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They are only "idiots" and "senseless" per your opinion. With no cost basis everything is profit. Even at $.30/share the alleged 6 million shares is $2 Million in cold hard cash.
If I woke up one day and with no effort or forethought and had the opportunity to put $1 million in my bank account I would take it, full stop. None of us can predict the future but with those shares and no cost basis they can literally, pardon the pun, take it to the bank.
On the topic of large shareholders everyone here seems well intentioned but don't for a second discount the fact that we are all faceless strangers sitting behind a keyboard. You have no way to gauge if any of us are being truthful when we say we're buying more or "Not selling a single share until multi-dollar level."
For all we know the ex-officers dumped 1M shares to put some cash in the bank and are letting the rest ride. That would mean other people with large positions flooded the market.
I'm long on the stock but my well intentioned game plan was to dump after the Q results dropped and then buy back in because I was certain the stock would retreat and I could try to ride the ebbs and flows. Unfortunately there was no pop and I my initial DD left me flat footed. I just have to roll with the punches. Based on what I wrote two paragraphs up though.... Maybe it wasn't my plan. Maybe I shorted 500,000 shares and am doing a little jig right now.
Everything Frozen?
Looks like everything stopped on/about 1310. Placed bids at .38 and L2 never seemed to get updated above .36. Very strange.
Shhhhhhh. Don't Jinx it.
EPS is EPS is EPS.
Nothing that is happening affects that in any way.
This is only having an effect because there is no volume and hypothetically there are people just looking to get out.
The way up is likely going to be slower because a number of individuals holding large positions, such as yourself, are going to be more likely to book profits when an attractive price is reached this time around.
They don't need to do a thing above and beyond what they are legally required to do.
If there is some shady shit going on with the T/A would you prefer they shoot from the hip on disclosing it or wait until a full investigation has occurred so they can get it right the first time?
Mgmt owns over 85% of shares outstanding. They don't care what any one of us thinks about the current share price and we couldn't scrape together enough voting rights to make them care. While they are probably angry at the T/A and may be trying to rectify that situation if they were blindsided it's probably just noise. They know where they are trying to steer the ship and this additional liquidity is a rogue wave they will just take in stride.
All of their "investor friendly actions" are just good business and our benefit is a byproduct. They have a vested interest in ensuring a good share price because it is how they will eventually cash in big time when and if they start unloading RSU's or as part of M&A activity.
Aussie expansion not looking good
Unless they change course e-cigs will be prescription only starting June 2021.
https://www.theguardian.com/society/2020/sep/23/e-cigarettes-to-become-available-as-prescription-only-items-in-australia-from-june-2021
Buckle up kids!
L2 is stacked up in a way that makes it look like people are spooked and trying to get out. I have a feeling things are going to snowball and it is going to get a lot worse.
It would be nice for us but I don't think, nor do I hope, that they would do this. Sitting on cash, imo, is more important for them at this point in time.
While they are doing great there is still a whole lot of economic uncertainty which a pile of cash could help them weather.
Also - primary stakeholders control the lions share of stock so they can't really be pressured from outside influences on the buyback front.
You don't need to sell me..... I've been buying on the way down. Just with I wasn't so eager pre-earnings as I would have a lot more shares right now.
It's not a loss until it's realized.
"The market can remain irrational longer than you can remain solvent"
.....right
Please share the math and reasoning you used to arrive at that figure.
Unpopular Opinion
I understand there is a lot of angst about the share price at the moment. Long term though I think KAVL is intriguing and they should always throw off cash because it is a relatively low overhead company.
I'm personally hoping that people get impatient and dump shares. I would love nothing more than for the stock to continue downwards so that I can pick up a ton of cheap shares and lower my cost basis.
There are a lot of people holding a lot of shares with a every cheap cost basis. If you have been holding for years I would expect nothing less than for these individuals to pare their position and bank some very impressive returns.
I think it is pretty clear cut, honestly.
There were some really lofty goals for the Q3 numbers that were likely a little divorced from reality. Granted who knows what reality is when a company posts >$20M rev's for first Q.
Q3 was released and the numbers were great and any company on earth would be ecstatic to have similar Q/Q growth. Unfortunately the higher expectations were already priced into the stock in advance of the earnings due to the PMTA submission. PMTA submission simply meant that the party could continue but does not directly guarantee larger revenues.
This is compounded by Daiello's revelation yesterday about the RSU's that were improperly released. If correct 2 guys came onto the market with a golden ticket and likely flooded the market with cheap shares precisely when we were hoping to get some new eyeballs. Any new eyes that were on $KAVL likely got in for a steal or were scared off by a stock not making any sense about it's direction of movement.
EPS YTD is currently sitting at ~$0.013. I think that we are realistically looking at an EPS ~$0.03 for FY20. You can apply whatever P/E multiple you would like but I think the stock is currently sitting a little under where it should be based on a conservative estimate.
