Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
This was very predictable. The red flags were all over the place.
Yes, but in the last two years ...
He just bought 10,000 @ $.59/sh. $5900.00
In the last couple of years his totals sales are 463,333 shares. The price was driven up on franchise sales. He sold into that. That tells me something about what the CEO thought about the strength of those franchises.
Insider Trades of PAPPAS BRIAN Information
Click on the column header to resort ascending (?) or descending (?).
Individual Insider Trades
Company Relation Last Date ? Tran OwnerType Shares Traded Last Price Shares Held
CREATIVE LEARNING CORP Officer 07/23/2013 Disposition (Non Open Market) indirect 10,000 0.93 2,169,000
CREATIVE LEARNING CORP Officer 09/13/2013 Sell indirect 150,000 0.58 2,229,000
CREATIVE LEARNING CORP Officer 10/18/2013 Disposition (Non Open Market) indirect 33,333 1.75 2,135,667
CREATIVE LEARNING CORP Officer 11/03/2013 Disposition (Non Open Market) indirect 105,000 1.8 2,030,000
CREATIVE LEARNING CORP Officer 12/06/2013 Disposition (Non Open Market) indirect 15,000 1.82 2,015,667
CREATIVE LEARNING CORP Officer 03/18/2014 Disposition (Non Open Market) indirect 50,000 1.94 1,965,667
CREATIVE LEARNING CORP Officer 08/13/2014 Disposition (Non Open Market) indirect 50,000 2.2 1,915,667
CREATIVE LEARNING CORP Officer 09/16/2014 Disposition (Non Open Market) indirect 50,000 2.05 1,865,667
CREATIVE LEARNING CORP Officer 11/13/2014 Buy indirect 1,000 1.85 1,866,667
CREATIVE LEARNING CORP Officer 06/18/2015 Buy direct 10,000 0.59 1,875,667
Read more: http://www.nasdaq.com/quotes/insiders/pappas-brian#ixzz3dqY04NLS
Been continuing my reading on this name and the more I read, the less comfortable I am. The company business model is suspect. Simply put, they have been selling franchises and master franchises by qualifying purchasers using Seed Capital. Seed is an entity that appears to get multiple credit card approvals for financing the franchises. Stop for minute and think about that. Interest on Credit Cards is typically 22% and higher. The master franchises bring in a much higher fee, naturally. The revenue of the company spiked when they had success in selling lots of these franchises. But how strong are they when they've bought them using Seed Capital? In the CFO lawsuit, he alluded to the fact that only a small portion of the franchises actually made enough revenue in their business model to make money. Economically for CLCN, it's the ongoing royalty income that is most meaningful. But if the franchises are profitable, the royalty income is a big ?. On Edgar, when you go back and read the notes to the financials, pay particular attention to the related party transactions. In doing so, realize that you are reading restated numbers because the company didn't properly disclose these related party transactions to you the first time around. Go back and do the following;
Look at the CEO salary each year. Look at the bonus he gets for signing up franchises. It's no wonder the goal has become signing up as many as you can regardless of financial strength/ business savy.
Add to that number the related party transactions which we were lied too about.
Compare all this to the remaining funds accruing to the rest of the shareholder base.
Once you've done that ... ask yourself if this company is really managing the business for the shareholders or as a personal ATM machine. It's no wonder the stock price has imploded and I could see it falling towards the cash value/share until we have a better understanding of the sustainability of the model and the managements intents with the free cash flow.
I think my intuition was right.
https://groups.google.com/forum/m/#!topic/alt.romance.chat/HP4c0Ao1CxY
Hummba,
No I haven't bought any shares. Too many concerns for me to feel comfortable in the business model and the people running it. I think this can easily trade lower.
For example Iif you dig you'll see that the past revenue growth was generated through collecting franchise fees and to a much lesser extent, recurring revenue from royalties. But the franchise fees were also generated in a less than ethical way (seed capital = advancing credit card debt). Upon Nicklenson first review only 12% of the franchises had revenue that could create profitability.
I will be watching from the sidelines at this time as I think this could get down in the $.50 range easily.
I'm questioning whether or not shareholder (other than the insiders) will benefit. Take a look at what has been brought into the company since inception ... and what has gone out to insiders.
Not very shareholder friendly imo.
29. Even beyond these basic requirements, Plaintiff found that the Board had sourced,and made available to prospective franchisees that had no liquid assets and even low net worth, a
credit card acquisition process, called Seed Capital.
