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Uhh, what 'news' was that -- or was it just PR?
In the timeless words of the Bard: "Full of sound and fury, signifying nothing."
Worth looking at the specific news which has come out:
- 2011. Up to ten stores (as I recall) in the San Antonio, TX area; two were opened, both closed now.
- 2012. Early year (or perhaps late 2011) PR speaking to 5 stores in PHX area by end of Q1 12. Eventually two were opened (one in Q3; in PHX area, with average temps of 100+??? business acumen questioned from my perspective, both closed now).
- 2012. Early year (or late 2011) sponsored Equity Research report projecting 100 stores at the end of 2012, per company plans (as stated in the report). Instead, stores have gone from eight early in 2012, to ten at the moment. And the audited financials showed revenue less than initially reported, and revenue DECLINED about 15% from the downward adjusted Q1 2013 to Q1 2014. 'Fast growing' claim??
- 2013 (or was it2012, time flies when having fun). Baristas branded ice cream announced, $500K worth of stock provided to the NY area distributor. 200+ stores distribution announced in NY area. Recent financials say nothing about ice cream as part of the business model (search on the word 'cream').
- Multiple dates. 'Uplisting' to senior NASDAQ exchange -- including a trading symbol acquired. But company comes no where close to meeting the financial requirements for uplisting (counter arguments encouraged, only truth should be published).
- May, 2014. Baristas-branded Tennessee sports bar to open by end of July, 2014. This hasn't happened yet.
But hopefully will happen soon, perhaps a short delay. But, recent history on 'openings' not helpful: A Jan 2014 announced the opening of a SW Florida coffee kiosk in 'early Q2,' hasn't happened yet.
And of course, there was the NJ kiosk opening announced in 2011 which never happened, but arguably that is water under a long lost (Hurricane Sandy) bridge.
Having said the above, the company did promise audited financials (OK, more than a year ago) but did deliver. What they showed, however, was a lot of 'dealing' between the company and its officers. For example:
- The unaudited financials never showed a receivable from key shareholders, but the audited ones do -- six figures!
- Yet in Q4, the key shareholders received 5M+ shares of preferred stock in exchange for 'debt' of $80K -- why wasn't said debt used to offset the receivable, as opposed to further diluting public shareholders?? (caveat: although preferred is convertible to common at 1:1, the financials point out that this is impossible since to do so would put common shares over the authorized level of 300K).
It is that kind of transaction which causes some to suggest that this is a scam. Again, counter arguments encouraged, I am just reading public documents perhaps I missed something.
The rebranded Knoxville sports bar promised July opening in the May PR.
Anyone know status?
Why do you think SW FL #3 -- same operator as #1 and #2 -- hasn't opened?
Jan 22 2014 PR said it would open in early Q2, not yet opened almost halfway through Q3 per the BCCI website.
Recently issued Form 10 financial statements say that SW FL operations lost money in Q1 14 despite significant advertising in Q4 13 as stores 1 and 2 opened.
Desiring not to continue to lose money is my hypothesis for #3 not opening -- despite apparent procurement of $100K+ of equipment -- but perhaps other posters have different hypotheses.
Not sure which link you want, please advise:
Company's PR related to SW FL #3 opening in early Q2 2014 (from the press release tab at the corporate url):
http://baristas.tv/notes/baristas-florida-open-another-location-south-west-florida-joint-venture-partner-0
The PR related to the Knoxville sports bar to have a re-themed opening in July, 2014 can be found here:
https://finance.yahoo.com/news/baristas-open-costume-themed-sports-102200003.html
I am unable to explain why the company has elected not to post the Knoxville Sports Bar PR, and the one week earlier PR announcing an 8 state franchising agreement with BMOC (the JV partner for the sports bar) on the company website. Both announcements would seem to be good news for the company. Although, the financial statements state that BMOC received the franchising agreement in return for 51% of the sports bar -- which might not be a good deal for BCCI if the sports bar loses money, as it may have in the past based on multiple operators over the last three years.
Meanwhile, I can observe that BCCI doesn't keep all PRs on its website. For example, the October 1, 2013 PR announcing the media buy of $1.7M worth of advertising in return for an unstated amount of common and preferred stock cannot be found on its website.
But you can read a bit about it by going back to iHub postings of that time; I had one, 26761. And the following url contains a summary of the actual PR:
http://www.pr.com/press-release/519470
Undervalued?
The company issued 1M shares in Q1 (a) in exchange for debt valued at $10K, Note 9 of the Q1 financials in the Form 10; or (b) for $10,000 of professional services, per the originally issued Q1 financials and page 20 of the Form 10 (surprise, discrepancy in the Form 10).
