I've kind of stayed off the board lately, but here's just some things to chew on in regards to financing and dilution. This is just opinion on SMKY's financing journey (past 18 months) or so:
- Financing for public companies is dilutive. Period. If it's not, they might as well be private. I mean, that's by far the biggest reason for going public, to raise capital through the sale of company currency (stock). So just for starters, we know that even the best financing terms are still going to result in dilution.
- It would have been nice if Eddie didn't have to resort to Asher, and we can hem and haw all day about what Asher is, toxic/non-toxic, "effective dilution" (which caused quite an uproar of opinions), and all that other stuff. Bottom line is that Eddie has used Asher multiple times. As has been stated over and over, the overall total amounts of dilution are relatively small, and for all practical purposes, as soon as the last conversion was complete we've held approx 200% from the bottom (as high as what, 500-600% depending on where the actual bottom was)...but my point is, the year long downtrend from last summer isn't really the result of multiple Asher conversions. In fact, we're really right in the same trading range as when the first conversion started, so the effects of the dilution have been minimal.
- What are the other options? Well, myself and probably other longs, believe that Eddie has had other financing options available. If that's the case, why hasn't he secured financing already? Well, we believe the offers on the table were at horrible terms. Terms that would truly wreck the value of shareholders stock in a couple of years.
- So is there any value in waiting? Is there any hope in waiting? Is there any chance for better terms? Is there any chance for major financing at all? A lot of people on this board would probably answer no to all of those questions, and that's fine, they have perfectly valid reasons for drawing their own conclusions...however, I believe it's worth the wait.
- Eddie has stated multiple times that he will not take a financing deal unless it's on favorable terms. So what's been done to create the possibility of better terms?
1. New updated business plan, I've already talked about this in detail. The business plan makes SMKY way more appealing, but after all, as has been pointed out by many detractors here, it's just a plan.
2. New management. Yes, we can all agree they're going to be paid somehow at some point. What I find really kind of amusingly ironic is that people liked to bash on how there wasn't the management in place to put together a nation-wide, multi-product business, and now that the management is in place, with experience and credentials, it's all about how much they're going to get paid, etc., etc. So, we'll see. But, new management had to come on board. From the last PR, it looks to me like they're already performing...I guess this next PR will add some details as to how effective the new team has been. Bottom line, new management adds to the probability of financing on better terms.
3. Distribution. This has been discussed a thousand times. The last PR was pretty clear, there are distribution contracts in place and I think we can confidently expect more to be added...possibly some REALLY big ones.
4. Revenues. Revenues are the golden ticket. We haven't seen any yet. We know it's going to take a while to restart the ovens and start to move products in these new distribution lines, but I think there's good reason to believe that by the end of the year, we will probably see very positive revenues. However, anyone that's talked to Eddie recently should know that certain factors weigh very heavily in the negotiation process in lieu of proven revenues.
So what's the whole point here? Without knowing the exact terms that have been offered in the past, and obviously not knowing the terms that will eventually be reached, this is what I'm confident of:
Even at the horrible terms of Asher, and even if it ends up being 4-5 notes that are converted in total, if those funds allow for the continued progress that we've seen in recent months, and that progress ultimately results in securing major financing on terms that are favorable to long-term shareholder value, I think it's safe (and fair) to say that in the end, using Asher in the short-term could save millions/tens of millions of diluted shares in the long-term.
My simple brain likes to try to think of things in simple analogies.
Let's say I needed a new car but every traditional financing institution I applied for either denied me, or approved me for a new car loan at horrendous rates because I had poor credit and no income. But my current car had major problems and needed big time repairs just to keep running. In the midst of all this I was busy going to interviews and submitting resumes, but still hadn't found a job.
Then, all of a sudden, right when I had landed a really good interview my car broke down and I had a decision. I could either finance a new vehicle at terms so bad that I would never be able to pay it off, get a small payday loan at a horrible rate, or let my car die and give up totally with no transportation to get to further interviews/job.
If it meant taking a couple of $500 loans from the local Check Into Cash to make some repairs and stay in the hunt for a job instead of financing a $20,000 vehicle at bad terms, that's what I would do.
In my opinion, that's what Eddie did with Asher. Of course, if he "never gets the job" that allows him to finance a new car at a reasonable rate, then putting money from a loan shark into a clunker will definitely leave him worse off than just throwing in the towel. However, if those payday loans keep the old beast running just long enough to complete follow-up interviews, get hired, and work long enough to get that first monthly paycheck to go to the bank with as proof of income and negotiate MUCH better terms on a new car loan, then it's clearly, without any doubt, the best option.
So, we will just see. I feel that we're already starting to see and will continue to see more as things progress, but only time will tell.
I'm not trying to change anyone's opinion here...and doubt that I will. Those that don't believe can list off a dozen reasons why Asher is killing the stock, why the new management won't perform, why the business plan is pie-in-the-sky, why it's all a scam, why Eddie will never get any financing, why the ovens will never see anything but dust, and why there will never be any real revenues or distribution. I'm not trying to argue with those viewpoints...they're not going to change.
However, for people that do believe, or want to believe, but maybe don't really understand why Eddie has resorted to using Asher, or wondering if the past inability to secure financing really does predict a future (and declining) inability to do so, then this may be of some value.
So, I offer it just as food for thought...for the whole board.