30. Seed Capital is a company that through some questionable process could get prospective franchisees approved to have up to 10 credit cards awarded to them at the same time. In some cases, Seed Capital would take a large payment up front for this service from the prospective franchisee. The credit on these cards was interest free for six months, but carried very high rates thereafter.
31. Later as Plaintiff took on the role of trying to help franchisees become profitable, he found one case of a franchisee that had borrowed up to $80,000 on 10 credit cards acquired
through Seed Capital. When the interest kicked in, it crippled their business and they had to try and sell. Seed Capital also adversely affected other franchisees in this way as well. Indeed, by he time Plaintiff left the Company, the number of franchisees needing to sell or quit had increased dramatically as he had warned the Board.
32. All of these sales methods obviously had resulted in the quick growth of the number of franchises, which gave the Defendant high rankings in the fastest growing franchises in Entrepreneur Magazine.
Recall when Nickelson left the business, only a few months back and the falling revenue trend ...
http://richardnickelson.com/wp-content/uploads/2015/02/Nickelson-Complaint-FINAL-021615-Filed.pdf
If you are long this stock then this is an important read.. This is the lawsuit filed by the CFO that left. There really appears to be some questionable controls here. The board is not independent. There are improperly disclosed related party transactions and it appears that the franchises, en masse, aren't turning a profit?
To me, the parent is living off franchise fees that are being allocated by a biased board to their related party business through consulting fees etc.... . But the actual franchises they are selling don't appear to be able to make money..
I would love the "long" thesis for balance but this looks like a disaster waiting to happen.
Thoughts?
New to this story.
Can someone please provide the Cliff Notes on the recent lawsuit filed by the former CFO. Also, on the change in reporting surrounding incorrect disclosures on related party transactions?
This is always a cause for concern. I'm considering spending some time on this name but wish to clarify the ins/out of these related party transactions ...
I'll go digging as always but if someone has a quick answer it would be appreciated.
Thanks.
careful terry,
disagree with the moderator and your posts will just disappear.
kind of telling,huh?
Here is some insight. Probably something not many have thought through...
November 1, 2010:
Share Count is currently 57,389,550
December 14, 2010:
Press release announcing the Institute B relationship and Christopher Ng is coming from Lululemon
March 31, 2011:
Through signing bonuses, Stephen Fane holds 4,323,598 shares and Christopher Ng owns 4,323,597 shares. These numbers include 1,000,000 options each, granted upon signing with the company. The terms of the options were not disclosed at that time.
September 28,2011:
The share count has risen up to 84,254,834 through a combination of private placements and other issuances to settle claims/debt. It’s disclosed at this time that Christopher Ng invested $100,000 of his own money in a private placement giving him an additional 666,667 shares and 333,334 warrants. The shares were purchased at $.15/share and the warrants were 2 years at $.25/share. At this time Stephen Fane continues to own 4,323,598 shares including his options. Christopher Ng now owns 5,323,598 shares including his options.
July 30, 2012:
It’s disclosed in the March 31, 2012 AIF that the share count is now 95,816,003. Stephen Fane has increased ownership to 7,750,000 shares and Christopher Ng has increased ownership to 7,250,001 shares.
March 31,2013:
The share count has again increased slightly and no changes occurred in ownership for Stephen and Christopher. However it’s revealed that their signing bonus options have a price $.15/share and are 5 years in duration. Very generous terms.
November 8,2013:
It’s announced from the company with a positive spin that creditors of the company have agreed to convert their debt to equity. Christopher reiterates that this is a strong indication of the creditors belief in the future value of the equity.
The company now has 144,827,871 shares outstanding after the conversion. The conversion was done at $.07/share. The dilution from Day 1 is massive. 152% to be exact. Upon further inspection it’s revealed that 80% of the debt that was converted to shares was done by insiders and related parties. (Stephen, Christopher, Ray, Clay, Institute B). For these parties involved, this has been an absolute windfall. For instance, after conversion of debt to equity Stephen Fane now owns 19,047,143 shares including his options. Christopher Ng now owns 19,501,601 shares including his options.
You see, by allowing their salaries to accrue on the balance sheet as liabilities, they were able to dupe their #1 supporter - Barunuuk. They hid a fairly large salary expense from the income statement and in addition to that they also gained the ability to time the eventual conversion of their own accrued debt to equity. By choosing to convert the lump sum now while the stock prices is so low,(they have done so at $.07/share)they have allowed themselves a significant increase in shares owned.
If you believe in the long term prospects of Alterrus and you are shareholder like Barunuuk - you should be pissed. Why? Because in lieu of salary today they have taken a huge piece of the companies future earning power away, instead.
