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Born - I wouldn't expect any news until they have to report Q4 at the end of March. Sam has a real challenge on his hands. The IVFH brain trust needs to look at all the alternatives, pick one and implement it. I would not be surprised if the spin off plan is changed.
From my vantage point, none of the options are attractive. All include some level of pain. Should be very interesting to see what happens in late March. I wouldn't expect much before then, but that's just my reading of the situation.
There are two questions that need to be addressed for a spin off to happen.
1) Is Fresh Diet capable of being a standalone company? Those financials can't be pretty.
2) If FD fails on its own, do the creditors then sue Innovative Foods for any outstanding debts? This is like asking if the sun will come up in the east tomorrow morning.
Sam's a crafty fellow. He is going to need all his craftiness to find a solution to this problem. This is not the return of the pasta company. That was a problem. This is far more serious.
I don't think you understand the situation. We are no longer talking about growth. We are now talking survival. We are talking animal with a leg in a trap. Chew off the leg and hope to survive or die in the trap.
This is not Revenge of the Pasta Deal. This is much more serious and difficult. There are no easy answers for this one.
He is on Linked-In. Fellow went to Princeton so I assume he's got some smarts.
Someone keeps painting the tape by buying 100 shares at the asked. I've noticed this over the last many days.
Here we are at January 15 and they haven't done the spin off yet. You have to ask why. You also have to look at the costs of spinning it off versus not spinning it off. Sam's in a jam either way.
Someone painting the tape today at 8 seconds to 4 PM so the day looks bad rather than disastrous?
The longer this divestiture takes, the more painful this is going to get.
For a company that was in a huge hurry to spin off Fresh Diet in early January, nothing has been filed with the SEC yet. Sounds like they have run into a few snags.
Still falling. No trades. Great job, Tom. You and that clown of an attorney really stuck it to the people who tried to help you succeed.
Reading is Fundamental. I said complete legalization is not going to happen. The USVI is too small to make a business of medical marijuana. Without complete legalization this is not a viable business in the USVI
Huge difference between medical marijuana and legalize recreational. You can't make money in the medical business on a tiny base. Too much competition in the States and no where near enough demand locally.
If there is a way to profitability here, it is only through complete legalization. Won't happen, especially in the islands where boatloads of pot can easily be grown in months. If the USVA were to completely legalize, half a dozen other islands would follow suit in weeks thereby minimizing the USVI marketing advantage.
This company is doomed to fail again. AT 400K marketcap, it may still be overpriced as a shell.
The meth is for the people who think that you can make a business out of medical pot on an island territory with about as many people living there as normally attend an SEC football game.
If you haven't figured it out yet, only recreational pot is going to provide the volume needed to make this work. And that isn't going to be allowed.
Though I liked your thought of medical meth. Anyone who believes that medical pot in a US territory of 106,000 people is a legit business opportunity should look into radical treatment. I would advise shock therapy attended to by a bankruptcy attorney. But who am I to judge. Just someone who recognized this POS for being what it is at .006. This new deal almost makes the old one look reasonable.
Wadirum - It is one thing for the US Gov't to allow a state or even many states to experiment with social policy. To allow a territory to take this action provides a complete green light to every other nation on earth that the US will no longer prosecute for pot.
It throws into question the entire war on drugs, from pot to heroin to meth and whatever else there is out there. Moreover, it now provides a green light for criminal enterprises to work with banks on drug trafficking and money laundering.
No president with even a tenth of a brain is going to open this up beyond the 50 states (and DC). The consequences and legal problems this would cause could be huge. Decriminalization is a reflection of reality. Legalization is the opening of Pandora's box.
Curious about how lowball your bids are? Two zeros in front or three? If it's three, you may need another 6 to 10 weeks. But fear not, .0009 and falling is inevitable.
Cannabis in the USVI? Seriously? It's one thing for Uncle Sam, even a Democratic president to let a handful of state legalize. Allowing a territory to do this tells the entire world to grow all they want and ship it to the USA. Not going to happen under a Dem. Under a Republican (with the possible exception of the Donald), it ALL comes to a halt. On January 21, 2017 the storm troopers move in to shut it all down.
No doubt. And look, it didn't cost you shareholders that much. You went from about 10 million shares outstanding to 23 million and you cut your stock price by about a third in a year. All in all, it could have been worse.
So tell me how a division that isn't profitable stays in business once the parent company cuts them off? And do the liabilities end just because they spun them off?
Earnings/Losses are out on SEC.GOV. 3.17 million loss in Q3. Nailed it.