Any way you slice it, that is .01 per share to the recipients.
And you think .06 is 'undervalued.' What do you know that folks accepting stock in exchange for hard dollars, don't know??
In fairness, we don't know if these shares were issued before or after what some have asserted was a 'pump and dump' scheme related to uplisting; for most of January and February, the stock was trading at .02x.
The question you have to ask, is what has happened since then to justify .06/share.
- Is it audited financials, which show that the company has had losses equal to revenues in the last year, rather than the profits previously claimed?
- Is it the 51% interest in the unsuccessful sports bar(caveat: my summary of the fact this is third owner in under two years).
- Is it the 5.9M shares of preferred stock issued in Q4 to management (page 17 of Form 10), versus (at least some of it issue for media funding (per the Oct 2 press release, no longer on the BCCI website).
It can't be the prospect of uplisting, as the company does not meet the financial requirements for uplisting, as clearly stated in the audited financials which have reduced shareholder equity well below that initially published in the 2013 financials.
Open Baristas stands have pictures on BCCI website.
Along with the one that was announced for early Q2 opening, SW Florida #3, where there is just a 'concept' picture.
FYI, as a preface to my financials review -- the revised Q1 financials show that the 49% minority interest in SW Florida lost $24K in Q1 alone, suggesting that the total lost was $50K, or $8K/mo/kiosk (2 open all quarter) (BTW this information was NOT in the Q1 financials issued in early June). Bad news if revenue per kiosk is under $15K/mo, as suggested by the revenue numbers; will certainly discourage prospective franchisees. And may explain why SW FL #3 has not opened, despite $115K of equipment acquisition by the minority interest in Q1, per the financials.
Also, the picture of the sports bar, scheduled to open in July per the acquisition PR in May, is not shown on the website. Perhaps it will be there when the opening PR is published between now and Thursday, as BCCI meets its published commitment. Or not.
Reel -- Good to see the audited financials come out, they seem quite thorough. I will be analyzing over the next few days, and post results.
The first summary statement is how different they are to the unaudited financials -- including significant differences with the 'audited' ones (that weren't) which came out in early June.
One number struck me quickly about this enterprise that had previously bragged about its profitability -- the 2013 loss exceeded revenue!
Good to see the 'intangible' assets at least spelled out -- and I concur with the other posters that most if not all should be written off. Where is there 'goodwill' in stores which after two/three years are still unprofitable, even with management taking zero salaries?
More to chew on later -- but I do think it is great that we will see audited results annually; will be interesting to see if the annual audited results equal the sum of the unaudited quarterly results -- I hope the audit process has taught the company how its books should be kept.
Looking forward to seeing a PR on the opening of the barista-themed sports bar next week (a July opening was promised in the May announcing PR; but then again, the third SW Florida kiosk was promised to open in early Q2, and apparently hasn't yet).
The audited financials (which weren't) certainly spoke loudly:
- Previously reported Q1 13 revenues were restated downward by about 15%.
- Q1 14 revenues were 15% lower than restated Q1 13, and Q1 14 was unprofitable.
- Previously reported 2012/2013 profits turned into losses; with well over a $1M loss in 2013 alone.
- The 'intangible and unidentified assets' account shrank by over 50% and became simply 'intangible' assets -- although they are almost 95% of total assets there is no discussion in the Financial Notes as what they are and how they are valued/amortized.
- The value of fixed assets dropped almost 85% in value at March 31, 2014 versus that reported on March 31, 2013. But, at 5% of fixed assets, there is at least a paragraph about them in the Financial Notes.
In fairness to your point, the rescinding BCCI PR a month ago said that when the audited financials were properly issued (promised 'within seven days,' but not yet here), there might be 'additional restatements.'
(Note: for some reason, the PR announcing the 'audited' results, and the PR rescinding the audited results and promising new ones within 7 days, are not on the company's website).
But, in disagreement with your post's implication, any restatement will likely not improve the results from the rescinded statements: the company is and has been unprofitable, with revenues from its core themed coffee kiosk business shrinking.
Indeed, one COULD hypothesize that the failure to produce the promised audited financials arises from disagreements with the company's auditor about the need for further (negative) restatements (if said firm has not in fact resigned over the June fiasco, which would not be a surprise).
One can only hope that second half revenues and profits get a boost from its new themed sports bar initiative, perhaps expanded to more locations with the assistance of its new partner.
And that its long delayed (three months and counting) third SW Florida store successfully opens. At least, the 22 Jan PR announcing its opening is still on the BCII website, giving hope that it will eventually happen.
