is working (too hard) for a living
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A key comment in the link is the following assertion:
because there are significant thermal coal deposits in the State Tasmania
Only 100 people were employed in black coal mining in Tasmania at y/e June 2008, relative to the 37,074 employed in Total nationally (e.g., Australia)
TRYING to go national might be a more accurate summary.
Of the four new states announced in the last year, only two have happened.
'Zoning issues' and high costs have been blamed for the failure to open New Jersey -- but the former is likely to be an ongoing challenge in our increasingly conservative nation, and the latter suggests that the BCCI business model is not readily financeable, particularly in urban areas.
More recently, a December 13 press release promised a February store opening for Phoenix/Scottsdale, with four more stores by the end of March, but radio silence since.
NET: BCCI is not announcing many new stores, and is unable to consistently open announced 'national' (non-Washington) stores. Three opened out of eight announced in the last year, and the eight does not include the additional stores licensed to the Texas group, who have so far elected to open only a single store.
100 stores planned for the year, one done after two months -- you do the math.
You say:
They are just proceeding to produce results rather then argue.
I am unaware of any 'results' in the past three years other than a failed RO and a series of press releases about such things as purported funding sources (Libertas, Sure Capital, Hunter-Wise, TXO, NBD Partners), acquisitions (Grand Monarch Holdings), unsolicited offerings of jet fuel (US Air Force) and miraculous technologies (FASER, flare gas, medical waste handling). If you are aware of positive business results -- please list, with links (before you jump in, I do not consider the payment of Mr. Bendall's hotel bills as a business result).
As to why anyone would do anything if Bellevue's chance of success is only 2%, the answer is easy -- no-one has done anything. Presumably after due diligence, Libertas, Sure Capital and Hunter-Wise faded away, and so far there is no evidence that TXO and NBD partners will do anything different, although I would loved to be proven wrong.
The 'misinformation' about Bellevue's COS is on page 2 of the 100+ page October 23, 1998 RPS CPR on the EEGC website. As to existence of a 'final' RPS Report showing a better probability -- f a more positive update was later created by RPS, why wouldn't EEGC post it, rather than leave the 'misinformation' posted? It doesn't take that much work to post a document -- EEGC certainly finds the time to post its press releases, although most get taken down after they don't play out...
PPS is not the way to measure value of a company.
- One share outstanding at .02, would be a small value, .02.
- 1 Trillion shares outstanding, would be a large value, $2B.
In EEGC's case, one could certainly posit that the stated $8M valuation on Yahoo (not sure if that is right, since the amount of dilution is not fully clear to me, absent filings to explain the share shenanigans of the last two years) is more than generous for an oil and gas development company with no money and whose only drilling license -- itelf on property with only 2% chance of testable results, much less commercial results -- expires in 2.5 months.
Not a good sign when the 'best posts you have seen lately' are restatement of old EEGC announcements.
Jersey EXCELLENT posts as a reminder of whats ahead for us who have shares in EEGC. Best posts I have seen lately.
Mr. Henthorn has certainly evolved a strong management team, based on experience -- which causes even more concern about the inability to develop financing for owned stores and to sign up franchisees.
Further, more than half of the stores announced for opening in the last year have not opened or confirmed opening dates (New Jersey - 1; Phoenix - 5).
Have to assume that the business model is not sufficiently strong at the store level to incent capital investment, despite historically low finance rates. Not a good sign for those anticipating that BCCI will reach their projected 100+ stores opening this year.
It would help if BCCI would produce on what HAS been announced (New Jersey, Arizona).
Failure to do so casts significant doubt on BCCI's ability to achieve 2012 forecasted store openings.
Inability to announce and execute openings suggests serious issues with both the franchise and owned business models from an investor perspective.
I'd rather have BH come through with more stores than a reality tv show:
- 100+ new stores have been promised for 2012, only 1 actual in the first two months.
- In mid-December, five new stores for the Phoenix area were promised to open this quarter, including one in February, but so far there is no public information as to where any of them will be, and there are no current job openings for any of them.
Or, are you stating that the reality tv show is necessary to achieve forecasted results, which IMO is not a good thing.
BCCI needs to generate dramatically increasing revenues and profits to justify even its rapidly declining valuation (at a time of overall market strength), and right now that does not appear to be happening and there are no current signs that it will happen in the near future.
Need more stores.
