Is it MMs playing you or is it KGKG raising cash to meet operational goals?
The company is projecting $8-$10 million in revenues this year, which represents an almost 4 fold increase in revenue from 2021. Therefore, they need to increase inventory. How are they going to do that with less than $1 million on the balance sheet at 12/31/21? In order to make money, you need to spend money.
The company issued several hundred million shares so that they can sell to raise the funds to not only build up inventory, but also to fund operations. This was a wise move in my opinion. What is happening today seems to be a raising of captial to meet operational objectives.
I do not know anyone who works for this company and I am not in communication with anyone who works for them. I am strictly an objective outsider who has been reviewing their financial statements and filings. There are several important things that one can learn from reading these documents, including the fact that the CEO has had a salary of only $350K the past 3 years and that he has forfeited a large percentage of that salary in each of those years.
The CEO owns more than 600 million shares, which implies that he is heavily accumulating shares of the company. Filings also show that a large portion of the company's debt is due to loans that he has made to the company. So, it appears that he is heavily invested in seeing that this company succeeds.
Yes, people do not like dilution; however, if this is what you need to do to avoid going out of business, this is what you do. As they build up inventory and capacity, growth into more stores will come. Will there be a reverse split? Absoulutely! However, having a reverse split should not deter anyone from investing; it will pay off in the long run, more so with foward splits. I have seen many comments about it never being good for a company that does a reverse split. Well, that is simply not true. If done at the right time, it is a good strategy. The right time is when you become profitable. There are plenty of companies that have had great success after a reverse split. Celsius (CELH) did one some years ago and look at where they are now. They uplisted to Nasdaq in 2017.
Here is CELH revenue by year:
2014: $13 million
2015: $17 million
2016: $23 million
2017: $36 million
2018: $53 million
2019: $75 million
2020: $131 million
2021: $314 million
CELH took a while to experience significant revenue growth. The main growth driver occurred when they started entering retailers such as Target, Costco, 7-11, CVS, and Kroger back in 2018 and 2019. If I had to compare, my guess is that KGKG will experience faster growth in the next 5 years than CELH did from 2014 to 2019.
According to KGKG, the plan is to uplist later this year; and if they do, it will probably involve a reverse split. It appears that the company is very close to profitability. If they are at profitability in the third or 4th quarter, look for a reverse split and an uplisting. And from there, things should move more smoothly.
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