Baristas Coffee Company, Inc. (BCCI)

[BobSinCA]

Actually, the shares issued as payment for services were reported in operating -- but at .001 per share (par value), rather than the price at which the shares could be sold when issued (market value).

Some of us complained about this as it happened, but nothing changed until the Q2 2013 report. Interestingly, the verbal focus was on 'misstatement of equity':

Shareholders/Stockholders Equity – From inception the calculations of Equity have been materially improperly calculated. This is the result of an overly conservative approach from the beginning that developed into an inaccurate representation of equity. Simply put, the equity had been calculated based on par value and not at actual value which resulted in an understatement of equity. Although subject to adjustment upon final audit review the equity reported herein is accurate to the best of the ability of the Company and has been derived from worksheets developed by the auditors

Since debits have to equal credits in accounting, writing up the equity also meant literally creating 'Unidentified tangible and intangible assets' on the books for an equivalent amount. But, as the shares were issued for expenses, those shares should actually have gone through the expense line at their proper value, which would have resulted in huge losses for the company, dwarfing sales!!

For sure, to have assets on the books you have to identify them!!

It is amazing to me that this sudden creation of assets (which should be expenses) was not a huge red flag for the Under the Radar folks.

The company says this equity restatement came out of the audit process. Perhaps that audit process has been completed and will be visible with publication of annual financials in the next month or so.