Bitzio, Inc. (fka BTZO)

[Odessa99]

Operating Loss Carry-forwards - a valuable BTZO asset...
It is clear from Bitzio's financial filings that the company carries a very large Accumulated Deficit balance (more than $20 million). What is not so apparent from that figure is how valuable an asset that can represent.

While a company does not operate with the intention of suffering large losses, extreme future benefits can be derived from the accumulation of such losses. The chief benefit comes if/when the company can begin to become profitable. At such time, income taxes can be avoided because the positive earnings can be offset against something called operating(tax) loss carry-forwards.

In the case with Bitzio, that future asset can act like millions of dollars in gift cards, which can be applied to future tax liabilities with the IRS. Large tax loss carry-forwards, on the books, can also make a company an attractive takeover candidate. Please note that there are certain change-of-control rules/requirements that must be followed for such an asset to be preserved in a takeover.

But the important point is to understand just how valuable that accumulated deficit balance can represent, going forward.

As always, simply my opinion.

For those interested, here's a re-post of what an 'Accumulated Deficit' is:

What an 'Accumulated Deficit' actually represents....
Retained Earnings/(Accumulated Deficit) is an account that all earnings and or losses get cleared out to, and as such keeps a running balance (from the beginning of time) of the sum total of net earnings/losses (less the impact of distributed shareholder dividends).

If your were to look at the balance sheet of WalMart, for example, you would see a Retained Earnings figure of about 80 billion (it would have been even higher, but gets reduced every fiscal quarter that WalMart pays their substantial dividend to shareholders).

It is not uncommon for companies, in their early stages, to rack up a series of losses. So any capital chewed up during that period reduce the balance in the Retained Earnings account (or in this case, increase the negative Accumulated Deficit balance).

As crazy as it might sound, being able to purchase shares of an OTC stock (such as Bitzio Inc) with a high Accumulated Deficit balance sometimes provides a substantial benefit to the new shareholder. This is the case because the new shareholders are the beneficiary of any value that was brought to the business (both hard assets and I.P. assets) while the capital was being deployed, and the accumulated deficit was being generated.

As always, simply my opinion.

BTZO