So far, it would appear that the franchisee dollars required to open a store (franchise fee, capital equipment, lease, working capital, and then ongoing royalties) are more than the market can bear. And similarly, company-owned stores are not happening at a rapid pace, suggesting that the cost of capital is too high for the business opportunity presented.
Would be interesting in hearing from other posters their thoughts about how this revenue gap can be closed without very significant dilution -- or significantly reduced profits, versus the recent 'independently' published business projections.
I took a look at the referenced financials.
The issue relates to the acquisition that was done at the time, and financial rules.
If you look at the footnotes to the March 31 financials as released, the 'real' BCCI is shown in the footnote with retained deficit similar to June 30, with the difference accounted for by the deficit during that quarter.
Those around at the time may know more, but looks like this may have been a 'reverse merger' whereby (operating) BCCI bought a basically bankrupt company which was trading, so they could trade. I am speculating here, but it looks like the prior company's financials were 'wiped out,' replaced by BCCI's financials which were disclosed in the footnote to the March 31 financials.
So, I don't see any wrongdoing here.
Yes, BH is paid by stock options, lots of them. Indeed, judging by the relatively low quarterly G&A spending, it would appear that most of the executive team is being compensated by stock and stock options, which gives them strong incentive to develop the company and arguably promote the stock, although within the bounds.
Meanwhile, looking forward to hearing about the opening date for the first Phoenix Baristas, promised for February in the December 13 PR, with all five promised for this quarter.
Fair comment -- I had viewed TOGL as a subsidiary of TXO, and thus if TOGL was funding EEGC, then so was TXO.
Perhaps I was wrong about TOGL relationship to TXO.
"No chance" is a bit harsh re: likelihood of license extension/renewal.
If there is verifiable money in the bank, could get a renewal of some sort.
Having said that, based on history, many will argue there is NO CHANCE of money in the bank and therefore, no chance of renewal.
Funding gets more and more convoluted. Most recently, TXO was to provide funding. But, they now only seem to be a 'finder' (like Sure Capital and Hunter-Wise before them), and they introduced EEGC to NBD Partners. Now, there is yet another unnamed 'entity' involved, perhaps NBD introduced EEGC to them.
Agree, the 8-K is a 'factual' document.
So, what does it say about funding, the critical element we have all been wanting:
Empire has finalized negotiations with a South Korean entity and is due to receive a payment of $100,000 to provide that entity with an option to enter into a $50 Million USD convertible Loan Note and Joint Venture and Management Agreement with NBD Partners Energy to pursue the GSLM drilling program.
For some reason, your quotation shows as a response to 16103, rather than my 16201 from which it actually comes.
Can I assume that your ????? etc means you didn't understand the point?
The point is:
- You said 'big news' coming last week.
- Turns out you were expecting a PR for the opening of Tampa, which would hardly qualify as 'big news' -- opening of an already announced, $125K/year store isn't 'big news' for a $20M market cap company -- although it is the first of a year planned to have over 100 such openings.
- I simply suggested that 'Bigger News' would be announcing locations and opening dates for the FIVE Arizona stores which were announced (PR dated December 13) to open by end of March, with first one in February. The reference to New Jersey was that there was a PR late last spring that announced a New Jersey store, which hasn't happened; hoping that will not be the case in Arizona.
Hope that answers your ??????
But not something positive about which one would expect a PR, which was the expectation created by poster BCCI.
I suggested that the opening of a $125K/yr store would not put on a buying rush for stock of a company with $25M market cap.
Similarly, although companies are required to make disclosures about adverse events, a slightly delayed opening of such a store would not deserve a PR.
It is certainly appropriate to observe that failure to open a single store in the first month of the year could create a negative prognostication about a company's forecast for 100 plus openings in the year (and, I would even give odds while taking the under) -- but still, not deserving of a PR.
While Sonic, Checkers, and Subway are not high end restaurants, neither are they coffee emporiums with the occasional miscellaneous food.
Still would like to see the appropriate comparables. I expect you would still be able to make your point -- but would have some credibility.
BCCI has committed to opening over 100 stores this year so the opening of one should not be viewed as 'big news.'
Although, this will be the first of the year and it is already February, so maybe it is news, and based on company practice one would expect a PR.
But I would not expect a burst of buying activity as a result, since the average investor will not consider the executed opening of a previously announced +/- $125K/year revenue stream as meaningful to a company with a $20M market cap.
