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koolmart 3 posts  |  Last Activity: Oct 30, 2014 10:15 PM Member since: Oct 25, 2008
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  • The reason the auditor found this to be the case is because ABRW's business loses money every single quarter. This company has serious problems maintaining liquidity which is why it went to the capital markets to pay for its much touted brewery expansion that the author speaks so highly of in his article. The expansion will allow ABRW to make beer at six times the rate it currently makes it but so what? Additional capacity does not equal sales or profitability and that is where bulls are missing the boat. There are millions of small businesses in this country that have additional capacity and operate with it forever because there isn't enough demand to use it up. Yet, we are led to believe that ABRW's shares will now shoot towards the heavens because the company's brewery has been upgraded. Where is six times the current demand going to come from?

    The company's business plan, as laid out in the 10-Q, is to expand its reach regionally at first. Yes, ABRW and the thousands upon thousands of other also-ran brewers that do exactly the same thing. The micro-brewery space is unbelievably crowded and while ABRW's beers may be good (I haven't had them), I have a very hard time believing this company's beer can't be replaced by something similar from a hundred other micro-brewers. There is zero differentiation in the micro-brewery space from anyone, ABRW or not, and that is a problem for its planned expansion.

    ABRW has managed to produce very small revenue increases thus far, including a couple of percentage points in the first half of this year comparable to the first half of last year, but nothing to suggest that it is butting up against capacity issues. In other words, the capacity upgrade is unlikely to fix anything. But even if it did ABRW's margins are terrible. In the first half of this year the company produced $262K in gross profit but it cost the company $471K to produce that revenue on a recurring basis. That means that ABRW, at its current margin rate, would need to roughly double its revenue without commensurate selling expenditure increases just to breakeven. Does that sound like a viable business model to you?

    To make matters worse the company currently isn't even paying its executives what they're owed. It has a payable for $530K (a full year of gross profit dollars) to pay executives at a later date. And this number just keeps going up ($70K so far this year). At some point, even if the grand turnaround is successful, much or all of the additional gross profit dollars generated from higher revenue will go to pay executives that haven't been paid their full earnings yet. The number is at a full year of gross profit now and it continues to worsen as officers' compensation is deferred. By the time a turnaround actually occurs we could be talking about years' worth of gross profit waiting to go directly to officers. And what does that mean for you? No profits to shareholders, no money to build the business and likely a disappointing share price. Earnings are only earnings if they make past the pockets of employees and ABRW is set up for years and years of playing catch-up with its SG&A expenditures that are currently being deferred.

  • koolmart koolmart Oct 30, 2014 10:15 PM Flag

    LOL 😱

  • You will lose all your money!

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