Borislav Tonev

Lack of News Isn't Doing Baristas Coffee Co (OTCMKTS:BCCI) Any Favors

by Borislav Tonev May 25, 2015

Baristas Coffee Co (OTCMKTS:BCCI, BCCI message board)'s performance has been rather underwhelming over the last month or so. On April 22, the ticker was hovering around the $0.04 per share mark. A couple of optimistic press releases came out of the company headquarters over the next few weeks and they just about managed to keep some investors interested. On May 14, however, the news stopped and BCCI started going down.

The last green session was registered on May 15 and Friday's trading was particularly intense for the stock. BCCI opened the day with a small gap down and it started slipping immediately. About an hour and a half later, it hit a 52-week low of just over $0.02 and although it later managed to recover some of the losses, it still finished the day 7.8% below Thursday's value which means that it was left to spend the long weekend at a little over $0.03 per share.

The lack of any new press releases is certainly playing a part in BCCI's underwhelming performance. It's really hard to keep penny stock investors interested, especially when the company's history is as long and as turbulent as BCCI's one.

The 10-Q for the first quarter of 2015 wasn't much help, either. It came out on May 20 and it presented us with the following figures:

  • cash: $43 thousand
  • current assets: $159 thousand
  • current liabilities: $5.9 million
  • quarterly revenues: $332 thousand
  • quarterly net loss: $2 million

It should be noted that some revenue growth can be observed on a year-over-year basis, but at 4.1%, it's not really that impressive. What's more, the quarterly sales at the end of March were actually 14% lower than the ones logged three months earlier. The rest of the statement is pretty disappointing as well. In light of all this, the stock's performance isn't really that much of a surprise. But is there a silver lining?

Well, the two press releases from the end of April and the first half of May talked about new BCCI locations being opened in Pennsylvania and New York. It looks like the business plan is in for a change as well. Baristas' new coffee shops are located in shopping malls and they won't feature the attractive female staff in revealing outfits from the drive-thru locations. This will undoubtedly disappoint some of BCCI's regular clients, but it could broaden the customer base. In Q1, the company also started selling their K-cups which could potentially bring in more revenues.

So, some people are probably hoping for a better future, but if you're one of them, you should keep one very important thing in mind – the convertible notes.

According to the latest 10-Q, at the end of Q1, there was about $615 thousand worth of convertible debt. It can be turned into stock at either fixed rates or a 50% discount to the market price and some people have already converted their notes. Last year, BCCI issued 9.3 million shares at $0.02 per share in order to retire some debt and between January and May, a further 2 million were issued for the same reason at a rate of just $0.01 a pop.

Currently, the O/S count is sitting precariously close to the authorized cap which means that further conversion is largely dependent on the management team's willingness to cancel some of their common stock holdings. Let's hope that they will do the best they can to protect retail shareholders.

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