Well I hate to say this but I think this company is now financially screwed. No fancy analysis, but did not like the Q report. No amount of quoting positive-sounding statements from their report will counter that sentiment. What really stuck out in my mind (from reading the commentary, not the statements) was:
-"Net sales for the three and six months ended July 1, 2008 decreased by $215,328 and $249,010(30% and 19%) to $503,367 and $1,048,560, from $718,694 and $1,297,570, respectively, for the three and six months ended July 3, 2007."
Revenue growth is a basic requirement of success. Causes everyone to completely rethink things. The negative early reports on H&H were true then. They should be marketing the shit out of this place. What is Alissa doing?
-"We believe that the decrease in revenue in our Woodland Hills restaurant is attributable to a combination of the following factors:
* General weakness in the Southern California/Woodland Hills economy;
* The natural tendency for a new restaurant concept to experience a drop in revenue in its second year of operation; "
True but irrelevant... these are obstacles investors expect a company to overcome, not to state.
-"Regular updating of the software in our Woodland Hills restaurant, which functions as our test lab, which has prevented us from offering guests a consistent experience in Woodland Hills; and
* Our experimentation, starting in early 2008, with a new method for pricing our game play, under which we charged game "credits" to play our games and patrons earned game "credits" with food purchases. Customer feedback on this pricing mechanism was largely negative and, in response, we have reverted to a game play model that allows unlimited game play without additional charge for the first 70 minutes of a guest's visit."
This is making excuses. Never seen a technology company publish such trash. No one cares. Solve the problem, don't write about it.
- "As a result, our loss from operations for the three and six months ended July 1, 2008 was $1,612,256 and $2,932,966, compared to a loss of $1,372,852 and $2,650,990 for the three and six months ended July 3, 2007, representing an increase of $239,403 (17.4%) and $281,976 (10.6%), respectively."
Holy shit. And the fact that they have only spent 400k on MV is ringing warning bells as well. If they were serious they would have invested the capital and got the place up and running. With this much left to spend (total = 1M), they cannot possible get it open by end of August. Especially adding in time for testing, etc.
Given their burn rate (worse than I thought) and their declining sales, in very short order (by Xmas) they will be in trouble. How much are they going to have left after another qtr like this and after investing in MV?
Holy shit. If this came out after market close today.. it will fall like a stone on Monday.
Sorry if I offend anybody, just IMO.
AI
