the news about the negotiations of a new supplier is the one that we’re most interested in. The first thing that we noticed in the press-release, is the fact that there are no deadlines as to when the deal will be finalized and when will the new components start rolling off the production line. We hope that this happens sooner rather than later, but that’s not the only issue. SNPD‘s CEO will need to make sure that he negotiates conditions of the contract, that are much more favorable than the ones with the previous suppliers if they want to get rid of the annoying losses that they have incurred over the past years.

Of course, Mr. Meadows says that he is going to do his best to achieve these things, but as always nothing is certain and we’ve seen far too many companies issuing optimistic press-releases, that turned out to be nothing but hopes and dreams.

If he does manage to achieve the most important tasks in China, we would advise Mr. Meadows to try finding a new office for the company when he gets back home. Indeed, the manufacturing facility is outside the US, but a residential house acting as a corporate office hardly inspires any confidence in potential investors.

And since we mentioned potential investors, we should point out that they must be careful while making their decisions on SNPD. Yes, the news does sound good, but as we explained above, it’s still quite early to call it. Furthermore, the promotion that is still raging on, could make some greedy shareholders take advantage of the increased demand and sell their shares at a huge profit. Which, by the way, is probably what happened when IMING CORP (PINK:IMNG) got the pumping treatment by pretty much the same newsletters back at the beginning of February. As you can see from the chart, in just over a month, IMNG lost a total of 75%.