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Not exactly true, Messr. Claridge.
The franchise laws require the company to disclose information regarding current and former franchisees.
Also, the company has made disclosures (presumably because it was legally required to do so) regarding endorsement deals. The company had disclosed the Mickelson deal in past filings, then it dropped those disclosures, suggesting that the Mickelson deal was dead.
Arguably, the company has a duty to disclose certain material events such as the loss of a major franchisee that it had spared no effort in promoting. I believe that the lack of such disclosure violates the securities laws, although it is not black and white.
Nevertheless, as stated above, the company does have disclosure obligations under franchise and securities laws.
Are you learning anything yet?
Here’s the problem- and it’s obvious that you already know it, given your choice of words- the statements you make are in the past tense, whereas Nicky keeps making the same statements in the present or future tense ( or in a way that would lead a reasonable readership to understand them to be present or future tense).
It’s a bit like a bald 60-year old listing a profile on a dating website about the gorgeous head of hair he had (30 years ago). His date is going to think that was a lie.
Because it is a lie. It is intentionally misleading and essentially untrue.
But you don’t have a problem with that.
For me, the easiest example is the incessant untrue touting of 6 flavors ( or 7 depending on the day of the week).
How can you believe anything an outright liar says?
A few thoughts on non-public information.
There are three primary risks associated with the disclosure of non-public information.
First, if the disclosing party has a legal duty (by way of a confidentiality agreement, for example), the disclosure could lead to liability.
Second, if the party in possession of the non-public information trades securities on the basis of the information AND the information is material, that person may be civilly and/or criminally liable.
Third, if the person disclosing the non-public information is a corporate officer, that person (and the company) may have a duty to disclose the information broadly to investors rather than restricting its disclosure to only a few.
Sonata, as far as I know, has no legal duty not to disclose VEND information.
Sonata has not and will not be trading on the basis of the information (and it may not be material).
Sonata is not an officer of VEND. If anyone should be careful, it’s the CFO, and he may (or may not) be complying with his obligations for all we know. I think that Nick had a problem with the release of information in connection with private offerings ( under Regulation FD), so maybe the problem persists here, but it is not Sonata’s problems.
The bottom line -Provided you aren’t disseminating false information with the intention of affecting the stock price, you should be free to disclose it here.
In fact, the publication of non-public information might render it public and thereby eliminate or reduce the problem.
So, IMHO, you should each share freely. And isn’t that the point of a message board?
Everything in the press release signals doom.
Hi all, I am on vacation and taking a break from my VEND obsession, but this press release got my attention.
The July numbers alone sound very bad. Every “kpi” offered by the company was lousy. Locations, down. Sales, way down. Installations, way down.
But I don’t think that alone was enough to bring about the decapitation of King Nick. There’s more bad news they’re not sharing yet. Clearly, liquidity has become a critical problem. This move smells last-ditch to me.
I wonder what drove them to seek an independent board- the SEC looking at the illegal commissions? The potential investors? The threat of litigation? One thing’s for sure- Nick and VEND did not make these changes easily.
The 10-K should shed more light, but I think it’s clear that the company has failed to raise sufficient capital.
The end is nigh.
I have called him RoBoZo a number of times, perhaps recently, but I decided to stop. I called him RoBo after that decision because I didn’t consider it to be disrespectful.
As I have said before, Alvie does a good job and deletes posts (including a few of mine) judiciously.
Another question for the shareholders' meeting -
Since Nick chose to issue an announcement in lieu of the last scheduled meeting in December, there was no chance to ask follow-up questions at the time. Maybe now that there will be a live meeting, someone could ask him to follow up on this statement that he made in December:
Production Volume
Our latest production schedule from a single line set up with our manufacturing partner projects an average of 150 kiosks per month through the first few months of 2019. It allows our teams to continue working on improvements while we maintain a more conservative and lean build schedule that is focused 100% on quality. An increased schedule based on the addition of a second production line is our number one priority and we believe this can happen in early 2019.
You might have (probably would have) done better than the VEND location specialists. Their primary motivation is to find a spot so that a sale can be closed. You would have a personal interest in the specific location’s appeal.
Aside from that, you seem to have more insight and savvy.
So, what did that lead to? No airport, a hospital, a school, etc., and one casino with the kiosk probably buried down some dark hallway in the back.