'Bigger news' would be to announce opening dates and locations for the five Phoenix area stores previously announced to be opening before March 31, to demonstrate that the Phoenix announcement was not like last year's New Jersey announcement where there is still no committed opening date.
Real news would be announcing additional franchisees with a significant number of committed locations; or, announcing financing with nominal dilution to support the 50% of this year's stores which are planned to be company operated.
It is good to have comparative store data, but I would argue that comparing Maggiano's to Barista's is comparing grapefruit to grapes.
A high end dinner house is quite different than a coffess stand.
It would be more interesting to look at Starbucks, Peets, and Seattle Coffee as comparisons -- although those comparisons would also be unfavorable.
And BCCI knows that current store revenues will not make it for franchisees, given start-up costs, which is why the 'independent' research showed monthly per store revenue increasing from $11K to $20K over the next four years.
To determine Phoenix cross streets, perhaps contact Mr. Henthorn or the development company; or, if city permits are online, check there.
I seem to recall at least one of the stores is scheduled for Scottsdale, which I believe to be 'home base' for one of the principals of the development company.
Although the PR said five stores by the end of March, my projection of three was based on the fact that no openings have been announced, and there may be a desire to learn from the first before moving aggressively on the others. However, I'd love for the company to prove they can meet the aggressive projection.
BCCI itself recognizes that $400/store/day is not sufficient to drive a healthy business for company or franchisee, given the capital costs to open a store.
The recent 'independent' research report says that average store sales will go from about $12K/month to $20K/month. Not sure what will make that happen -- as it is budgeted for a couple of years from now (2014 or 2015, forget which), it can't be the reality show.
In the overall scheme of things, a delay of a week or two in the opening of a single store means nothing.
The more important issue is whether lease signings are at a sufficient pace to reach the 100 additional store number by end of year. And right now, I think not; can anyone name more than five new stores to be opened by end of March? My rough numbers suggest one in FL, three in AZ, and one in TX (note: some opportunity for AZ upside).
While this is an increase on the number opened during the last six months of 2011, it is hard to make a case that the current trajectory gets BCCI to 100 new stores in 2012.
You have to be kidding:
There are 422 million shares outstanding. A very respectable job Malcolm has done for us shareholders in keeping it low. One of the best reasons to own this stock.
Check out your local newspaper -- most of the articles are from some other source, not written by a 'local' reporter.
It is a positive that BBCI PRs are being picked up by all of these outlets -- although it is an interesting use of resource for a company with less than $2M/yr in revenue to have a Senior VP of Corporate Communications.
Seems like the communications (and reality TV) strategy is to
(a) get the stock price up to reduce the dilution of the equity placement which will be required, per the recent 'independent' research report; and
(b) get attention such that customers will try the coffee, but also -- and perhaps more importantly -- so that prospective franchisees will have the confidence to invest the large sums required to open a franchise.
According to the Prime Eaquity Research report:
Franchise Costs
- $50K franchise fee
- 6% of revenues as royalty
- 1% of revenues as marketing fee
Plus $100K outfitting cost.
Plus 30% of annual revenue as working capital (seems high, but I think that is what it said):
- About $40K at today's typical store revenue.
- About $75K at store revenue predicted for 2014.
Please open a few!
Certainly appropriate to scrutinize the key assumptions in the report.
Stores opened is certainly key -- and BCCI's ability to forecast that number was certainly not good in 2011.
Two others that caught my eye:
- Monthly Revenue per store, going from <12K/store now, with many of the stores open for years, to $20K in 2014 (no discussion as to why).
- Operating margin in owned stores, going from 22% to 30% in 2013.
A CFO for a company at which I worked had an expression for forecasts such as these -- TAMO (Then A Miracle Occurred).
BTW, if monthly revenue per store were to stay at $12K, and all other assumptions in this report 'held,' the analyst would have had a $.12 - $.24 target, roughly where pps is today.
The 2012 franchising model implied in the numbers is concerning --and please correct the following for any errors.
- Store revenue per year is $140K. If company owned stores have 22% operating margin, then franchisees would have 15% (6% royalty, 1% marketing fee 'off the top'). So, $21K/yr of operating margin.
- For which the franchisee has to pay, presumably up front, $50K franchise fee plus $100K store start-up costs. Additionally, there is discussion of a 30% (of revenue) working capital requirement per store, so another $40K. Total investment $190K for a $21K/yr profit. Feels like a lot of cost for not much reward, which may be why franchisees have not come on board quickly.
