Wanted to add a comment to this post about how I would suppose further financing would go. I think they would do a debt financing, not an equity one. Therefore it would not impact investors in terms of dilution or Reverse Split. Now, I have no experience in Corporate Finance, and this is just my opinion. Right off the top of my head. Just provoking commentary.
uWink is like many high-tech companies in that they have no debt. This is not normal or even healthy for most companies in terms of a capital structure, but fairly common for hi-tech companies. For most companies a debt/equity ratio of around .5 would be normal. Again, I am just guessing. Financing purely by equity is not the norm. Debt provides more stable working capital than equity does.. increases the earnings available to shareholders.
For high-tech companies it is different. The reasons are; they don't have the usual requirements for capital that companies have, that is, capital investment requirements, bricks and mortar, manufacturing facilities, the like. Their major expense is salaries, their only really important capital their intellectual property (people). Therefore they do not need alot of capital. The banks don't want them either. As a startup they have no positive cash flow to finance debt. They also have nothing to liquidate (assets) in case the bank wants their money back. They are worth nothing in terms of liquidation value. Hence, until they are successful they tend to be cash-strapped, as this poster has described, and limited in their financing options.
But if they make it.. that is another story. Once they start to bring in revenue they often hoard it because they do not know what to do with it. Software is incredibly profitable once a solid product is successful in the market. Then the banks want their business, and the company does not need it! Night and day. Often they grow by acquisition. Why develop technology when you can simply buy it? All this leads to management chaos in addition to the symptoms the poster describes. I have worked for several software companies.. know the story. Buy territory, buy markets, buy customer lists, buy software.. worry about integration later.The trick for the investor is picking the ones that will make it. Unless they continue to innovate and develop new product (invest their money wisely) they become attractive takeover targets (still not bad for the investor)
Anyway, uWink is in the stage where it has been cash-strapped and is trying to break out of that style. Establish "critical mass". Up until now they have not had the cash flow to finance debt. Had to go to the market. With 3 restaurants I would guess that they would not have to go that route. Revenue from 3 restaurants will stabilize the Income Statement. Debt, financed with the new revenue, stabilizes the Balance Sheet.
I would guess then that if they wanted to expand they could fairly easily, by repeating the model. The best way ( and the only responsible way for the shareholders) would be to issue debt, not equity. As long as they remained profitable, they would be fine. And looking at the financial performance of their restaurants, that would not be hard. All they have to do is borrow a few Million.. build restaurants.. 3 more restaurants doubles their cash flow.. no problem.
Anyway, just thoughts. I am curious about other opinions as to how they would grow (if they wanted more company-owned restaurants).
One thing about what the poster said.. as long as the long term continues to looks good? the price movements this stock has made as the financing occurred have not been fun for anybody..
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