Anyone who has ever set foot in a casino on the strip can see that every inch of floor space is used to maximize profits. The prime locations that VEND might covet are also candidates for any number of revenue sources. When the casino operators ask for data on revenues per kiosk, the space that is made available (if any) is going to be low potential.
Even with their low standards, VEND’s team doesn’t seem to be very successful at securing locations. Why would any franchisee want to use them? In Houston, your kiosk will probably end up in the parking garage of a 9-5 M-F building.
Yeah, I'm putting the odds of a Q&A at about 1%. If they were serious about actually having shareholder input, they would at least put the directors up for re-election.
That said, if it's a small group, there should be opportunities to ask questions informally or even during the meeting (out of order, but who's going to stop you?).
And RoBoZo, with his connections and solid support, would certainly not be turned down if he wanted to finally get an explanation on the disappointing sales prices. (But I'm guessing that he wouldn't want to have an audience of less enthusiastic shareholders hear the answer to that one.)
You could start with the illegal commissions on stock sales by unlicensed individuals such as Nick.
Despite its promises, VEND has done nothing about it. And, even if they had, it's still a big problem.
Will you be there, RoBo? If so, please wear a white carnation in your lapel.
And, if there's a Q&A, maybe you could ask Nick why the kiosks are being sold for so little when you had been led to believe that they were all sold at $58,000?
I'm wondering whether there will be a Q&A period at the meeting.
They don't hold many conference calls. If I'm not mistaken, the most recent call followed the release of fiscal 2018 financials. And, instead of permitting participants on the call to ask questions, Yates answered some "frequently asked questions".
Any idea why they quit selling new franchises at $58,000 per?
They dropped back to less than $48,000 a kiosk in June. The only explanation I can think of is that cash flow desperation has led them to accept lower-priced deals if the buyer's deposit doesn't have to be escrowed.
They aren't going to be earnings or cash-flow positive at those prices (unless they start delivering kazillions of kiosks without increasing overhead). They need to step up the price.
VEND only placed one kiosk in a casino of the 5 Vegas-area locations they have disclosed.
So, it must not be that easy to get your kiosk into a casino. That was in the Tropicana, which does have a yogurt bar.
I would love to know where specifically in the Tropicana the machine was placed, but I would bet that it's not a very good location, and I would also bet that the percentage rental paid on it is high.
Location, location, location.
In looking at R&I locations, sometimes one that seems like a good location may turn out to be tucked away in an out-of-the-way corner in what might otherwise have been a venue with high foot traffic.
In Honolulu, for example, the kiosk is in a Hyatt Regency Hotel. Sounds great, until you realize that it seems to be tucked in a hallway near an entrance on the back side of the property that probably doesn't see much traffic and certainly doesn't have any traffic that is dawdling in the area.
The location in the west Houston office building is even worse. It's in the lobby of the parking garage. A less than ideal spot in a less than ideal location.
The outdated information on the R&I web site shows 5 Las Vegas area kiosks in operation. They are in a variety of locations - one casino, one hospital, one college, one gas station, one vacation club.
Useful life of a kiosk and maintenance costs? Don't ask VEND!
The recent discussion made me wonder what the franchise disclosure documents have to say about the kiosks, their useful life and the costs of maintenance.
Amazingly, they are almost completely silent!
So, if you are a prospective franchisee, you are told nothing about what to expect in terms of either the length of time you can expect your kiosk to last or the cost of maintenance once you are out of warranty. And VEND only provides a one-year warranty, so it's not like it's that far out in the ownership experience.
So, the franchisees are expected to buy in without any information about the total cost of ownership over time. Who would do that?
I guess VEND is still able to close sales because it focuses the prospect's eyes on the top-line revenue. Too bad that the results described in the franchise disclosure document are limited to the very few machines that were in place in June 2018, including the off-the-charts Houston Space Center.
Hey, Robo, I'm glad to hear you're asking questions and being skeptical.
How about you provide the expected useful life for the kiosks and your source for that information? Set us all straight.
What is the warranty period?
Who provides the warranty and warranty service? If Stoelting provides a warranty for their parts and others provide a warranty for other parts, who resolves disputes regarding whose part is not operating correctly and how is that sorted out?
Over what period (useful life) does VEND depreciate its company-owned kiosks?
How much time per week do you spend servicing your kiosks?