Born, that's an excellent question. Why would an investor put up $1 million for 5%. We will know in a few hours approx. how much money FD lost in Q3. We already know about Q1 and Q2. I'll let you do the math. Compare IVFH's results in 2014 to 2015 - Q1 and Q2. The difference is all FD.
Now ask yourself if you know all the details of that $1 million valuation. You don't know who it is, so I suspect you know none of the other details. If it looks too good to be true, it probably is.
Geodan - Let's see what the numbers look like on Monday. It will be very interesting to read the documentation that FD puts out as its stock starts trading in 2016.
While you may be thinking unicorns, I'm thinking rabbit caught in a trap with a wolf picking up his scent. Lunch Mr. Wolf?
You are about to become a direct owner of FD. Let's reserve judgement on whether this is a good deal until you see some additional indication of FD's viability as an independent company.
Now you get to see the company up close and personal.
Remember, this spin off wasn't a promotion. It didn't happen because the rest of IVFH was holding FD back. It happened because one or two more laps around the bowl tethered to FD and it was time for the long swim from which there is no return.
We haven't seen the Q3 results yet, but the timing of this announcement should tell you all you need to know. There are no coincidences in this world.
So Sam had four choices, but only one makes any sense. He could stay the course, sell it, close it or spin it off. Think the 7 Stages of Grief. Stay the course? IVFH broke 50 cents on the downside. 30 cents anyone? No, something had to happen.
Sell it? Do you think he tried? I do. If he found a buyer, it might have led to a write-down. That makes the happy story of unique focus and business specific value difficult to position. So he had to sell it for no less than the price he bought it for. Umm no deal.
Close it? Think lawsuits galore plus write down. Worst of all worlds.
So we get the final alternative. Is FD viable as a stand alone company? That's the big question. In their favor, Q1 and Q2 are the best quarters. Then again, look at how FD did in Q1 and Q2 of 2015. Should be an interesting 2016.
Born - if your math is correct, that would work perfectly. Remember, Sam paid about $20 million for FD, $14 million in stock and then he absorbed about $6 million in debt. If investors value $1 million at 5%, then Sam can claim that the asset isn't impaired and no write-off needs to happen.
Of course, the minute the stock begins to trade all bets are off. I don't fully understand the rules, but I do know that as long as Sam stays under 20% ownership, he doesn't have to take the company on his books. He may also not have to take any write down even if his 19.9% is now worth far less than 19.9% of $20 million. Don't know those fine points of accounting. I do know that below 20% means it it just a passive investment with no requirement to co-sign for anything.
Can't wait to see the Q3 report in the next day or so. If this spin off doesn't happen until early 2016, IVFH has one more quarter of living with FD.
IVFH is going to have to leave FD is relatively good shape following the spin off.
Now you know why IVFH is up from 50 cents to 70 cents.
Two completely different business models. It's like asking why Toll Brothers doesn't put wheels on their houses like Winnebago does.
Now they could open an on-demand business because they have a kitchen or two with plenty of spare capacity. But one wonders how much the shareholders can take. It isn't clear anyone in the on-demand business is making money short of those pure transportation companies (the GrubHubs of the world.)
The problem is that with all these people out in the world selling stuff literally off the back of the truck, it gets harder and harder to sell food on a subscription basis. Too many people skimming off the dinners and too few people willing to pay for the highly profitable breakfasts.
There are dozens of these guys popping up all over. Many are VC backed. On-demand is the newest hot category in food-tech. Think 'just in time' inventory that was super hot just a decade or so ago. It works great right up until the time that it doesn't work.
It is not clear if any of these companies are profitable. Eventually, the majority of them will burn through their investor cash and close up. There are too many of them, they need huge volumes to be profitable and they are not scalable. Other than that, these are exciting businesses.
Goinlong - do not confuse silence with agreement. No use fighting a PR machine that is having success. Unfortunately, shorting a company like this is not an option. Well that worm has now turned. Let's see the Q3 report to decide who knows what is going on.
Good talent isn't expensive. It pays for itself. Bad talent is very expensive. No matter what the price.
Lets see what Q3 has to offer and then we'll both know the answer to that question.
Excellent question Geodan. Let me first state that I myself look very favorably on fraternity brothers being one myself. That said, here's the story.
I have talked to a few PE people about this very situation. The fact is that they love subscription businesses. But they love these businesses when churn is measured in 1% per month. When churn is 5% to 10% per WEEK (not month, per week), they just freak. And yes, those numbers are very realistic. They regard those numbers as unsustainable. In many cases, it is hard to argue that they are wrong.