The timing of the debt conversion stinks.
Here is an example to wrap your head around it:
Day 1:
Share Count = 57,389,550
Barunuuk invests $20K and buys 100,000 shares representing .175% of the company
Stephen owns 4,323,598 shares/options representing 7.53% of the company
Christopher owns 4,323,598 shares/options representing 7.53% of the company
Today:
Share Count = 144,827,871
Barunuuk raves about sales growth and discusses all things positive with what Alterrus is doing. He/She still owns his/her 100,000 shares now representing .07% of the company. You been completed diluted. You have effecctively lost 60% of the stake you once did.
Stephen on the other hand now owns 19,047,143 shares/options representing 13.15% of the company
Christopher now owns 13.46% of the company.
In laymen’s terms. Stephen and Christopher have increased their own ownership from 7.53% to north of 13% at the expense of all other shareholders in the company who have been significantly diluted. It’s true that Stephen and Christopher are due fair compensation for their work but I disagree strongly with the timing (and price)of when this debt was converted. And furthermore, the comments about creditors having strong convictions about the future earnings potential is somewhat tainted when your provided the insight that 80% of the creditors were actually the management team, themselves.
I suspected as much Terry as the US pink sheet OTC (ASIUF) exchange didn't impose a trading halt, just the CNSX (ASI). That points one to expect the news was exchange specific and fee related. It's not a large expense. Perhaps just an ovesight or with the machine breaking down and no cash in the bank, pennies arae being pinched?
Thanks for the link to confirm it.
Trading Halt:
Alterrus Systems halted at 6:43 a.m. PT
2014-01-15 09:45 ET - Halt Trading
Alterrus Systems Inc. has been halted at 6:43 a.m. PT on Jan. 15, 2014.
the current reality is factually and materially different from your rose coloured glasses scenario:
their current direct product costs and labour costs sum to a number that exceeds their current level of sales. Yes, sales can expand and cover this but there are other quarterly expenses that are yet to be accounted for;
a)project development ..............................$125K
b)G&A ..............................................$90K
c)Executive salary as it's being accrued ...........$128K
d)Interest on debt................................. $112K
other concerns;
a)only have $36K in cash in the bank
b)accounts payables of $2M vs. receivables of $45k
c)$5.3M in negative shareholder equity
(* These are prior to recent debt conversions, however the majority of the debt conversion was actually accrued salary commitments being converted to equity. It created greater that 50% dilution to shareholders)
d) they are already in breach of the covenants on the loan given to them through their first banking relationship.
e) there are currently $380K in legal claims against the company.
f) they don't own any visible unencumbered assets.
This isn't subjective thinking. It's a statement of facts taken directly from their presentations. They have an ugly balance sheet, limited financial flexibility at the moment to fix their machine let alone expand and the one bank that has provided past funding holds them in default for breaking their covenants just months after providing the loan.
It's not good at the moment. Plain and simple.
Barunuuk, are you in any capacity affiliated to Alterrus/Institute B?
As I'm asking you this question, it is only fair that I answer it too. For me, the answer is no. I have no affiliation. Just an investor.
Are you speaking with authority on behalf of Institute B?
You are a waltzing conundrum.
USG wrote back on August 20th/2013: Post #622:
Alterrus is joined at the hip to Institute B. They are already a certified B Corp but I doubt that would be the case as a pot grower. That's more up Nick Brusatore's lane.
_____
B Corps are certified through a rigorous screening process administered through B-Labs, an independent non-profit organization. To qualify as a B Corp, a firm must have an explicit social or environmental mission, and a fiduciary responsibility to take into account the interests of workers, the community and the environment as well as its shareholders. It must also publish independently verified reports on its social and environmental impact alongside its financial results.
A Fundamental View.
Here is what is not being discussed with all the pro forma fluff floating around:
I'll use the current quarterly for reference:
Sales were $209K
COGS were $323K
Ouch.
Gross Profit is an oxymoron at the moment. They had a gross loss of $114K for this quarter. Upon closer inspection we see the $323K in COGS is comprised of the following items:
Direct Product Cost = $138K
Direct Labour Cost = $127K
Depreciation $48K
Selling/Marketing = $2K
Other = $7K
The Depreciation is related to the Building, Tray's and Rigging and the verticrop system itself. While depreciation itself is a non-cash charge, it is certainly a real expense. All depreciation does is spread a real cost over the useful life of the asset. Trays will need to be replaced, equipment serviced etc ... So, while it doesn't effect cash flow in the reporting period it certainly must be accounted for in any analysis.