What did VEND tell you to expect the useful life to be when they sold you the machines? And what was their source for that information?
What's the typical service history for the kiosks that have been up and running?
What's the average useful life of the kiosks that have been placed in the field? What percentage of them have failed?
What do you do with a kiosk if VEND is no longer around? Or it doesn't produce enough revenue? Or it becomes a pain in the neck to keep serviced? Can you continue to operate it? Is there a resale value?
It sounds as though you didn't have the information or do the analysis at the time you made your purchase decision. It's a little late for you to be asking those sorts of questions now.
And were you skeptical of VEND when they answered these questions, or did you take their word for things because of Nick's sterling reputation for honesty and transparency?
A close reading of the press release leads me to suspect that it's not just more frequent cleanings that will complicate the lives of California franchisees. Quality assurance plans, bacteriological testing, etc., etc.
But the topper may be the need to empty all the unsold product from the machines and to dispose of it. Imagine having to throw away perfectly good product every week. Then you have to lug that stuff out to your vehicle and find a way to dispose of it.
I think you're right - owning a kiosk in California just became a much more labor-intensive operation.
Temporary is a relative thing, though, isn’t it?
Considering that it has taken two years or more just to get this far in California, with only a few kiosks in place and still more health issues to overcome, my bet is that they will be cleaning those machines 3 times a week for at least a temporary period of two more years.
VEND is required to disclose his compensation in the 10-K or annual proxy (of which there is none), but only after the fact.
There are some other executive compensation rules, but I suppose they don't apply to VEND (or only apply to annual meetings, of which there are none) or they are being ignored just like the rules that prohibit sales of your securities by unregistered agents.
As far as potential uplisting goes, it's problematic that the directors have not faced election by the shareholders.
I don't know the specifics, but I believe that in addition to financial requirements like positive earnings, substantial positive net worth, market cap, etc., the exchanges will require certain minimum corporate governance standards.
About the most basic corporate governance standard would be the election of the board. The fact that Nick doesn't even bother to put that on the agenda or to hold annual meetings shows just how serious he isn't about qualifying VEND for uplisting.
More evidence that he's blowing smoke.
Which means that the average for the remainder of the franchisees who didn’t make the top 10 worked out to about 8 cups per kiosk for the day. Best day ever, mind you.
Let’s see VEND promise NEVER to put another kiosk in an office building. That would be a whole lot more meaningful than the “We’re learning from our mistakes “ line.
Take a gander at the listing requirements for NASDAQ and NYSE.
There's no chance of an uplisting for a number of years. Nick is up to his old puffery.
RoBozo wins the chutzpah award!
Gotta love it when someone refutes statements as unsubstantiated by making unsubstantiated claims.
And, yeah, who would have the nerve to raise bankruptcy risk for a company with 2 principals who have filed personally, a gigantic negative net worth, a division that is in an insolvency proceeding, huge negative cash flow, a constant need to raise capital, etc? The nerve! Show that guy the door! Not to mention that many franchisees get just what gdogg was requesting - deposits held in escrow. But, hey, Nick is very principled, and you can’t let people like that into the group.
Nick is also predicting a loss for 2020.
Even if VEND achieves the 26% gross profit margin that the CFO projected (by October, as I recall), that won't be enough to generate a profit in fiscal year 2020.
On $40 million in sales, a 26% gross profit amounts to $10.4 million.
Operating expenses, although reduced, still amounted to $4.1 million in the most recently reported quarter.
Consequently, VEND is looking at a $6 million loss for the 2020 fiscal year. So, even in the unlikely event that operating expenses are pared back further, it's not going to reach the point at which a profit is on the horizon.
Cash flow is an even bigger problem, considering the franchise buy-backs and debt repayment that they are faced with.
It's interesting that in an article touting its rate of revenue increase, Nick proceeds to repeat the prediction that fiscal year 2020 revenues will only amount to $40 million.
You do realize that means that Nick is saying that results for the next 12 months will be essentially flat as compared to June, 2019, right?
So, the bragging about the not so brag-worthy achievements of fiscal year 2019 includes an admission that whatever the rate of increase has been in the past, we shouldn't expect it to continue.
June revenues were $3.1 million on installation of 74 units. A $40 million target is only 8% higher than that run rate, around a $3 million increase.
Now, take into account the fact that 2020 revenues should include substantial royalties from the installed base. That's over $1 million in revenues right there.