Having said that, the fact that the Texas franchise is now looking at another store is a positive, although as an initial franchisee they may have gotten a 'sweetheart' deal, and the fact it has taken so long is not a positive indicator for the 2012 yera end forecast of 50 franchised stores in operation.
If you go to the research company's website (www.privateequityresearch.com; typo in BCCI PR), it is clear that this company does paid research 'for the benefit of shareholders,' that is their model.
If the fee paid was only $6400, this suggests that a lot of the actual work -- development of key assumptions, number crunching, market research, writing, etc. -- was done by someone other than PER, there is a lot of work here.
I doubt very highly this work was initiated by PER, not enough revenue in it for them.
BCCI's key motivation to see such a report published is the price they will get for the equity which must be sold, they appropriately want to minimize dilution.
Took a look.
Do you think it is meaningful that Mr. Bendall's oft-quoted RPS Energy report is missing from the new site as well as are many historical press releases, financial data, etc.
On the other hand, we no longer need to look wistfully at the Hunt #3 rig ready to drill, or look at the following headline which is part of the home page:
Tuesday October 26, 2010
Empire Formally Re-acquires Grand Monarch Holdings, Directors Travel to Middle East to Finalize $180 Million Structured Finance Transaction, Rig Set to Return to Bellevue
Over a month since a PR announced a trip the next week to Asia to confirm draft funding agreements with NBD partners, with no follow up.
Disappointing, but not surprising given the other announcements of 'pending funding' which have come out of EEGC over the last many years with similar results.
Five months until lease expiration. Where is clipso with the explicit countdown? I'm sure this is obvious to him.
Not sure your issue with a pre-paid loyalty card.
My Starbucks gold loyalty card is also pre-paid; indeed, when I receive gift cards, I just add them on to the gold card, which gives me a free drink for every fifteen paid drinks, plus a free drink on my birthday.
Don't know the particulars of the BCCI card, but I don't see why pre-paid should be an issue relative to industry practice.
If EEGC's case against Smart Win for billions of dollars is so strong, why wasn't it filed when the damages were incurred?
It isn't like EEGC doesn't need the money.
IMO, it was filed solely as a defensive maneuver against Smart Win's suit, hoping it would be a bargaining chip to make the Smart Win suit go away. The fact that it hasn't suggests that EEGC's suit isn't very strong.
The fact that EEGC's market cap is under $7M suggests that the 'efficient' stock market isn't expecting billions, either.
Unfortunately, I (and more importantly the market, valuing EEGC at under $7M) agree with you:
People can read anything they want and spin stories every which way but simple logic says there isn't a financial avenue anywhere on this planet that will toss millions of dollars away on a 2% chance of oil at Bellevue and less at thunderbolt. Not a snowballs chance in hell.
Good news on second and third TX stores -- having a franchisee open additional stores is a very positive sign. However, the amount of time it is taking after the first store opening does imply that 102 stores open by year end 2012 may be a stretch.
Would love BCCI to have stores in NJ with that huge population, but only if the economics are right.
Thanks for your thoughtful response.
However, you have not responded to my request that you provide links to your assertion in post 15460 that
(BCCI has) 30 signed leases which means space and rentals have been negotiated. On 30 new completed leases (franchise only) they will make a little over 1MM +++ the fees associated with owning the location.
You mention
They have 30 signed leases which means space and rentals have been negotiated. On 30 new completed leases (franchise only) they will make a little over 1MM +++ the fees associated with owning the location....
I was unable to find anything else on DCB Management, LLC, which is surprising given Mr. Conlan's comment about
DCB brings the capital and the expertise to nationally brand Baristas in a relatively short period of time.
About the Author
C. Douglas Conlan is a 19 year marketing veteran and partner in Kaboodle Ventures, a developer of innovative marketing strategies for restaurants, bars and nightclubs, and provider of http://www.happyhouralert.com . Visit http://www.happyhouralert.com/listing for the best of Arizona’s restaurants, bars and nightclubs and to see what C. Douglas is up to these days, or read his blog at http://www.golf-in-arizona.com
BCCI's plan is national expansion through franchising, with the backgrounds of staff brought on board. The problem is how long this expansion' will take.
- FL and NJ stores are long since announced, but not open -- or even specific locations provided.
- One store is open in TX; if I recall right, that company has an agreement which enables it to open several more, but there is no public indication of when a second might occur.