But stop for second and simply look at the sum of the Direct Product Costs and Direct Labour which sum to $265K. This sum exceeds the unit sales figures for the quarter all by itself. The Direct Labour appears to be too costly. This is a hint that something went wrong during the quarter. Higher than expected costs or lower than expected Sales. It's possible that expected orders didn't pan out. You can't make money taking inputs worth a $1 and selling outputs to the public for $.90.
This margin should be closer to +50%. Why? because you still have to pay for G&A, R&D, expansion, and interest on debt. So let's have a closer look at those additional expenses which we've yet to address.
Product Development cost are comprised of Site contractor Fees and Consulting Fees. They were relatively stable Q over Q. They are currently costing the company $125K per quarter. If the company is to expand, contractor fees etc will expand with that. I would guess these are related more to Epcot at the moment.
General and Administrative expenses were roughly $90K. See anything wrong with that? (see below for the answer) This category includes rent, travel, office, consulting etc . As the company grows these expenses are not going to shrink.
Next is interest on debt and royalties paid. This totalled $113K for the quarter. Some good news here will be the positive effect of the debt conversion to equity. This will lower their interest costs as debt was eliminated. However, you should understand how this all came about.
$3.4M was recently converted to equity. A logical question would be who in their right mind would give up a debt claim for a stock certificate offered by a company that had negative equity? The debt is a more senior claim.
Lo and behold upon inspection you'll find that of the $3.4M which converted, all but approximately $500K was done by related parties and Institute B. In other words, the friendly hands and the executives.
So, to sum up:
At the moment the companies sales must increase dramatically without incurring any additional expenses to have a shot of making money.
Good: Sales ................................. $209K
Bad: COGS .................................. $323K
Product development ................... $125K
G&A ................................... $90K
Interest .............................. $113K * will decrease next q due to conversion
All else being equal, sales would have needed to be greater than 3X what they are in order to create a positive bottom line without a penny of increase in additional expenses.
Finally, one last thing that Barunuuk clearly doesn't understand.
The expenses listed above are actually drastically understated. Why? Because Stephan Fane and Chris Ng are currently accruing a salary rather than actually being paid in cash. I applaud them both because I believe that past accruals are what they both just converted to equity and therefore they are eating their own cooking to some extent. However, it has cost the rest of the shareholder base significant dilution!
In 2012 Stephan's accrued salary was $336K. Chris Ng's was $176K for a combined total of $512K annually. That represents another $128K per quarter if the salary was actually being paid and not accrued. When they finally do take regular pay it will become part the G&A line item.
If executive salaries were actually being paid and included on the income statement, then the total sales hurdle per quarter would become roughly $780k before the shareholders got to spilt even one penny.
This is the reality of where Alterrus is currently at.
Pro forma blue sky projections are meaningless and this is why;
1) I get my back up when the board is sprayed with a bunch of pro forma garbage.
2) anyone hanging their hat on bottomline earnings at this stage of the game is delusional.
They are climbing Mt. Everest in barefeet at the moment.
you said you were done last time.
Just sayin'
Let me get this straight. You're pointing the finger directly at me (although as you claim you don't do that) and suggesting I don't use comparable analysis...
duplicate
For the Record:
Reading the posts this morning its clear that some have failed to interpret my words below properly. My tongue was firmly planted on the inside of my cheek in writing the following. It was a parody on the "fundamental research" that Barunuuk claims to use. I am not an accountant nor am I an MBA. That is Barunuuk according to his past posts. Incidentally Terry, I agree 100% that an MBA is not what it once was.
Again, the words below have no bearing on what I truly think this company is worth. It was written in jest.
Probably why Barunuuk agrees with it all....
I've never once discussed my level of education or background. You've got the wrong chest thumper.
Last post from me for a while so you're in luck.
USG
Let's see now;
Now, if there are 50 states, 10 provinces and 3 territories then that equals 63 unique geographic area's in North America to target.
Now if Alterrus can setup 5 farms in each city then that's 315 operating units in just North America.
Now if each of those operating units makes $1.5M to $2M in Revenue which has already shown to be realistic, then Alterrus can create sales of $473M to $630M per year.
Now, if operating costs don't rise proportionately to sales and neither do admin or general expenses, then clearly the company will be able to expand there net margin.
Now if the net margins eventually expand and become 10% then the earnings will be $47M-$63M annually.
Now, the company only has 145M shares outstanding. So, therefore $63M in earnings waterfalls down to $.43/share. Actually, it's $.43448 but let's call it $.43 to remain conservative.