But the other problem is that, IMO, too many of the people running companies in this business are utterly clueless. To the extent they have some success, they have no idea what to do next, become enormously self absorbed, and acquire this god-like mentality. I would love to tell you I saw it once and I am assuming it happens all the time. Unfortunately, I have seen it many times.
Let me just tell you a short story. Every industry in this world has a convention except the meal plan business. I asked the fellow who compiles the industry report every two years if he ever thought of putting together an industry convention. His response to me was that in no other industry do the people who run these companies have a visceral hate for other business owners like they do in this business. I could only conclude that in an industry of small minded fools, it isn't worth looking for the one or two who aren't. Eventually they will rise to the top and be recognized for their competence. In over 15 years, that hasn't happened with maybe one exception. (That company is LA based).
Geodan, I think you know the answer to this question. But as gingerly as I can, let me say that the subscription part of the food industry seems relatively unattractive to investors. I know of at least one company with outstanding prospects in this business. Yet the subscription companies remain relatively unloved by the big boys with capital.
The second point is the quality of management. Look at the people who run subscription businesses and compare them to the people who run GrubHub, Plated, and other foodtech businesses. The glamour people avoided the subscription world like the plague. I don't know why but they did. Admittedly, the subscription meal plan business is largely populated by people who can charitably say 'I also attended college'. Some barely finished high school. The monied people just don't find most of them to be of interest.
IMO, the majority of money invested in this industry by the private equity crowd could have done more good if turned into ones and burned for fuel. But you know how trends are. If everyone is buying petrified dinosaur turd rings, then maybe I need a petrified dinosaur turd ring. I have no idea why but shame on me for falling behind. So these idiots invest tens of millions of dollars in businesses that can never make money. I guess that's why they make the big bucks. Look at the geniuses who invested in Organic Avenue. It was shut down about a week ago. 100% investment all gone in two years. More useful idiots who thought the cold pressed juice business was more than a fad. It isn't. When the hipster scum find something else to love, the business is toast. $10 for a glass of juice. Yeah right.
Seeds,
I'm curious about these 'widely acknowledged' concepts of which you speak. I was not aware that there were any acknowledged concepts in the business, be they widely acknowledged or locally acknowledged. I would appreciate a list of these.
My interest in this business is the fact that work with multiple companies in this business and related businesses. The foodtech business is very hot these days. Many of my colleagues are busy losing tens of millions for their employers by grossly overpaying for companies and talent in this field. I prefer to deal with companies capable of long term sustainable growth.
The fact that FD is now public makes them a source of readily available information. Their metrics represent data points that every competitor is interested to know. Knowing that they have been able to re-up 80% of all their customers acquired on a Tuesday with a last name starting with one of the letters from the word 'Excelsior' is not especially relevant to me, my clients, FD or anyone else. We like to stick with KPI's that are relevant to a subscription model business.
There is always the story behind the numbers. FD is an especially interesting case. It was once the largest company in its industry. I'm not sure it still is. Yet it is interesting how few companies have reached FD's size. In a sea of hundreds of competitors, maybe one is bigger than FD. Naturally, anyone with an interest in the business follows them.
Seeds, by nature most small cap investors are an optimistic lot. You and several others have shown that. It's an admirable trait.
I, however, am not. I understand that many market makers earn a very nice living by taking the opposite side of your trade. By and large, small cap investors lose money. Some hit that 20 bagger. They are the exception. The money is made on the short side. For most small cap and nearly all micro cap companies, their first mistake is their last. If one is going to make a mistake, one must realize it quickly and take action. To delay is to die.
We are going to know a lot more around 11/15 when the numbers come out. But understand that in the FD business, the first half of the year is far better than the second half.
Well stated Mikeymac. You can be sure that Sam is wrestling with the same concerns. Assuming he knows what the the likely trend is for FD and IVFH (an assumption I would not make), he will look at his alternatives and make a decision on what to do.
Please don't misunderstand something. I have no interest in seeing FD do poorly. The company makes a fine product and makes the lives of many people better. But the data shows that they are losing money. A lot of it. Far more than anyone ever imagined.
At some point in a failing battle, a leader has to either devote more resources to the cause or retreat. Status quo is not an acceptable answer. IVFH is not General Electric. FD is half the company by sales. Its impact on the bottom line is enormous. The impact on the stock price speaks for itself. There is no long term if death comes between today and the rosy future. Something has to change.
Seeds, all I can tell you is to shut off the sound and just read the numbers. Don't listen to the spin. Don't listen to the metrics that no profitable company has ever dreamed up before. Just compare 2014 with 2015, quarter by quarter.
You don't need to get into the weeds on anything except the comparative income statements and the cash flow statements. The difference between the first half of 2014 and 2015 is almost 100% FD. It's simple math. No addition needed. I hope you are comfortable with negative numbers.
