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Interesting email from a reader of the Internet Stock Blog. He asked to remain anonymous; you'll see why from his comments below:

Have you taken a look at JLHY.OB? It was once known as Novacare, is now known as JL Halsey, and will soon be known under the name of the operating company it just took over: Lyris.  Yes, the ListManager Lyris.  They also have a bunch of other server side and hosted email products. From my quick review of the filings, it appears that Lyris is very profitable:

 

($ in millions)
                                         2001  2002  2003  2004  CAGR
                                         ----- ----- ----- ----- -----
                        Revenue           4.6   7.6  10.9  12.0  37.7%
            Income before taxes           1.6   3.4   5.1   5.8  53.6%
Net Cash Provided by Operations           1.8   3.6   5.2   6.8  55.7%

Source: http://biz.yahoo.com/bw/050512

Assume they grow cash flow from ops in 2005 by another 1.6M, as they did in 2003 and 2004, and you get a company that could rake in 8.4M or so (with tremendous profit margins). Not bad, given that the total purchase price was around 30M. At current prices, the market cap of JLHY is just north of 40M.

Here's the kicker: JLHY has net operating loss carryforwards of over $180M from Novacare, a medical company which blew up when medicare reimbursements changed. That means that Lyris income will not be diverted to Uncle Sam for a real, real long time.

I have taken a small position and will probably build it over time. You may share this info with readers but I would prefer if you do it without attribution as I don’t want to feel compelled to update anyone as I build my position.

Source: Microcap Internet Stock JL Halsey (JLHY.OB)