Taken from the company's last 10-Q:
"To date, we have been dependent upon equity and debt financing. Since our inception through July 31, 2009, we have been funded through capital contributions of $68,803 from Michael Jordan Friedman, our President and Chief Executive Officer; from the sale of common stock between November 2005 through July 31, 2009 for gross proceeds of $123,969 to 11 investors; from convertible loans totaling $356,210 from 15 individuals; and one private loan of $7,500. In addition, since inception, Arthur Friedman, the father of the Company’s President and CEO, has made advances to Fresh Harvest totaling $859,598, a portion of which ($250,000) was converted into 5,000,000 shares of common stock in February 14, 2008. Illuminate, Inc., a principal shareholder, has made advances of $13,000 to Fresh Harvest."
Your first question on where the bars are manufactured is a good one. Judging from the company's balance sheet, they do not have any fixed assets. This could be because all the fixed assets are fully depreciated, but highly unlikely because the company would like to show hidden equity. Reading through the notes, no mention of fixed assets were made except impairment, which was vague and just stated accounting policy with no amount. So...this means the company has no plant to manufacture the bars. Well, they could lease a plant, but the company had no outstanding lease obligations, and usually, this amount would be broken out in operating expenses, or at least, an amount given in the notes. This means they do not manufacture the bars themselves.
After researching a little deeper, I got really interested in the business plan. This kind of digresses off of where the plant is, but their business plan or strategy is to be a completely vertically integrated natural foods company, primarily through acquisitions (cheaper as opposed to start-ups). This is awesome news for people holding for long term. We know they are acquiring companiesm, but being vertically integrated is one of the most cost effective operating methods, primarily due to cheaper costs of goods sold. They not only want to do this in terms of manufacturing, but also in marketing, selling, DISTRIBUTION (what if they acquired BGEM in the near future??), etc... Now, the curve is a lot flatter because it would take them a while to make everything efficient, but it would be well worth it, with economies of scale going off the chart.
To be fair, some companies end up getting too caught up in efficiency, that they actually lose efficiency. So picture a good lawyer. Well, the lawyer is good at law, but he is also the best typist. As legal documents are lengthy, he spends a lot of his time just typing instead of working on cases (where the money is). So it obviously makes more sense for him to hire a secretary (outsourcing).
Then the plan says it will be put on hold if the company doesn't have sufficient working capital...which is where we are right now. The company is eating cash. After reading a little deeper, its because of the lack of credit the company has with manufacturers requiring them to pay upfront, instead of on a short term standard turnover of 30 days. This is the KEY to good financials. Credit. They must be able to save their cash while attaining more bars for distribution. I think this is going to be a huge influence on the next set of financials (for those interested in fundies)...so be on the look out for that information come the 10-K.
Sorry for the long-winded post, but stayed out late last night for a friends bday singing kareoke to Lisa Loeb (don't ask) and I'm straight wired off coffee. Have a good weekend and WHO DAT?!?! (goin to NOLA to watch the game since I don't have tix to Miami)
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