Or perhaps third party ice cream sales become significant this summer - although with over 250 announced locations in Spring 2013, I would have expected it to happen last year if it was going to happen. Plus, the words 'ice cream' do not even appear in the Business, Products, and Services section of the company's financial statements. This is the first summer with ice cream in the SW Florida stores; successful distribution there -- particularly if the third one opens -- could create the opportunity for 'third party' distribution at least in that territory, creating momentum for that business.
Interested in your source of information about positive financials.
The most recently issued financials (Q1 14, out in early June) included significant restatements of previously issued financials, reducing previously reported revenue (that's a new one, at least for me), and turned previously reported 2012/2013 profits into huge losses.
Having said that, when the company published these financials, they said they were 'audited,' but then on June 17 said
'just kidding,' they weren't -- and did promise that new financials would be out by June 24, and they might include additional restatements.
Not out yet -- three plus weeks after they were promised to be out -- but sounds like you expect the restatements will be less negative than the prior restatements. But not sure that is a good definition of 'positive' financials -- what is your definition?
And perhaps the releasing PR will include information on ice cream revenues as well as the reality show you mentioned, company hasn't said a lot about that in the last two years. Or perhaps it will include information about the SW Florida store that was supposed to open in early Q2, per a Jan 22 2014 PR, but has apparently not opened as yet.
BTW, none of the above means that BCCI will not be green on Monday -- or a month from Monday -- a lot of volatility in this stock.
Revenues have NOT been growing. Q1 14 DOWN 15% from Q1 13, and that was AFTER Q1 13 was restated downward by 15% from what was published last year. Kiosk count has only gone from 8 to 10 in the last two and a half years, with entire states closing down (TX, AZ). Most concerning, the third SW Florida kiosk announced on Jan 22 as opening early in Q2 has apparently still not opened
And, the company's recently issued financial statements showed losses the last two years rather than the previously announced profits, indicating major accounting issues. A June 17 PR announced that audited financials -- perhaps including further revisions -- would be published within 7 days as part of a registration statement, but nothing yet.
Revenues should grow dramatically with the new themed sports bar -- but question is whether it will be profitable (third attempt at this location in a couple of years). Hopefully so with the new format.
Stands, yes -- but revenues growing, profitable?
Q1 14 revenues down 15% from Q1 13.
And 2013 'profits' were restated in the 'audited' financials to be a loss, almost equal to revenues.
I personally don't think this is a scam. But, certainly not an investment vehicle for those looking for a growing, profitable business.
Perhaps trading profits here, but I don't see the investment case. No-one on this board has yet made such a case, nor has the company.
And there has only been one 'big' third party investor, and that would be the individual who did the first two SW Florida stores, supported by significant advertising from the October 2013 advertising buy. Jan 2014 a third SW FL store was announced as opening early Q2 -- but still not open. Not a good sign.
Unfortunately, company has a history of not meeting expectations created by PR.
For SW Florida, concern is that maybe the first two stores are not performing as well as they did when the huge marketing dollars were being spent upon opening in the fall. SW Florida is a bit of a proof point for potential coffee kiosk franchisees; although not technically a franchise, there is an apparently independent individual who has invested significant cash.
The company did announce a multi-state franchise agreement a few weeks ago, and announced an initial foray with that organization into the sports bar business. Good brand extension, IMO, though the location has suffered through two failures in the last couple of years. Will see how it goes -- will certainly improve revenue, time will tell what it does for profits. Hopefully the new format will make a difference.
On June 17, the company promised a Form 10 Registration statement 'within 7 days,' with the possibility that the financials might be further revised prior to being labeled 'audited.' It is now 16 days and the clock is ticking. Anybody have a revised expected date??
Or, maybe they are busy trying to get the third SW Florida store opened; a January 22 2014 PR announced its opening for 'early in Q2.' Perhaps a typo, they meant Q3?
Or, management may be enjoying the new sports bar -- it is World Cup season after all. Hopefully not enjoying it too much....
Were you shocked by today's PR that the "audited" financials released June 4 were not, in fact, audited?
Would you now agree that the "controversy" was appropriate? Would love to have been a fly on the wall in the discussions between the "Accountant or Auditor," Mr. Klein, and Mr. Henthorn, since the June 4 PR.
I am personally looking forward to the upcoming "audited" financials, for detailed review. One of the things I noticed about the Q1 financials was that the new results for 2012 showed losses in each of the four quarters. That wasn't a surprise, given the even larger losses in 2013 -- but what was interesting was that the quarterly loss in each quarter was exactly the same!!! The odds of that happening by accurate accounting is nil, so not sure how the auditor will be able to express an opinion on 2012.
For those who want to follow along, go to the Issuance History, STATEMENT OF SHAREHOLDERS/STOCKHOLDERS EQUITY, second column from the right.
