lawsuit against psa for 10.5 million awarded to........

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Posted By: Green Eye Shade

More than the court verdict, the reason for the stock decline seems to be a weakening in CLCTs earnings performance. Versus the comparable quarter last year CLCTs operating income is down almost 50%. Much of this is the result of increased general and administrative expense. Digging a little further, half of this general and administrative expense increase results from the costs associated with Sarbanes Oxley compliance. This shows the impact of increased government regulation on small business.
CLCT does not report this large a decline in earnings because of the substantial increase in interest income resulting from what they are earning on the funds from their recent stock offering. The quarter to quarter comparisons are actually worse than portrayed in the press releases since they compare quarter to quarter earnings per share on a fully diluted basis (reflecting the additional shares from the stock offering) but only the current quarter has this additional interest income from the funds generated by the offering. I think it would be more meaningful to compare undiluted prior quarter earnings with diluted current quarter earnings which would make the performance look even worse. This, in my opinion, is why the stock is going down.