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I've got a floor of $66/67M for Q2.
They said in the PR for 10-K that Q2 looked like it was shaping up for a 300% increase YoY. I am choosing to trust the estimate is going to fall in line with reality rather than get hyped about what could be until they have a record of under promising and over delivering. At the moment they appear to shoot everything straight which is a good thing. People would be wise to remember this and not get hyped about "possibilities."
Part of my unease is also attributed to the opacity of the relationship.
In a typical B2B relationship you can have faith in each party negotiating to get the best possible outcome for their organization. They sit on both sides of the fence and we will never know if a truly equitable arrangement was made between KAVL and BIDI. BIDI may enjoy benefits they otherwise wouldn't if they dealt with an unaffiliated distributor.
I get it.
Also - I went and looked at US Foods.... It's probably not the best comp but they were one of the first "distributors" that came to mind. Their Gross Margin is ~16.5% so my 20% hopes may be a little off the mark.
I'm less concerned with the share compensation..... I have some questions about the size of the disbursements and whether the organizations are REALLY providing value commensurate to their compensation but that is another matter entirely.
The Gross Margin decrease is the real head scratcher. It's not what you make it's what you keep. What happened to cause us to earn less per dollar of sales with a marked improvement in gross sales?
I'm also not certain that I'm in love with the margin percentage as a whole. I would expect closer to 20% to be a pretty standard markup as you make your way through different stops on the supply chain. I think it's even more imperative for this number to be higher considering we shoulder the burden of marketing BIDI products. We are also paying FDA consultants which is another expense I'm not certain is being recognized appropriately. KAVL is a distributor. I would think it is incumbent upon BIDI to provide products to their distributors that can be legally sold in target territories.
So what's everyone think?
My thoughts, as conveyed to KAVL via email to the investor relations mailbox, can be found below.
My understanding of most business to business arrangements is that pricing terms become more favorable to the purchaser (KAVL) as the volume of orders increases until a point of diminishing returns has been reached. Based on my calculations I arrive at a gross profit margin of 13.58% for Q3 FY20. I arrived at a gross profit margin of 12.84% for Q1 FY21.
Why has KAVL's gross profit margin decreased by ~.75% when the value of the orders to Bidi increased by 13.35% between the two periods? Worst case scenario I would have expected the gross profit margin to remain unchanged as KAVL was still within the same purchasing band under their arrangement with BIDI.
Additionally - General and Administrative expenses ballooned 500% between the same periods. Were one time expenses realized in Q1 or should shareholders prepare themselves for similar rates of Administrative and General expenses moving forward?
Glad that is cleared up. The Shareholder count being so low never made sense to me. Maybe some things got lost in translation with the TA swap.
I would suggest re-reading what I posted.
The purchase price of the patent is $3M + 15% royalty
Form 1-A payment is the lesser of 2% of the raise or $1 Million. They are agreeing to give the patent holder up-to 2% of a public offering. That means 98% of the offering (up to $49 Million worth) would still be hitting the market. Theres also no mention of the patent holders getting shares issued directly.
The additional payment is the $3 Million less Form 1-A payment and is not payable until shortly after KAVL makes money with a product derived from the patents.
3/15 is in the agreement as a drop-dead for filing with SEC for the securities offering.
Things could have changed so who knows but next week should be interesting.
I'm strapped in for the long haul. I just hope that rocket fast and soon so that I can park some funds on the side for other interesting plays. I'm leveraged to the tits on KAVL because I like where she's headed.
(leveraged is an inaccurate term because I'm not on margin or anything.... just sounds better)
Splits, imo, are merely cosmetic. Share price obviously has an impact on perception (See GE's R/S announcement) but it doesn't really have an impact on the underlying security from a fundamental perspective.
Wasn't trying to be negative.... solely providing commentary since the patents and dilution were on peoples mind.
