Dilution is not always bad.
I think dilution can be looked at two ways. There is a good dilution and a bad dilution. The giveaways that occurred recently were bad dilution. Someone asked how we defend it. I won’t. I don’t know what that is all about, but someday I hope to talk to someone in Toronto or hear from someone else who posts they talked to Toronto, and we get an answer for that. For now, I think that was bad. However, there is also GOOD dilution, and that has happened a lot in the past two years, but I don’t think is being looked at as being good. So here’s my thoughts on it.
The company is still young in the expansion game. They said they were going to expand into the USA, but in reality they had no money to DO the expansion. So they needed investors. That meant dilution. But … that is the type of dilution that is WORTH doing. Let me show you some approximate numbers and how it is positive.
We had 3 cafes open in 2018. We also had about 600 million shares outstanding. That’s about “200 million shares outstanding per café and thus per $2 million in revenue”. Yes I know there were other businesses as part of Amfil too, but I’m just talking about the S&L Cafes, which is where we are heading finally now anyway. I’m also rounding EVERY café to the same numbers, which is NOT true, but which is a good average overall. Tempe will do more revenue than Tucson, but I'm talking generally. So … if we wish to expand, and we get investors to buy convertible notes that later convert into about 40 million shares to open a new café (say ... Tempe?), that means we would have 640 million shares outstanding, but we would have 4 cafes open instead of 3. That drops us to only “160 million shares per café and revenue stream.” If we then open yet another venue (say ... Tucson?) and can do that one for another 40 million shares spent to get the funds to do it, that is now 680 million shares for 5 cafes, or “136 million shares outstanding per café and per $2 million in revenue.” After the conversions, it makes the total outstanding shares higher, but it takes less shares to get the same revenue number, meaning each share now generates MORE pro-rated revenue, in spite of the dilution. That's positive dilution. That doesn't make it a bloated turd, or a scam. It means they used someone else's money to build before they had their own available, and they gave out debt that converted so the people investing would have shares in the company, and in a company with growing revenue. With 5 cafes open instead of 3 we bring in $10 million in revenue versus $6 million for 3 cafes. We are up 67% in total revenues. Yet our outstanding shares have been diluted only from 600 million to 680 million, which is 12.5% higher. That shows how PART of the recent years "dilution" has been a POSITIVE. This type dilution makes great sense. And in the next year or two, I am thinking they CONTINUE to “dilute” some shares and get some investors to open MORE locations (like Denver, and Fort Collins. I already know some people who wish to join a team to fund those two locations. We CAN get it done, once we get Toronto off their backsides and ready to expand again. I think they WILL be willing in 2022, after they get the existing cafes back running smoothly after COVID). A s we have more cafes open and more revenue, it becomes easier to overcome the corporate needs and the other subs and turn this into a larger and finally net profitable company. I see that happening this fiscal year, which is why O have said I expect in the last two quarters of THIS fiscal year to have at least one of them be NET POSITIVE in earnings. And if we grow more in 2022 - 2023, that profit should rise. People DO wish to play games and eat our food, and I have spoken to them IN our cafes. NOt conjecture or bias, but from actual people. If we added another 400 million shares to our outstanding over the next 18 months but added another 10 new cafes by doing it, that would be AMAZING for us. Even with the dilution. We’d be doing over $30 million in revenue, instead of the $10 million I truly expect for this current fiscal year (From the cafes. Not adding anything for other areas, if we even own them by the end of this fiscal year.) And that would lead to a higher price, even with the "dilution", and in turn that would mean less shares needed in the future and LESS dilution per new cafe. Because the conversion rate will be higher as the price goes up. So my illustration of 400 million more shares for 10 more units would probably be too HIGH. More like 250 - 300 million more shares. That plan could still work, like I presented it to Toronto in 2018. They just need to start expansion again, after they get the existing cafes back up and running smoothly. Deal with that now, and then when things are smoother over the next months, we should start expanding again. In 2022. Let's see if they do it. I think Denver and Fort Collins would both be ready and able to be fully funded fully and easily in 2022, if S&L will get back to expanding. Hey, investors funded Tucson in about a WEEK when it was brought up that an opportunity existed. I thin that would happen with Denver as well. Dilution. For revenues and profit. A GOOD thing.
AI