If Q4 attains some lofty goals all bets are off but I think we eclipse $1 right around the new year. Hopefully they can get Q4 released a little earlier without the PMTA deadline looming.
If we do get some new eyes that are willing to buy in speculatively or there is some news representing a seismic shift then we could move higher sooner.
Im in a similar boat with an added kicker that I am responsible for 20% of todays volume. Ha
Great find, daiello. It's short term pain.
If you weren't trying to free up some capital this week should be viewed as a bonus buying opportunity that shouldn't have happened.
On paper it looks like that. Unfortunately KAVL reported Q2 erroneously.
There is ~1.6M in revenue and "cost of revenue - related party" that was not reported correctly in Q2. I am not sure how exactly that would flesh out in net income. This can be verified by looking at both 10Q's side by side and adding things up. Q2+Q3 Revenue != Revenue for 9 months ended 7/31/20 on most recent 10Q.
Based on my math in post 9875 their gross profit actually increased 2% between Q's
EDIT: KAVL has been informed and their auditors indicated that it wasn't necessary to report. They are however considering the release of an amended 10Q for Q2.
L2 currently has 10k bid @.053
IMO, this is very obviously a typo on the traders end and they likely meant to bid .53. Hope they catch their mistake and don't hang around all day thinking they couldn't get their order filled.
Precisely. Very suspicious.
I am trading through fidelity and it appears they use citadel for trade execution. I have seen in the past where the L2 would show my bid quantity plus another amount that didn't seem like it would possibly be an order from someone. I'm assuming this is "market maker" aspect of things.
I confirmed this by sliding bids around by tenths of a penny and watching OTCMarkets update L2 with my new bid and another odd quantity.
Just the other day I had my bid partially filled in one of those scenarios where there was a random quantity attached on top of my bid. Low an behold the other quantity at my bid price showed up in the trade history.
The last couple days my bids don't even show up on OTC's L2
What I'm not a fan of is having a bid waiting to be filled and then looking at trade history to see a bunch of filled orders that occurred at a lower price than mine.
What do we know?
Q2 Revenue's of $22,506,154
Q2 Cost of Rev of $19,900,000(18.3 but I added in $1.6M discrepancy)
Q3 Revenue's of $32,375,309
Q3 Cost of Rev of $27,976,013
31% increase in revenue Q over Q
Q2 Gross Profit Margin of ~11.6%
Q3 Gross Profit Margin of ~13.6%
MSRP of BIDI Stick is $15.99. Has anyone gotten their hands on a stick and can comment on retail price?
A lot of assumptions to follow
Wholesale price on BIDIVAPOR.com is $7.50/stick when purchasing as few as 90.
Retailers are going to do better than $7.50 from their distributors otherwise they would just purchase from BIDIVAPOR.com. Unless of course it is purely convenience buying from the same vendor that provides all of their other supplies. Let's assume it's another 10% off to get price to $6.25.
If the distributors are making ~20% margin that would mean the price from KAVL is ~$5.40/stick.
If my assumptions are in the right zipcode I am estimating that approximately 6.1 million BIDI sticks were sold in Q3.
Subtracting KAVL's 13.6% margin has $4.61/stick going to BIDI.
If BIDI is targeting a 20% margin does $3.68/unit seem like a reasonable figure to build the stick and package it or is it too high?
What does the future hold?
As the product line continues to grow KAVL will likely receive more favorable terms reflecting the increased volume of sales. There is going to be a point of diminishing returns for BIDI so I can't imagine KAVL will realize greater than 20-25% gross margins.
My prediction for KAVL would be the following:
42M in revenue = $6.5M "Gross Profit," $3.99M Net Income, $0.014 EPS
52M in revenue = $8.9M "Gross Profit," $5.33M Net Income, $0.019 EPS
If you were to annualize the above EPS I would expect to see ~$1.50 within the next 3 quarters assuming revenues were stagnant at $42M. If the revenues continues to show great growth and/or obtains a higher multiple than my modest 30x it could happen sooner.
Anyway - it's late and I'm rambling but my prediction has been memorialized.
Nailed it.
Per Amended agmt Quikfill can also get up to ~30M shares over the next couple years if their deal is maxed out.
Shares vs Cash payments is up to KAVL's discretion. With their cash on hand I certainly would have preferred they paid the 2-300K instead of doling out 3M shares.
Not sure what pot the disbursements came out of but it's nice to know it wasn't all new shares.
This is a good point. Based on the 10-Q almost 12 million shares were disbursed to employees and QuikFillRX at the end of the Q. I don't see any mention of those shares being RSU's so I would imagine some of them made their way to the open market.
On the topic of QuikFillRX.......
Per the amended service agreement with the company they are paid $125k/month or $375k in base compensation for last Q. They are also entitled to bonus compensation
I am long.
With all of my criticism and cynicism I still bought a bunch more shares at $.61 today.
