The 10-K makes for fascinating -- scary -- reading.
Not at all surprised at the market's negative reaction.
This post will focus on 2014 operating results (ex BMOC); another post will focus on BMOC; and a third (likely not today) on stock 'activity,' which commits significant dilution of at least 40% for stock to officers alone for newly signed employment agreements!!!
Operating results were a huge disaster:
- Despite Q4, a period which should be strong due to holidays per a company PR of a couple of years ago, revenue only increased 5% over Q3 14.
- Even without $2.5M of stock-based compensation (double revenue for the year, all booked in Q4; discussed in 'stock activity' post), the operating loss for the quarter was $510K, or $1.64 per $1 of revenue, versus $0.56 in Q3 (absent SBC).
Direct costs and compensation (read: materials and barista salaries) were down slightly from Q3; the increased loss was driven by an increase in G&A from an average of $82K/quarter in the first three quarters, to a whopping $456K for the fourth quarter alone, or almost $1.50 per $1 of revenue!!!
$193K was due to 'advertising' (10-K says $208K for the year; Q3 10-Q said $15K YTD). Have to believe a large chunk of this related to the reality show, but 10-K simply says 'advertising.'
- Interest expense was $33K for the year, versus $167K for the nine months ended Sept 30, 2014. ??? Perhaps abnormality is related to the fact that the company also booked a Loss on Loan Settlement of $314K in Q4; could have included interest in that.