I don't think the royalty is problematic because I believe the royalty was based on gross profits..... Its a fair and reasonable rate. Plus - accountants for the movie industry are very familiar with legally moving money around so that a $1B box office stunner barely turned a profit on paper and screwing everyone that had back end participation deals... The money out the door for a royalty could be reduced if there was sufficient desire to do so.
I'm more intrigued by whats going to happen re: patent by Monday. I completely forgot about the March 15 deadline until you had brought it up. Not a fan of the dilution aspect of an offering.....
BUT
I would be very curious to see what they would deploy ~$50mm in capital on. Also - While no one likes getting diluted some additional liquidity could prove beneficial for the stock. Lastly - Fundamentals don't matter any more so more shares probably won't phase anyone.
I don't like it one bit. They also have a provision where KAVL has the right to pay the commission in Cash or some combination of cash and stock.
QuickFill must have some dick picks of Niraj or something /s
Wouldn't be surprised if Quickfill had hooks into convenience store market looking at their website.
On the topics of dilution and patents though....... 10K stated that the patent hadn't been transferred yet. KAVL agreed to pay $3 Million for the patent(s) and a 15% royalty on sales emanating from products based on the patents...... I'm sure this relationship was leveraged to get BIDI favorable terms on synthetic nicotine since the pouches do not use tobacco derived nicotine.
Patent Terms - Condensed for clarity
“Additional Payment” means the difference between Three Million Dollars ($3,000,000.00) and the Form 1-A Payment. For the avoidance of doubt, if the Form 1-A Payment is One Million Dollars ($1,000,000.00), then the Additional Payment will equal Two Million Dollars ($2,000,000.00) and if the Form 1-A Payment is Eight Hundred Thousand Dollars ($800,000.00), then the Additional Payment shall equal Two Million Two Hundred Thousand Dollars ($2,200,000.00).
(ii) Form 1-A Payment. KAVL shall pay NGL the Form 1-A Payment within fifteen (15) Business Days after the Form 1-A Completion Date.
(iii) Payment of Additional Payment. KAVL shall pay NGL the Additional Payment within fifteen (15) Business Days after the Additional Payment Triggering Event.
“Form 1-A Completion Date” means the date on which the Securities Offering shall end in accordance with 17 CFR §230.251 and the Securities Exchange Act. It is expected, but not guaranteed that the Securities Offering will end within ninety (90) days after the Securities Offering is qualified by the U.S. Securities and Exchange Commission.
“Form 1-A Filing Date” means no later than January 31, 2021, unless extended in writing by KAVL in good faith to no later than March 15, 2021.
“Form 1-A Payment” means the lesser of: (a) two percent (2%) of the total amount of securities KAVL sells through its Securities Offering; or (b) One Million Dollars ($1,000,000.00). For the avoidance of doubt: (y) if KAVL raises Fifty Million Dollars ($50,000,000.00) through its Securities Offering, then it will pay NGL One Million Dollars ($1,000,000.00); and (z) if KAVL raises Forty Million Dollars ($40,000,000.00) through its Securities Offering, then it will pay NGL Eight Hundred Thousand Dollars ($800,000.00).
I was starting to think I was the only one who reads the reports cover to cover.
During the year ended October 31, 2020, 3,674,056 shares of our common stock were issued to QuikfillRx, LLC, a Florida limited liability company (“QuikfillRx”) as compensation for marketing and promotion services rendered to us.
During the year ended October 31, 2020, 150,000 shares of our common stock were issued to Uptick Capital Partners as compensation for consulting services rendered to us.
During the year ended October 31, 2020, 1,094,000 shares of our common stock were issued to seven of our employees as employee bonus compensation. We withheld 226,000 shares to satisfy tax obligations due upon such issuances.
As of October 31, 2020, we had approximately 176 stockholders of record. As of February 11, 2021, we have 166 stockholders of record
Q1 '21 earnings are due by 3/15. They mentioned in the 10K that they are anticipating $40M in revenue for the quarter.