As for the cash flow statements, just look at the cash from operations. That's your relevant number. There's some investment use of cash, but it isn't huge. This isn't a business with large capital assets. If cash from operations is minus a million, then it ether came from the company's bank account or they sold more stock.
It's not scare mongering. It's math.
Interest costs are not that significant. Let's put it this way. While they may be large, prior to the FD purchase, the company was profitable, though not wildly so. Remember, food brokerage is a low margin, high volume business. So the interests costs were manageable. Sam did some fine negotiating with the debt holders to get that situation stabilized.
As for FD's profitability, the meal plan space is increasingly under competitive pressure from on-demand competitors in major markets. So rather than sign up for 3 meals a day, Monday through Friday, you may just order a handful of dinners and a few lunches from an on-demand supplier. Think GrubHub, Munchery, etc. If you actually feel like cooking once or twice a week, then Blue Apron or Plated becomes a competitor.
Meal plan companies need a very strong brand. There has to be a definite reason why people want to buy their product. A company can build a base for establishing a brand in just a few years if it has the talent and money behind it. So if I am correct, IVFH will need the talent and the capital to make this happen.
How much more patience do you think the market has left? How much more dilution are shareholders going to tolerate? Are the right people in place to make this happen and who is going to make that assessment?
Seeds, I'm a simple man. I don't know from neuroscience or PhD level economics. But there are a few things I know.
I know the stock action says something is drastically wrong. Stocks don't fall by this much this fast for no reason.
I know how to read an income statement. I know that when they print things in red or put numbers in parentheses, they are losses.
I know that not everything works. Even geniuses make mistakes. The Babe struck out a few times. Sometimes, people take on projects that are just out of their league. Kinda like when a good D2 football team thinks its a wise idea to make some easy money by setting up a game against Alabama. Kids get hurt in a 70-3 loss.
I have a feeling that there are going to be some major changes. I believe they will happen very soon. If Q3 is what I think it will be, Sam is going to have to tell the world he has another plan. We are going to find out in three weeks how well the original plan has worked so far.
I can only tell you two things.
1) A large portion of the business is very price sensitive. Some is not. People who want the service may not care about $30 or $35/day. But to a great many people, price is very important.
2) A 30% price increase in the business is enormous.
If you have a well defined brand, you should avoid selling on price at all costs. Companies that do sell on heavy discounting do so because they lack marketing competency.
And BTW, what is cash EBITDA? Is that where you pay for salaries with stock so you can say that money doesn't count? Is that where you don't pay for something on December 29 but hold it to Jan 2 and say you didn't owe it at year end? Do you think the difference between the GAAP loss and the cash EBITDA loss is just depreciation and amortization? Umm no. Cash EBITDA is one of those metrics like 'She was the prettiest girl on the north side of the street if you don't count the houses painted red or green.' Beauty queen descriptions generally don't sound like that.
Congrats on recognizing Webvan for being the farce it was. Note that the same idea has been reinvented multiple times since Webvan's demise. Same results - failure.
As for FD, and any meal plan company, the challenge is marketing, not production. This is not a food business. Never has been, never will be. It is a marketing business. Some companies in the business don't even produce their own food. They outsource everything but marketing.
This business is not even close to the same business that is the rest of IVFH. Yes, they both make food. But one is a marketing business and the other is an operations business. I think some of the FD skills are applicable to the food brokerage business. None. Zero. Nada of the food brokerage skills are applicable to the FD business. It's like the difference between running an airline and manufacturing airplanes.
As for what has happened at FD, I can only guess. I won't speculate publicly. I just know how to read a financial statement. The difference between IVFH in Q1 and Q2 2014 and 2015 is FD. Unless you think the base IVFH business collapsed, and I do not, then simple math tells you how FD is doing.
No massive dilution going on? First, don't confuse free trading shares with shares outstanding. Outstanding shares has absolutely ballooned. Go look at it for the last 6 quarters. Even if you ignore the ten million shares paid for Fresh Diet, look at the increase in shares outstanding.
Of course, a part of it is shares used as pay for management. Now the good news is that when a stock craters like this one has, warrants don't get converted. But management, the same management that was responsible for trashing the stock price, then comes back and says we need to reprice all the warrants or we have no management retention program.
Kind of a dilemna, yes? The shareholders get to dilute their stock even more to reward the same people who failed them. Why? Because they can.
Then we assume you'll be loading up the truck. Given the massive share dilution going on, there's plenty of shares to be purchased.
Question is how much pain will the market tolerate? The market is not comfortable with the current situation. Time for a major change?