Artfest International, Inc (fka ARTS)

[Kool Aid Man]

10-K Observations & Commentary

(The following statements are my personal opinion and DD. Whenever possibleI will provide links to back up any statements of fact)

Under LEGAL PROCEEDINGS Artfest “Agreed to pay $150,000 settlement.” This is proof that the CEO did indeed breach the contract of his lease with his former landlord (some reported ARTS was 'evicted' for continual use of common areas, etc). One assumes the CEO did not agree to pay this amount of money --an amount equivalent to that of his sister’s annual salary-- out of the goodness of his heart. Based on the dire financial statements made in the recent 10-K, it’s highly unlikely it will ever be paid. IMO, it will be discharged thru bankruptcy. However, if not, any cash payment in this matter should show up on the next 10-K. (Too bad this former landlord won’t accept “Goodwill” or common stock in lieu of payment.. I’m sure the CEO tried the latter!)
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To quote Keyscruiser:

"Total Current Assets $ 1,714,167
TOTAL LIABILITIES $ 3,135,641
Net Income (Loss). The Company recorded a net loss from operations of $3,637,411"

But if you remove the $3,798,667 listed as “Goodwill” total liabilities= $6,934,300!!! Add to that any other overstatements of assets, and understatements in liabilities, and you’re well over $7 million in the red, right?
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To quote TRON, I too "think EV has tried to build a company." The problem is he has tried and tried to build a company based on a dubious business model and a dying sector of consumer goods. The art & collectibles industry has been 'on the ropes' for years now and is still in decline.

The CEO states he is using a direct sales model akin to that of "Home Interiors & Gifts." While it's true that HI&G was wildly profitable for many many years, it --and several huge subsidiaries (one Dallas area framing operation that was the size of 5 Home Depot stores!)-- went went belly up in 2008. And this despite the best efforts of billionaire owner Tom Hicks (ClearChannel Advertising, owner of the Dallas Stars & Texas Rangers and more).
http://en.wikipedia.org/wiki/Home_Interiors_and_Gifts
http://en.wikipedia.org/wiki/Tom_Hicks
http://en.wikipedia.org/wiki/HM_Capital_Partners

Now if a guy like Hicks --with all his money, connections and business acumen-- couldn't make it work.. what makes ARTS CEO think he has a better mousetrap?

The other problem (IMO) is the CEO is excellent at "signing agreements" and making grandiose announcements... but he's lousy at focusing and following through with anything. He is (IMO) in way over his head here.