Personally - I don't think the Q is going to move the needle unless there is fresh news that hasn't been disclosed. This would be info relating to the FDA approval process, Increased revenue projections, etc.
It's also possible that the market could be thrilled by $40M for the quarter and people have been sitting on the sidelines after the 10K until they see the numbers rebound and written in stone.
Without some major catalyst such as FDA or NASDAQ in the next 12-13 weeks I think it's going to be a pretty sleepy period. Volume is abysmal because so many people are holding their shares. The low volume allows price to get dragged down which, imo, creates a feedback loop of despair.
"The stock market is a device for transferring money from the impatient to the patient." - Warren Buffett.
It sucks watching the stock drift down day after day. It's made a little easier by the simple fact that THE ENTIRE MARKET IS DOWN! NASDAQ is in correction territory. TSLA is down 30%. We aren't doing so bad.
The recent PR's haven't moved the needle because it is just confirmation of information that was already known and priced in. While the needle doesn't move, the recent PRs provide certainty and conviction around previous assumptions and beliefs.
Revenue's, facts and future projections will win out every single time.
Ask for a catalyst and ye shall receive
Price doesn't matter. % returned is the only thing that matters in this game. Who cares if you got into a trip 0 if it only returns 10%.
I think it's healthy to look for whats wrong; the good stuff takes care of itself. If those grievances get aired a discussion can form around it and differing opinions can be discussed. I jump in their shit for doing things I would like to see done differently. Just because I, or anyone, calls out a mis-step it doesn't automatically mean that the company is a failure and no money can be made.
If I was so taken aback by something that I thought it was detrimental long term I would exit my position and state as much. There is still plenty of upside to KAVL.
The day when noone has an opinion that could be considered adverse to the collective is when we should all run for the hills.
These are single use disposables. While I agree with you that most shopping is online I believe a lot of tobacco/nicotine purchases still happen at the counter in a physical store. If this was a company selling Rigs/e-juice/etc I would agree with you that this might be problematic.
I don't think their online sales represented a significant amount of revenue.
I did not know this but just looked it up. This is a plausible, and likely, explanation for why they made this move. Gov't changed the rules of the game. Just come out and say it. I despise spin.
The advisory around online sales, imo, is BS.
I think they took the tact they did because it sounds better than "We're not really selling anything through our website and decided to discontinue online sales. This will allow us to refocus our efforts on building an unparalleled distribution channel."
edit: not sure how to post images here.
https://imgur.com/vkpLb1t
Source:https://web.archive.org/web/20201203051937/https://bidivapor.com/shop"" rel="nofollow" target="_blank" >https://web.archive.org/web/20201203051937/https://bidivapor.com/shop
The above clearly shows that their online sales platform was already geared towards minimizing youth access. They were sending things out via USPS with adult signature required. They took reasonable steps to reduce youth access via their online platform. The risk was minimized and transferred to USPS. Are we really supposed to believe that some gig-economy worker who is running deliveries for GoPuff is going to be more stringent than the USPS with regards to who receives a delivery?
KAVL is the #1 performing penny stock in Q1 '21.
https://pennystocks.com/featured/2021/02/21/top-5-best-performing-penny-stocks-watch-list/
I get that. I'm of the opinion that a an effective "halt" to revenue generating operations is something that you let your shareholders know.
Revenues were reduced ~60% QoQ and no guidance was provided to inform shareholders of this fact.
BURIED THE LEDE!
$10M for Q4.
This is a hot take as I obviously haven't dug into everything. Big disappointment for Q4.
I don't think it's the holiday. I think it's actually February being a short month.
Also on that SecureXFilings site I used they state that the EDGAR system is actually closed on Monday just like the market.
EDIT: I'm an ass..... we are in February!
Get out of my head BerdBoy. I think they actually have until Tuesday based on what I just found.
https://stocktwits.com/BuyNStonks/message/288747004
That answers part 1. The mulit-million (literally) dollar question is...... Did Hackney fill the warehouse with their first order or are they going to ramp up.