Now, if that conservative estimate of future earnings is $.43/share then the stock should trade at 100X earnings which implies value of $43/share. Why? Because Lululemon did.
Now if the stock is currently $.06/share and it's going to $43/share then that's 716X your money people. Now, if you invest just $1,396.65 today then your going to be a millionaire in no time!
Oh, and don't listen to that USG guy who educated me on accounting even though my wife's an accountant and I'm an MBA. He has a lot to say but never backs it up with the fundamental numbers like I just did.
i stand corrected then.
let the record show ... this is not actually an insult.
6)"Not sure if you have an inferiority complex, or small man's syndrome [sic], but you must be making up for something"
1)"Pretty sad life you have"
2)"You be great as a bean counter, just not as a CEO of a company"
3)"you have displayed that there is no way that you could ever be a Level 5 leader"
4)"even if you were a CEO, you wouldn't be that good of one (and definitely not an inspiring one)."
5)"you stink of arrogance"
6)"Not sure if you have an inferiority complex, or small man's syndrome [sic], but you must be making up for something"
so, you don't like personal attacks and yet you've issued many personal attacks yourself? need examples? what gives?
interesting behaviour for the self appointed board moderator.
facts remain; you're over your head in a parking lot puddle.
yeah, I've definately dug myself a "dipper" hole. my bad.
enough arguing with the dullards. i can think of better things to do than waste more brain cells on the intellectually disabled.
as i said, a long length of rope is now yours and for any followers drinking the koolaid - i wish you success in equal proportions to your independent though and analysis.
go back and reread the 3 (not two that you listed, but the three that I wrote about) sources of revenue.
1) Owner/Operator [Like Vancouver]
2) Selling the machines [Like China]
3) Servicing the machines [Possibly include in Chinese deal]
According to you, I've gotten the revenue model wrong. That's the kind of logic that we've all come to expect from you.
... So you were so self-absorbed that you decided to self appoint yourself ...
Artfully avoided:
Just out of curiosity though ... How did you become the board moderator? Were you really that self absorbed that you pushed the button to self-appoint?
_____________________________
So I've said from start they can't be profitable huh? Here is one of my first posts from Feb 11/2011. If only the truth were half as interesting as your imagination.
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=59836358
And I quote from that post...
The total revenue model will likely be a combination of a) owner operated revenue, b) outright sales, c) servicing revenue.
I’m quite excited about the prospects but one task remains … we must see some revenue generation by any of the means shown above.
______________________________
As for this: " My point here is that anyone hanging their hat on positive bottom line earnings at this stage of the game is in my opinion certifiably and unequivocally delusional"
Who's been correct ... me or you?
The financial back me up. What backs you up is your pie in the sky ... "if my aunt had balls she'd be my uncle" analysis.
Congratulations, you're a genius. All that success without even knowing what a receivable was.
See Barunuuk, it's posts like this that are inflammatory. You say I make comments without providing fundamental backing. The truth is, if I didn't provide you with fundamental backing then you'd still be scratching your head wondering why the huge ramp up in receivables didn't translate to the revenue line.
You say it's all about building a brand. I do agree. But I also know that it's hard for a company to build out infrastructure when you owe more than you own, have no savings and have already hugely diluted your shareholder base. So, I've suggested they could look to sell the verticrop as a way making money. Lo and behold, enter China ...
As I've said, moving on ... while I've enjoyed some of the personal one on ones with other posters (and thank you for that)its clear to me that with you here, it takes away way more than it gives.
Just out of curiosity though ... How did you become the board moderator? Were you really that self absorbed that you pushed the button to self-appoint?
My investment in Alterrus was made specifically for the Verticrop commercialization. Prior to that, I didn't even know the company existed.
At this point I'm having trouble deciding which piece of art on the wall of your living room you covet more;
1)Jesse Ventura pointillism portrait
2)Retro-chic Chicken Little poster
3)The large 72' x 72' mirror or,
4)Bigfoot lives bobblehead
Rumour has it you spend a lot of time admiring the mirror.
At this point, anyone who tunes in to listen to your investment fallacies deserves what's coming to them. For that reason, I'll step aside from this forum for the time being as its an asymetric payoff for me at this point and I'm on the losing end.
(The equivalent of providing you a long length of rope)
Best of luck to all other posters.
For the record, I remain long my shares of ASIUF with no plans to change that at this point.
Interview with Rae Abbott
http://vancouverisawesome.com/2013/12/19/la-vida-local-local-garden/