For those who have praised the historical profitability of this enterprise, and believe the new financials, this column shows that the company has lost almost $5M since September, 2011 (the previously announced $1.2M 'adjustment' in Q4 2011 has ballooned to $2.9M) and $2M in the last ten quarters.
And that assumes you believe the almost $3M of 'intangible' assets remaining on the balance sheet. As the biggest number by far on the balance sheet -- other than retained deficit -- hope there is a note in the promised upcoming audited financials discussing this account, there wasn't in the recently released financials. Can you imagine -- a note to talk about $126K of 'fixed' assets, but nothing to talk about $2.9M of 'intangible' assets, when those assets are the only thing between positive book value and negative book value.
Although, worth a note on the fixed assets. The June 2013 financial report showed Dec 31 2012 fixed assets at $784K and Jun 30, 2013 fixed assets at $451K; this report shows Jun 30, 2013 fixed assets at $212K and Mar 31 2014 FA at 129K. That's a reduction of 85% in five quarters!!! The note says that these assets are related to the kiosks, therefore this 'depreciation' should be flowing through the P&L. This also suggests (but not definitively) that equipment from the five stores closed in the last couple of years was not of sufficient quality to transfer to the new stores in SW Florida.
You are looking to an iHUB board to tell you why NOT to 'invest' in a company?
Seems backwards to me, but if you want some reasons (and I am assuming you are interested in INVESTING, not TRADING -- a subject I confess to know nothing about) ...
- Market value to sales is over 20 -- and that attributes $0 MV to the 7M preferred shares outstanding.
- Quarter over quarter (Q1 13 to Q1 14) sales have DECLINED by 15% -- and that was AFTER Q1 13 sales were restated downward by 16%.
- BCCI lost $1.4M in 2013 -- about equal to sales -- according to the Q1 2014 financials (FWIW, initially published 2013 results had shown a profit of $154K, and even that was less than the sum of the quarterly profits previously published).
- Instability of financial reporting.
Look back -- such a simple number as the number of shares outstanding historically has not been consistent. Compare share counts in the recently issued Q1 2014 Quarterly Report (through 3/31/2014) with 2013 Annual Report (through 12/31/2013) Statements of Shareholder/Stockholders Equity, both involving the same accountant/auditor. History for 2012/2013 differs between the reports.!!!
Inconsistency in such a similarly basic number as revenues as well as profits, is discussed above.
- The number of 'open' units in this fast growing company has gone from 8 to 10 in the last 2.5 years.
On January 22 BCCI announced that the third SW Florida store would open 'early in Q2,' but here we are in the last 15% or so of the quarter with no sign of it.
Hopefully, the company will be successful with its new 'sports bar' format. Negative as I can be as an ex CPA, that concept makes sense to me for the 'themed costume' format though I worry about the fact that two prior operators have not made the location work. Still, revenues should be dramatically higher than in the coffee kiosk business, hopefully profitable as well.
- Lot of PR about ice cream -- indeed, 5M shares were spent on distribution two years ago -- but the most recent Q1 financials did not mention ice cream once.
BTW, if you really want to invest -- I am sure you can get a number of shares direct from the company at a substantial discount by paying the company cash. During Q2 2013, the company sold 4.5M shares for .01/share, $45K in cash. During Q2 2013 BCCI traded publicly between .04 and 08/share, but the company sold it privately for .01/share.
It is unusual for the 'comparative' balance sheet to be nine months prior. Generally it is the end of the prior fiscal year (in this case, December 31, 2013).
Indeed, it is very unusual to have audited interim financial statements (that is, statements other than year end). Even very large companies only have their interim financial statements 'reviewed,' that is looked at for reasonableness by their auditors but not actually audited and all that such work entails (this is the practical reason why companies are given 105 days to publish their annual reports, and 45 days to publish quarterly).
Not sure why BCCI didn't put the effort into auditing the 2013 financials, as I had previously suggested might happen, even if delaying them further, as opposed to having the first audit be of a quarter.
Post withdrawn -- I now see ppv has updated his post to include BCCI's drastic restatement of previously published numbers, should have read all posts before beginning mine.
I had expected expense restatement, due to the incorrect treatment of issued shares in the past -- but revenue restatement a surprise -- and of course year on year revenue decline, a head scratcher for a company claiming to be 'fast growing.'
You need to be explicit about which messages you find offensive, as this message is a reply to 'None':
Not sure what PCAOB can do at this point; their role is to oversee auditors of public companies, as I understand it, and right now we don't have audited financials therefore PCAOB has no BCCI auditor to oversee.