I guess I'm really just hoping someone is going to throw something in my face that will help me rationalize the little feeling in my stomach in spite the different things that give me pause.
You make some good points and it is all exciting news... to a point.
I am just not of the opinion that this stock is going to approach an absurd P/E ratio. I would love nothing more than to be made a fool of by this statement, however.
I also got in much later than a lot of the posters on this board which is probably contributing to my pragmatism.
That's the thing though.... They most certainly are not one and the same.
They are controlled by the same people but each morning they are going to wake up and cycle through the inventory of hats to wear that day. They are going to operate in the best interest of whatever company is stamped on the hat they are wearing at a given time.
They are a publicly traded company that didn't IPO so they received no capital as part of routing BIDI's business through KAVL. If they wanted to be one and the same they could have simply set up another LLC to act as the distributor if this arrangement was solely for tax/liability reasons.
Do you have any hypothesis' why they went to the trouble of creating a publicly traded company? I personally don't have a clue on this front.
My issue with the insane P/E's mentioned is that KAVL has no IP.
I certainly think there is money to be made with this stock but I think there is a lot of talk on this board that could use some tempering.
KAVL's business model is pretty clear cut and is effectively arbitrage. At the end of the day they are acting as a middle man and taking a piece off of the top. Additional products could certainly be added to the portfolio in time (THC BIDI) but KAVL's net income will always be very tightly linked to the amount of someone else's product they are moving.
A positive to this setup is that they have low overhead and should always turn a profit. In time this could lead to acquisitions or a dividend changing the calculus. At the moment though I don't see anything exiting to make me believe an exorbitant P/E ratio is on the horizon.
Last week there was talk of big tobacco investment. I still don't understand why this would benefit KAVL. If big tobacco were to get involved I would think they'd be throwing their money at BIDI since that is where the IP is. If it isn't a buy-out scenario this could theoretically benefit KAVL as the sales would pass through. Big tobacco would reap the rewards on the backend by sharing in the profits of BIDI.
Also as far as sales growth and new distributors is concerned - FAVS Inc accounted for 56% of sales in the previous quarter. Not sure when the other distributors came online. While the new distributors are a plus we don't have SEC filings talking about the arrangement or the minimum quantity/value of the relationship so that makes me believe they don't represent a material change to the organization.
Could be a fair assessment.
According to Stern NYU as of Jan 2020 the P/E for Tobacco was 33 and for Retail (Distributors) was 27.
Based on this single source maybe 27-33x would be a more realistic target.
Appreciate the update. It is interesting that they speak of an audit firm but they are submitting unaudited financials to SEC.
Also - Some quick back of the napkin calculations based on this Q.... If Net Income as a percentage (8%) of Net Revenues remained the same we would need $100M/qtr for $.115 EPS.
What would be considered a reasonable P/E multiple for a company like this? I think 10-15x is probably realistic. Based on that we will probably need ~$80M/Qtr to hit a dollar. Now this might be more reasonable for an established company VS an organization with a lot of unknown upside potential so 10-15X could be low at this stage in the game.
BAD NEWS CONTAINED WITHIN
There is ~$1.6 Million unaccounted for in the "Cost of Revenue - Related Party." Adding Last Q ($18,301,800) to current Q ($27,860,145) should put the 9 months ended total at $46,161,945. Instead it is reflecting a higher value of $47,771,211.
Net Income for the 9 month period is under-reported by a similar quantity.
Where did it go?
This is pretty big oversight and I hope it is just that.
Daiello nailed it in his previous post. Annualizing just this qtr would put EPS at $.0376
I'll eat my crow - You are correct. Disregard.
Once again - How is that arrived at? The 10-Q clearly states common shares outstanding is in excess of 575M shares. Just because they are locked up in preferred shares or other RSU's doesn't mean they don't exist.
It's also interesting that in the last Q an additional 4.13M shares were issued for compensation further diluting our investments.
Their earnings didn't live up to expectation. They did $22M in ~6 weeks. They should have hit $44M+ if the earnings stayed steady. They added additional distributors and still didn't match last Qtr let alone exceed it.
Last quarters revenues were likely juiced by a distributor buying a huge quantity to decrease their unit cost and stock their warehouses. Now they are likely falling back to the Agmt minimums if needed.
If the above assumption is correct we could see a rebound next Qtr from a yo-yo like effect until the distributors figure out demand and their needs.
Can you break down your math for me? The 10Q clearly states net income per share @ $0.01 for the 9 month period and $0.00 for the last quarter. With the data I am looking at a 10X would be $0.10 if I am not mistaken.
Takes two to tango. There are bids and asks so no one is willing to sell either.
Reading up on the enforcement policies from the FDA that led to the PMTA it's quite clear that they are building their business to meet the letter of the law and to stay off of the FDA's radar.
It's the reason for the flavor renames, the strict age verification process, etc.
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