I just bought some after calling Scott at the IR firm. I asked him about Marsonn and he said that they were working with TCBG back before the Kraft lawsuit. TCBG broke off the agreement with them. At present Marsonn can only use the rip it sip it type pouch with dry goods and of course that is useless.
- TCBG has no debt and has approx. $250,000 in cash.
- They will be releasing a press release shortly stating who they have chosen as an auditor. Of course this is necessary to become a reporting company. The books will be audited at the end of July. Also there will be other press releases soon. He mentioned that Cliffstar and Sweet Ripe each produce for the top 10 retailers in the U.S. and Canada so as I take his meaning that each time one of these top 10 starts to receive their product in TCBG's pouch they will announce it.
- In the next few weeks, they will be announcing some type of preferred offering for approx. $2 million to purchase another 4 Volpak 240 machines. This will give them 10 machines. They presently have 3, 3 more are in route, and then the 4 they will buy. The Volpak's cost $550,000 each. They are presently leasing their machines like you said Calvary. They want to own them outright.
- The first right of refusal with Volpak means that Volpak cannot sell these machines to anyone else until the year 2000.
- It takes Volpak 45 days to manufacture 1 machine.
- He stated that the current estimate of $5 million per machine per year is low and should be around $6 million. This is based on a 20 hour per day run. I did a little math, at the stated 120 units per minute times 20 hours per day times 250 production days per year times $0.16 per pouch comes out to $5.76 million per year. So that seems reasonable.
- He expects them to be producing $250,000 per week in revenues soon. Again the math, 3 machines now producing 580,000 units per week,(each), at $0.16 each equals $278,000 in revenues.
- He expects $9 million in revenue for 1998 and of course huge numbers for 1999.
- The artwork for the 4 products for Walmart was approved on Friday. He said that they will contain messages written on the inside back label that will say things about how you should wear your helmet when riding your bike etc. Walmart is really getting behind these products.
- I asked him about expected net profit margins and was told that the 10% juice products should be around 15% and the flavored water products around 20%. I have no way of verifying these estimates, they seem very high but if they are true, this company will make a lot of money and no doubt have very nice cash flows, which is one of the most important factors about a company to me. I didn't realize that TCBG has no production facility themselves, this should make for low overhead costs and make those profit margins seem more probable.
If they were to have 10 machines running at full capacity for the entire 1999 year, (10 machines are conservative). This would generate $48 million in revenues for the year. At a net profit margin of 10%, (conservative by IR), they would have $4.8 million in earnings. Presently TCBG has 19 million shares outstanding. If I use 25 million shares out for the end of 1999, (to be conservative), they would generate $0.19eps for the year. Those revenue and earnings estimates would be triple or quadruple digit growth. Using a conservative P/E of 50 for that kind of growth would net us a stock price of $9.60 by 3/00, a +433% gain in 20 months from the present $1.80 level. If you use optimistic numbers for all of the above....... well it would be nice to say the least. So the risk to reward ratio here was such that I had to buy some. I am a long term investor and that's why I bought it.
Thanks to everyone for all the information posted here.
Mark |