However, the CPA himself, Charles Klein, Managing Partner of DKM Certified Public Accountants, is now well aware that his name is shown as "Accountant or Auditor" by BCCI in the published Q1 2014 financial statements which have been stamped 'AUDITED,' but which fail to contain an auditors report.
If he were not to be shown as resigning in the next financial report, then PCAOB might well want to have discussion with him, since it seems to me a CPA should not be OK with this circumstance.
As a comment -- this accountant and his firm were new as of the 2013 annual report, covering Q4 and the rest of the year. He is based in Clearwater, FL; quite possibly he was referred by Mark Schaftlein, the managing member of South Florida Coffee Company, BCCI's 49% partner in the two open Cape Coral stores, or perhaps by others involved with SFCC.
Which reminds me -- anyone know the status of the third SW Florida store, announced on January 22, 2014 as opening 'early in second quarter'? Indeed, in that PR, Mr. Schaftlein spoke about moving forward with 'additional locations,' suggesting at least a fourth store.
Not surprised at no response from CPA firm.
Their only obligation to communicate is with their client.
I continue amazed that BCCI had the audacity to label the Q1 financial statements as 'audited' with no signed auditor's report! The fact that 'legacy adjustments' were made, including reductions in previously reported revenues and increases in previously reported expenses, does not make them audited -- who knows how many other recommended adjustments were NOT made!
If I were the CPA listed as the company's accountant, I would seriously consider resigning as my role is at the very least being mis-represented by said labeling and the accompanying Press Release.
PPV, interesting point about cost of sales (COS).
I am not an expert on how coffee restaurants should report, so I decided to look at larger companies in this industry.
- I looked up Starbucks, and found that while cost of sales included occupancy costs (presumably, rent and utilities) it did not include Store Operating Expenses, Other Operating Expenses, or Depreciation and Amortization Expenses, all of which were separately listed below the COS line, along with General and Administrative.
- For Tully's, the object of BCCI's affection a while back, I found a very old 10-Q, filed in February 2012. It separated retail cost of goods and occupancy costs, with a subtotal incorporating the two (so, the subtotal is similar to Starbucks' COS) -- and it also had following lines called Store Operating Expenses, Other Operating Expenses, Marketing General and Administrative expenses, Depreciation and Amortization Expenses -- and a line which I think it would help BCCI to show, to explain losses, store closure and lease termination expenses.
- For Peet's and Seattle's Best Coffee, I could not find financial statements, likely they are privately held.
Net -- while BCCI reporting is not specifically consistent with the 'big boys,' its practice of excluding store payroll from Cost of Sales does seem consistent. And, perhaps 'Personnel Costs' for BCCI relate to 'Store Operating Expenses' for Starbucks/Tully's and 'Operations' relates to 'Other Operating Expense,' so there is the possibility, at least, of some consistency.
Hopefully, nomenclature will directly match in future reports.
Frankly, I am more concerned about lack of an auditor's report in these 'audited' financials.
Not sure that we know the cash balance at end of 2013.
The Comparitive (sic) Cash flow Statement says 'cash at end of year,' but I think it means 'cash at end of period,' and shows a date of 3/31/2013 in the second column, and cash of $0, suggesting $0 on 3/31/2013 (different than previously reported to be sure).
The Balance Sheet has a second column heading of 6/30/2013, and shows a balance of $0, suggesting $0 cash on 6/30/2013. But the page heading in upper left corner says B.S. is for 3/31/2014 and 3/31/2013.
But, to your point, the second column of a balance sheet is traditionally the end of the prior year, so could be it means $0 at end of 2013.
For an accountant to present a positive written report on statements with these kinds of typos -- even if better than prior financials -- would be career suicide, IMO. But I know from experience that their are lower cost CPA firms in FL who exercise 'flexibility.'
Hopefully a clean-up will occur when (if, to be sure) an auditor's report is provided.
Company's PR said 2012/2013 revisions coming.
On the cash, I think we need to see the revised 2013 and 2012 numbers, though these may not include quarterly numbers.
Note my comment on the balance sheet, added in an edit after you commented on my post -- not clear the date represented by the second column represents, and so not clear whether there is a discrepancy.
If an auditor's report is in fact coming, hopefully the balance sheet will be 'cleaned up' as well, in terms of clarifying the date of the information in the column.
As another former CPA and frequent poster on this board, I thought I would add my comments about the newly issued financials.
1. Audited. By definition, audited financials must have an auditor's report. These don't, therefore they aren't. They are already late -- if an auditor's report is due out in a day or two, why not wait??? Doing it this way just hurts credibility, reeking of desperation.