I was personally estimating ~$80mm for Q1 assuming there would be some sort of ramp up to get them to the original $400mm projection for 2021.
With all of the recent news who knows where Q1 will land. Hopefully we get a little insight in the 10K.
Touché..... although that Toshiba outfit has always made me a little uneasy.
Indeed it is.
I honestly don't know what would happen. It would be suicide for them to miss the extension date so I do not consider it to be a likely outcome. Just venting about my preference for it to be release tomorrow morning over tomorrow afternoon.
I'm not overly stressed it's just not a great look with all of the positives moving in our favor.
I'd imagine Eric and Niraj are spinning a lot of plates right now so it is understandable if they didn't get their pile of receipts together quick enough for the bean counters. I would be much happier if an auditor gets thrown to the wolves though instead of a breakdown of internal processes.
It needs to come out tonight or tomorrow morning. AH on Friday is no good. Dropping news Friday evening into a holiday weekend is a tactic that is usually deployed to bury the lede.
Q1 is already closed so I would not expect to see any numbers associated with HT Hackney nor the pouch. Hackney's first order may have squeezed in before end of January. Impact on revenue will depend on whether they are testing the waters or if they received a "fill the warehouse" type of order.
Funny what a difference a couple months can make.
352k volume as of this post and we're dismayed that the volume is low. I know most on this board have had positions for months, if not years, and remember the dark days.
I'd like to go all the way back to October 9 where we had a total volume for the day of 9,912 shares!
How far we have come. Can't wait to see where KAVL takes us next.
Mid-March is the game changer.
I am torn on the action we will see from the 10-K. I believe I stated it here and on Stocktwits before. I think people will see an awesome 10-K and think KAVL is underperforming because it won't translate to a $400mm+ 2021.
In my mind the recent run up exacerbates this problem and some holders are going to take profits and leave because they think "the jig is up."
I sold some shares......
To buy Gamestop and in turn increased my KAVL position by 15%!
Volume is a big factor here. Someone dropping 50k shares on a market order could move this stock 5,10,15% if there is no base of support. If you look at the L2 a 50k sale right now would probably drop the price to $2.60 in the blink of an eye.
100%.
I'm honestly not even concerned about KAVL's earnings potential in a downturn as I think they are going to be somewhat recession proof. There will however be a serious readjustment of P/E multiples when the music does stop.
No one has a crystal ball so right now the only thing we can do is white knuckle it and hold on while scooping up every dollar we can.
I concur.
Just hoping $KAVL can get its big run up/day in the sun before the impending correction/contraction/crash of the market. Could be 6 months or 3 years down the line but I'm certainly starting to get nervous about the possibility.
Great thought.
Updating the math that Emerging Growth used in their article to account for 50% of the footprint and 50% of the market cap would give us a ~$67 share price. I'm going to set my eyes on more (seemingly) realistic targets but it is a crazy thought none the less.
Discussion Time -
Posted this on Stocktwits but I have a feeling ihubber's are more engaged.
I think the author of the @EmergingGrowth article may have understated the potential of $KAVL in the comparison to
$RLX. They use the info in the HT Hackney PR to suggest that $KAVL will have a 35k store footprint. Late November $KAVL released a PR about their expansion into Circle-K and 7/11 among other partners. This PR said they would have a 30k store foot print. I'm thinking that the HT Hackney news brings $KAVL's footprint up to 55k stores.
To recap, RLX has 105K outlet stores versus the anticipated 35K stores of KAVL. In terms of store distribution KAVL’s new footprint is 1/3rd the size of RLX. So on this metric alone KAVL has the potential to be 1/3rd of a $37.64 billion market cap. Doing the math what works out to $12.55 billion or $45/share assuming 280 million shares outstanding. In comparison to the $1.80 stock price and the $400 million market cap, investors have to be asking questions of how long it’s going to take RLX to figure out that they need to talk to KAVL and buy them up for a pittance of a price.