The above suggests that the franchisee business model, which must include payments to BCCI in addition to all other expenses, may not be particularly profitable and/or financable.
Or it could indicate that financially weak organizations have been the ones who have applied or been recruited for franchises.
Or perhaps there is some other reason for the slow pace of national which has not been disclosed as yet.
In any case, hard to see how this slow growing business with $1M in revenue and nominal margins is worth its $31M market cap. But, given the valuation, perhaps the company might consider an equity raise to enable faster expansion through start-up loans to franchisees or organic growth.
I'd feel better about your conclusion, "BCCI will soar," if you could point to positive corporate events that will enable the $1M/yr revenue company in a relatively low margin business (after taking into account cost of coffee, labor, equipment, and leasehold) to justify a $30M valuation.
The key issue is how this company grows quickly without additional dilution.
Great concept, no argument -- I just don't see how the business model rewards equity holders. The stock may well go up in the short/medium term due to pumping being stronger than dumping, but how does the company succeed in the longer term so that the stock has inherent value?
What are the financial assumptions that support the current valuation? Number of franchise stores versus corporate stores, over what period of time? Relative profitability of each per year? Cost of acquisition? Capital cost to create company owned locations, etc?
Not saying there are not great answers to the above, just saying I haven't seen them discussed during the pps dialogue; in the long term, business drivers result in pps.
And the $62K Q3 profit is 'overstated' as I don't believe that the chief officers are receiving salary; rather, they are 'rich' in stock and options.
From one perspective, that is a strength -- the proposition is sufficiently strong that key individuals prefer stock rather than being paid cash. A key element for a 'bootstrap' (non venture capital) financed company, and good for shareholders when succesfull.
However, it is still hard to see how $1M in revenue in a relatively low margin niche business which is not growing rapidly is worth $31M today. The TX, FL, and NJ announcements suggest that the niche could be national -- but the delays in opening franchised FL and NJ stores, and nothing that I'm aware of about a second TX store - suggest that gaining the requisite financing to open stores at a rapid rate may not be easy for franchisees, or even for BCCI which is clearly 'cash poor.'
And note that in the franchised operations, BCCI will likely not receive all of the profit but instead a percent of the revenue which must be sufficiently low to enable the franchisee to make money and pay debt service.
I believe Barry Henthorn is a focused, shareholder friendly CEO, doing his best to build long term value in a sustainable manner. My view of today's PPS is that it ia all about relative valuation, not whether current momentum is with pumpers or dumpers. And for me, current valuation is too high, arguably by an order of magnitude.
The question is whether such rigs are available on a timely basis.
The clock is ticking....
Actually, logic says there isn't oil in EEGC's leasehold; if there was perceived to be a high probability, EEGC would not have such a hard time obtaining funding, and would have a market cap well above $8M.
I know you don't like the 2% 'Chance of Success' number, but that WAS the Bellevue (upper and lower) number in Table 1 on page 2 of the RPS Energy Competent Persons report for EEGC dated October 23, 2008, on which the subsequent 2009 report was based (note the reference in Z's quotation).
As you are apparently close to the company, I recommend you obtain a copy of the report and read it, particularly if the 2% number would change your entire perspective.
Having said the above, I believe there is a positive business case to be made for investing $5M in drilling Bellevue in return for 49.9% of the company, based on 'expected value' and the investor's risk preferences.
I would certainly pay $5 for a 2% chance of winning $500, for example. Hopefully TXO feels the same way -- or is able to find someone who does (since they don't appear to be investing their own money).
As you have the RPS Energy report dated October 23, 2008, turn to Table 1, page 2, of the Executive Summary which clearly shows that the Chance of Success -- defined as the 'chance or probability of discovering sufficient hydrocarbons to be tested to the surface' -- a lower threshold than 'chance of discovering commercially viable hydrocarbons' -- is 2.0% for Bellevue, and lower for all other prospects.
At one time, the RPS Energy report was on the EEGC website. I can't find it there anymore. Perhaps Mr. Bendall decided to remove it because people actually read it (100+ pages long, very impressive research, very thorough and logical methodology) and quoted unhelpful portions of it, such as the above.
When Mr. Bendall quoted it, he quoted the size of the potential reservoirs and ignored the Chance of Success, or Risk Factor as RPS Energy also called it.
Hopefully, TXO will provide sufficient resources to drill Bellevue and determine whether we have, in fact, won the lottery.