Observation: the listed accountant in Clearwater, FL is the same one who was shown as the accountant for the 2013 annual financials, but NOT the same as the WA accountant for prior financials. Likely the Clearwater person was pushed to get out the 2013 financials but spent more time on these.
2. Arithmetic, Appears much better. The balance sheet actually balances, the Comparitive (sic) Statement of Cash Flow foots, etc., creating more confidence.
Net, even if not audited, I have substantially more confidence in these statements than prior ones (other than the treatment of stock issuance, where I am uncertain about treatment).
3. Operations.
- Revenues have suffered a 15% decline, per the current financials, from $366K in Q1 2013 to $318K in Q1 2014. Hard to reconcile with the claim of 'fastest growing....'
- Or even more?? Interesting that revenue was originally reported as $433K for Q1, 2013, but is now reported to have been $366,673. 15% less.
- And -- no surprise -- the company was unprofitable in Q1.
- While the 2013 restated report is not out, review of the Issuance History shows that rather than a profit in 2013, the company had a loss of $1.4M, likely more than sales when the final numbers are out, particularly if sales for the entire year are reduced from prior financials.
4. Stock Issuance.
- Limited in Q1, good.
- BUT, the company is now using .01/share for many of the earlier shares issued -- better than the previous (Q1 2013 and earlier) par value of .001, but not market value.
Though not stated, my supposition would be .01 is being justified by restrictions on sale of the stock -- but if so a more logical approach would be as a percent of market (not sure what accounting standards say here). Some of the shares issued are shown at market value, indicating some thought given to the subject.
- Per these financials, a total of $150K of stock was issued in Q4; but the company's 1 October 2013 PR (no longer on website) said that $1.7M worth of advertising was purchased in return for a subset of the total stock issued in the quarter. And certainly, we have seen a lot of advertising of late!!!
This latter point is yet another reason to question the use of .01, and the use of .025 for preferred stock -- but I do not know the appropriate standards.
5. Intangible Assets
- Substantially reduced from prior reports, when the account was tagged as 'Unidentified Intangible and Tangible Assets.'
- Appears to have reduced for two reasons:
- Allocation to prior period expenses; and
- Use of .01 per share for many of them, versus market values in the Q2, Q3, and Annual 2013 reports.
- I agree with those posters who suggest the company should present a rationale as to why these assets are on the balance sheet, and the strategy for their amortization. Whether such disclosure is required, I don't know.
6. Fixed Assets.
- Not sure if the 2013 numbers are for 6/30/2013 (header on the column) or 3/31/2013 (upper left hand corner) or 12/31/2013 (prior year end, the traditional comparative date on interim financials).
- But, they are dramatically down. The 2013 financial statements showed net fixed assets at 12/31/13at $520K; the second column of the current balance sheet shows them having been at $212K; and the 3/31/14 number is $129K.
- To me, this writedown is encouraging, suggests someone is actually paying attention to the financials.
There is a history about "Intangible Assets."
For many years, the company debited expense at the rate of .001 per common share issued -- that is, par value of the stock. Many of us on this board said that was wrong as it happened.
The Q2 2013 report noted that the auditor had pointed out that the value of the stock when issued should be used. Logically, this would mean restating expenses, but lemonade-meister Mr. Henthorn instead put all of these dollars on the balance sheet as 'Unidentified Tangible and Intangible Assets,' about $6.9M, and trumpeted the increase in the company's book value as a result of this 'correction.'
This account increased by about $700K alone in Q4 2013, to about $7.6M.
I will comment more about this account in a pending post on the Q1 financials, after I have completed studying them.
They have shown an ability to announce stores.
- Ten in TX (as I recall; two eventually opened).
- Five in AZ (two eventually opened)
- One in NJ (none so far)
But that is different than opening profitable locations. The fact is that in the last 2.5 years, open store count has gone from eight to ten (none in the aforementioned three states), with 5 stores closed (for those who care about profitability, who knows the ongoing real estate cost burden alone of the closed stores, plus unamortized improvements; perhaps that is part of 'Unidentified...Assets,' now totaling $7.6M).
On Jan 22, the company announced the planned opening of the third Southwest Florida store 'early in second quarter 2014'. So far, no address or picture on baristastv.com. Anyone know about it?
Announcements are cheap -- or maybe not, with $1.7M of advertising paid for with significant dilution causing the current publicity.
Key is actual store openings -- and continued operation. Recall that an NJ store was announced, five stores in AZ were announced, and I think it was ten in TX; these states currently have a total operating store count of zero.
Having said that, the BMOC announcement has already produced a potential game changer -- extension of the Baristas brand into the sports bar market, a natural IMO.
Now trick is improved site selection, opening new stores on a cost-effective basis, and operating them profitably.
