Replies to post #5454 on Otcbargains Daytrading Accountability Board

[natstocks]

otc, I'm not trying to bash you in any way shape or form :) I am doing my DD here because it is an intriguing opportunity. Sorry if I came across that way; I should've made that more clear.

(Don't worry though, I've got more pain in the ass on the way! I'm writing another post with all of my misgivings about this stock, just to air it all out there. Feel free to ignore, but the purpose of this board is discussion, DD, etc., right? Sorry I am just trying to size this thing up exactly in case it jumps I want to know what I am willing to pay/not pay.)

[natstocks]

Thanks for the reply. I agree this is an interesting situation, or else I wouldn't be looking at it!

I will just list some of the things sticking in my mind..


1. None of the company's financials are audited, not even the annual report.

2. FWIW, yesterday's annual report lists (as of Aug 25, 2014):

103,316,636 Class A Common Stock
25,000,000 Class B Common Stock
0 Class A Preferred Stock

So I guess we use 103M for the O/S count until we find out what those B shares are; you are right, the company itself excludes them from per share numbers, etc.

3. I thought this was an interesting line from the recent report:

The company has written down the loan from Babysitter Wanted, LLC by 80% as the investors have written this loan off on their taxes and taken a loss. This is part of BSEG’s focus on strategically limiting its liabilities.

And in the financial report notes:

The Reyes Group made loans to the Company for the financing of the film Babysitter Wanted. As of March 31, 2014, Reyes Group is owed $165,153 in principal and $0 in interest in production loans. Under the terms of the agreement the loans bear interest at the rate of 7% per annum and Reyes will also be entitled to contingent participation of 50% of all net contingent proceeds from the picture after full recoupment after distribution, marketing fees, other investors and interest are recouped plus interest has been fulfilled.

It shows that $825,765 was owed to Reyes Group a year ago, but now that amount is only $165,153, a difference of $660,612, or 80%.

There is only one loan shown in the liabilities on the balance sheet: the $165,153 owed to Reyes Group, a "production loan".

Finally, in the Financing section of the Cash Flows statement, we see that BSEG used $660,612 for "Principal Payments on Production Loans - Related Party".

SO, did they write it down or did they pay it in cash?

If you write off a loan that you owe, I don't think you count that as "cash used" on your Cash Flows statement.