Then take into account that the revenue per kiosk for June was less than $42,000. The revenue recognized in 2020 should be based on sales that were made at prices higher than that. If the price per kiosk is increased to only $45,000, that alone will account for the $3 million in increased revenues for 2020.
In other words, Nick is almost breaking his arm patting himself on the back for modest 2019 achievements while acknowledging that there's not much hope for respectable improvements in the current fiscal year.
Thanks, that was well worth the time.
September 9, 2019.
That's the date by which VEND must file an updated franchise disclosure document in California in order to maintain its effectiveness when the current registration expires on October 21, 2019.
VEND won't be required to provide prospects with the new document until October 22, 2019, I suppose, but for those of us who are curious (obsessed?) with the performance stats (the meaningful KPIs, not the ones Nick chooses to share) and the number of franchisees who have departed, we should be able to sneak a peak at the new disclosure document shortly after it's filed.
So, 7 or so weeks from now, we can anticipate answers to the questions of how many cups per day per kiosk (or revenues) are generated and how many franchisees have quit.
Oh, happy day!
I wonder whether they will file the 10-K before the meeting. It could address questions like:
- The status of the Stoelting arrangement. It's July 15, and there's been nary a peep about the manufacturing that was supposed to commence this month.
- The status of the Flavor Burst mechanism. What's the problem, and why do you keep talking about 6 or 7 flavors, Nick?
- Projected installs for the balance of 2019. It seems noteworthy that, contrary to previous reports, no further guidance was provided for the balance of 2019. Could that be because the Stoelting manufacturing line hasn't started and the ability to ship the 600-800 kiosks that Nick had predicted is doubtful? The only projection - a potential "$40 million over the next fiscal year" - sounds ominous. Even at only $50,000 per kiosk, that's only 800 machines over 12 months instead of 600-800 over 6 months. And Nick conditions the achievement of that performance on the solution of the "short-term" cash flow problems. Sounds to me like a set-up for another disappointment.
- Most importantly, the status of their "short-term" cash flow issues that were going to be the focus of their attention this month.
So, if these questions aren't fully addressed in a 10-K that's filed before the meeting, will there be a Q&A session for attending shareholders to get their answers?
I am glad they read this board and attempted to address the problem.
Nick, could you please quit claiming that there’s a choice of 6 (or 7) flavors? It’s intentionally misleading and just makes you look more dishonest.
Can’t bring yourself to do that, Nick? OK, then please decide which lie you want to run with - 6 or 7?
I had noticed 325 mentioned in a very recent article, but I chalked it up to some sort of fluke.
But now they've updated their main web site to reduce the number from 407 (which already sounded low compared to their claimed installs through June 30) down to 325?
They now date the information. As I recall, the 425 number was as of June 7 (and I wasn't sure whether to read the date as U.S.-style or European-style)? Now they indicated that the number is as of July 11 (today).
Something is seriously wrong here. Since they use the curious term "Operating Installations" instead of just "installations", it makes me wonder whether a whole bunch of kiosks are down.
I love it!
Why don't you ask for it to be put on the agenda for the shareholders' meeting?
By the way, has there ever been a shareholders' meeting?
It is kinda funny.
I liked the reference to the "Back to School" season. I realize that there is a lot of traffic in college-area BB&Bs when school is about to start (been there, done that), but I somehow can't picture this sort of conversation happening between a mom and her daughter:
"Bedsheets? Check
Comforter? Check
Pillows? Check
Bathroom gear? Check
Kitchen gear? Check
Oh, yeah, there's something we didn't think of! Let's print some photos while we're here!"
At least for my family's part, the desire to finish up getting the necessities at BB&B and get the hell out of there ranged from very strong to insanely intense. I suppose there are those who will bite, but I think most will consider it to be a waste of time during a brief period filled with way too many essential chores to accomplish.
But I guess I lack Nick's vision.
I think you must be right.
Maybe.
Let’s hope that the legal advice they are getting is more competent than when they paid Yates and others commissions on stock sales.
Smells like BS, doesn’t it? (Because it is)
There are a few of the standard lies here, 7 flavors, $160 million and god only knows what else.
But what caught my attention is the requirement that franchisees service each machine 3 times a week! That sounds like a lot more than the franchise sales pitch would lead you to expect. I suspect that’s the outcome of the California difficulties.