Q1 financials worth waiting for if audited.
But I'll take the under on that one (meaning, I expect late -- which they already are -- and unaudited).
Plus note that audited financials are a necessary, but not sufficient, requirement for uplisting.
Not clear that BCCI meets the other requirements.
Look at my original post 31731, where I also said I liked this broadening of the brand.
Certainly, revenue will go much higher.
The question is whether they can make money doing it. Their site selection hasn't been stellar in the coffee kiosk business, with all of their Arizona (2) and Texas (2) stores closing, along with one of the two purchased Montana stores.
While the Knoxville location has apparently not worked well for the prior two stores, the new format could well change its fortune. We all certainly hope so.
Plus, as I said, BMOC has experience operating at this location, and may well be putting up some of its own cash to make this happen (likely in exchange for BCCI equity of some sort, have to wait for Q2 financials to see).
Knoxville versus Nashville, got it.
So, researched Pavilion 117 Knoxville. It is also new within the last year, having taken over for Quaker Steak and Lube. Two yelp reviews to date, mixed; concern that food quality reduced after change from Quaker Steak to Pavilion 117. To me, indicates margin squeeze, likely due to insufficient volumes overall. A lot of bikers can show up -- but if they don't spend money, not helpful to the host.
Net, third brand in a year plus for this location. Hopefully, third the charm with the new format.
The Nashville bar is an interesting transaction.
BCCI is basically saying that instead of being in the coffee stand business, uniquely positioned by their costumed approach, they are in the broader restaurant business (of which coffee is a sub-sector), uniquely positioned the same way.
There are three points about this:
- Can BCCI bring anything unique to the restaurant business? Certainly, costume variety is a differential with Hooters, but it is not exactly intellectual property. But still, Baristas branded is a positive; can sell their coffee and ice-cream, and potentially merchandise.
- Can they operate a restaurant profitably? Restaurants have a notoriously high failure rate; we have to hope this isn't similar to the prior BCCI acquisition of a failing location (Montana, and arguably some of the Seattle area stores). I could not find a Pavilion 117 in Nashville; I could a Pavilion Kitchen and Bar on Demonbreun which has been open less than a year. And that restaurant replaced Red Rooster by the same owner, which had opened and closed on the same site. Perhaps an iHub poster can clarify.
The good news here is that BMOC (Big Man on Campus?? Don't know, just saying...) has restaurant operation experience, with this particular operation.
- Finances of the deal are unclear, as were finances in the Southwest Florida transaction (reminds me -- where is the third Southwest Florida Baristas outlet, announced as 'early Q2' in the January PR?).
Net, I absolutely like the concept of broadening the brand in this way (I was less impressed with ice cream in grocery stores in 'new' territory, something which cost $500K in stock). But the finances are unclear.
Second quarter financials (showing at least some of the structure, perhaps, in terms of dilution) and third quarter financials (in terms of top and bottom line impact) should be revealing. Perhaps lack of transparency on structure has caused the relatively muted market reaction to this deal.
But first, need to get the first quarter financials, now two weeks overdue and counting...
O/S key share number, not A/S -- and that has gone up 50% in the last couple of years as documented, without crushing the stock; indeed, some posters have marveled at 'low dilution.'
I have to believe that A/S will be increased, as the company pays a lot of its outside services bills in stock (since it has no cash), and recipients will want that stock to be tradable so they can get cash. There is currently about $7.6M of such payments on its balance sheet, showing as 'Unidentified Assets" (note: some of that stock has been issued for other purposes, I am sure; but until there is an audit, don't know).
And preferred stock has gone up 400% -- not sure what that could mean for stock valuation, unless someone can tell us the terms of the preferred stock.
The Q1 financials are overdue; precise O/S - A/S amounts have historically only appeared there, and they would only be through 3/31 in the Q1 financials.
As of 12/31, all but 5M or so of A/S common had been issued. There were 7.4M of 30M A/S preferred issued as of 12/31, including almost 6M in Q4 alone. This figure excludes 5.4M of shares reported as issued in the 2012 financials (in exchange for debt reduction), but MIA in the 2013 financials.
Not sure the relationship between the two forms of stock, except that common has a .001 par value, and preferred has a .025. Preferred also does not trade publicly, so hard to value it.
I would be surprised if a PR was issued about an increase in A/S, unless coupled with a valuable announcement such as XYZ had accepted ABC common shares to produce the oft-mentioned reality show.
Dilution history is not on your side, if history predicts the future.
Since March, 2012 there has been almost 50% dilution, going from 202M to 295M shares O/S (caveat: that is per the Statement of Shareholder/Stockholders Equity in the 2013 report -- the following table in that same report shows 210M O/S in March, 2012).
