Baristas Coffee Company, Inc. (BCCI)

[BobSinCA]

IMO this is not a quality piece of work:

http://smallcapir.com/wp-content/uploads/2014/04/BCCI-CFA-Report.pdf

A few items to point out (others may already have pointed these out and more, lots of activity on BCCI/IH these days...):

- Page 1, paragraph 1 says:

The company currently operates stores in Washington, Florida, Montana and Arizona.

I do not think there are any stores currently operating in Arizona, based on my research when I was there ten days ago. Address?

- Page 1 says all stands are company operated, but page 2 says it has 'over ten franchises operating.' In fact, there are only ten stores operating in total, and all are company owned (caveat: Coral Gables is 'franchised' by a group owned/controlled by BCCI).

- Page 1 says

Baristas has recently filed documentation to allow the sale of franchises in 28 states.

Mr. B must work in slow motion, the PR announcing this was published a year ago, with at most one franchisee (Coral Cables, dubious provenance) signed since.

- Page 2 says that

BCCI has $1.4 million for advertising and have just started using it this year

. In fact, they don't have any hard cash available for advertising, but traded so far undisclosed equity for advertising per October 1 press release. And some of the $$ were spent in Q4 to support Coral Cables openings, I guarantee far more than the 1% marketing fee paid by franchisees.

- Page 3 says

Information dated 9-30-13 is already six months old and we have no way of knowing what has happened
with the company since then

, Yet he refers (see last item)to advertising that was obtained on October 1. However, he maybe gets some slack on this; the 10/1 PR for some reason no longer appears on the BCCI website.

- He says

Gross margins have been equally consistent in the range of 75%.

But, this is because labor has not been shown in the gross margin line contrary to GAAP.

- He says company is profitable; but this is only because shares provided in return for professional fees and ice cream distribution have inappropriately been put in assets rather than expense. $7.5M worth, and company is only doing $1.6M/year in revenue!!

- He says company is cash flow positive -- I don't think so; but if so, only due to tremendous dilution whereby expenses were paid for with shares.

The disclaimer says he wasn't paid to write this, and received only $250 to have the report distributed. Have to believe someone closely associated with BCCI wrote it.

The above is all IMO, of course, do your own dd.