I am all with Dave on the great points he made. One correction, though. Dave said that the 51 million shares are inclusive of all the warrants issued. But that cannot be right. The 10-K said that the Company had as of March 31, 2014 issued and outstanding common shares at roughly 51.7m. It also mentioned that around 20m share warrants are outstanding, which if exercised in full, will add another 20m shares. Therefore, the fully diluted share capital at March 31, 2013 should be: 51.7m outstanding+23.2m shares issuable upon exercise of warrants & options=75m. Plus the Company will probably issue incentive shares to distributors from time to time as compensation.
Two scenarios of diluting events in 2014. One, to maintain current operation and enhance its capacity to meet the coconut water demand, the Company will need more working capital on top of its cash balance. Given the time gap between the cash demand and collection of receivables, there will have to be another private placement in 2014. As in past three years, I suspect that the raise will be around $2-3 million.
Two, to help grow the Company faster, the management are contemplating acquisitions. It has been talking about the subject for a while. We need to assume that it is in the pipeline and remember the statement fromnthe last 8-K that it has lined up investors to finance such acquisitions. Depending on the size of the acquisitions, the dilution can be serious.
It is unfortunate that the financing activities happened in 2013 when the shares were traded at fairly low levels. It can be the case for 2014 as well. That means many shares will be issued. I do not believe that the Company has a very savvy financial adviser to advise it. It needs a major institutional investor to set a high price bar with a large chunk of shares to give its valuation a boost. Not a bunch of small investors.
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