Much if not most of this dilution was as payment for services rendered. Rather than be in the company's expense statement, the value of many of these shares is on the balance sheet -- $7.6M of 'Unidentified Assets,' an amount that is more than four times annual revenues!!! This account increased by $700K in Q4 alone.
(Note to someone asking when audited financials will be available -- likely not until these 'Unidentified Assets' have been identified and/or written off -- and, BCCI has sufficient cash to pay an auditor, as they do not accept shares.)
The good news is, only 300M shares are authorized, so hopefully no more dilution.
The bad news is, the company does have a preferred stock with 30M shares authorized (not sure if the terms of the preferred stock have been disclosed).
Their history is even murkier. The 2012 financial statements show 6.9M shares outstanding at the end of 2012, with 5.4M shares issued in the second quarter in a debt conversion -- but the 2013 financial statements show only 1.5M outstanding at the end of September, 2013, with approximately 6M more shares issued in the fourth quarter -- likely as part of payment for the advertising deal announced on October 1 (PR surprisingly no longer on BCCI website, but it spoke of issuance of a mix of common and preferred stock as payment for $1.7M 'worth' of advertising, the fuel for the current campaign).
Not sure what happened with the 5.4M shares, reference to them is missing from the 2013 report.
Their financial statements do not show money spent on marketing; G&A has actually been declining, per their financial statements.
The October 1 press release, for some reason no longer on the BCCI website, stated that the $1.7M 'worth' of advertising bought from Media Funding was paid for by common and preferred stock. Financial statements show 19.7M of common and 150K of preferred issued in Q4, without stating use other than for services.
But you are right that if this stock issuance had been correctly shown in the financial statements as expense, the company would be hugely unprofitable. Not necessarily an unreasonable decision; WebEx had a huge marketing campaign with nominal revenue, and built themselves up to where Cisco bought them for $1B or so.
The 2013 financial statements can be found at:https://www.otciq.com/otciq/ajax/showFinancialReportById.pdf?id=118957
The first lowlight is that some of the schedules literally do not add up. Look at the shareholder equity for 2013. Look at the 2013 cash flow statement. The share counts in item 3, Security Information are noted to be as of December 31, 2014 (perhaps forecasting no more dilution??)
It goes on, and on...
Retained deficit reduced by $800K during the year even though total 'profits' were $154K for the year (which in turn is less than the sum of the quarterly profits reported). Total assets do not equal total liabilities plus shareholder equity -- have you ever seen that one before in a public company?
$7.6M of the $8.3M in assets are 'Unidentified Tangible and Intangible Assets.' Most if not all of this is related to the issuance of shares for services; they were originally booked as expense at .001/share -- par value, rather than their value when issued. That was reversed in Q2 2013 -- but rather than take this large number (a multiple of annual revenue) to expense, it was put on the balance sheet. And increased by $700K in Q4, I think related to the Media Funding advertising buy (with common and preferred shares) of October 1, 2013.
And no, these are not audited, as you will immediately know when you look at them.
As a fellow former accountant, I'd be interested in your take on these.
BCCI claims attractive girls in themed costumes.
I don't know that they use 'hot' in their marketing -- and I don't think they should. They are trying to be a bit upscale and professional in their approach -- I support that.
I just don't think it is a profitable business.
As a former CPA (OK, 40 years ago), the financials tell all to me, and these do not indicate profitability. Yes, they report $50K or so per quarter of profits, on $450K in sales -- but they have $7.5M of 'Unidentified Assets,' on the books which IMO should flow through the P&L statements as an expense. You do the math.
I am not saying this ticker is garbage.
As a trading vehicle, it is fantastic -- lots of ups and downs. Mr. Henthorn is great at creating publicity, more power to him.
As a business, it is heavily unprofitable -- though not shown in their financial statements, because they put shares issued for services on the balance sheet as 'Unidentified Assets,' rather than expense. $7.5M of such assets at the moment, with an increase of $500K+ over the last quarter, more than sales!!
For example, the current advertising campaign was paid for with common and preferred shares on October 1, 2013; but not a penny has founds its way to the P&L!!! Who believes advertising is not an expense?
And, publishing a balance sheet which doesn't? Priceless.
Perhaps the new franchise group -- brought in by the advertising campaign -- will bring some adult supervision to the business model, certainly they have the experience.
The franchise agreement is great news, now we just need to see store openings.
Recall that San Antonio was originally opened with thoughts of ten stores, two opened, now closed; Phoenix, five, two, closed.,
Having said that, these guys have great experience in this business. Hopefully, they can open a sufficient number of stores in one geography to support a marketing program.