The harsh reality for Koios Beverage Corp. (CNSX:KBEV) shareholders is that its auditors, Dale Matheson Carr-Hilton, expressed doubts about its ability to continue as a going concern, in its reported results to May 2019. Thus we can say that, based on the results to that date, the company should raise capital or otherwise raise cash, without much delay.
Since the company probably needs cash fairly quickly, it may be in a position where it has to accept whatever terms it can get. So shareholders should absolutely be taking a close look at how risky the balance sheet is. The big consideration is whether it can repay its debt, since in the worst case scenario, creditors could force the company to bankruptcy.
How Much Debt Does Koios Beverage Carry?
You can click the graphic below for the historical numbers, but it shows that Koios Beverage had US$197.0k of debt in May 2019, down from US$275.7k, one year before. However, its balance sheet shows it holds US$3.01m in cash, so it actually has US$2.81m net cash.
A Look At Koios Beverage's Liabilities
According to the last reported balance sheet, Koios Beverage had liabilities of US$548.3k due within 12 months, and liabilities of US$15.4k due beyond 12 months. Offsetting this, it had US$3.01m in cash and US$37.1k in receivables that were due within 12 months. So it actually has US$2.48m more liquid assets than total liabilities.
It's good to see that Koios Beverage has plenty of liquidity on its balance sheet, suggesting conservative management of liabilities. Because it has plenty of assets, it is unlikely to have trouble with its lenders. Succinctly put, Koios Beverage boasts net cash, so it's fair to say it does not have a heavy debt load! When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since Koios Beverage will need earnings to service that debt. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.
It seems likely shareholders hope that Koios Beverage can significantly advance the business plan before too long, because it doesn't have any significant revenue at the moment.
So How Risky Is Koios Beverage?
We have no doubt that loss making companies are, in general, riskier than profitable ones. And we do note that Koios Beverage had negative earnings before interest and tax (EBIT), over the last year. And over the same period it saw negative free cash outflow of US$3.1m and booked a US$3.1m accounting loss. Given it only has net cash of US$2.81m, the company may need to raise more capital if it doesn't reach break-even soon. The good news for shareholders is that Koios Beverage has dazzling revenue growth, so there's a very good chance it can boost its free cash flow in the years to come. While unprofitable companies can be risky, they can also grow hard and fast in those pre-profit years. We prefer to avoid a company after its auditor has expressed any uncertainty about its ability to continue as a going concern. That's because we find it more comfortable to invest in companies that always keep the balance sheet reasonably strong. When we look at a riskier company, we like to check how their profits (or losses) are trending over time. Today, we're providing readers this interactive graph showing how Koios Beverage's profit, revenue, and operating cashflow have changed over the last few years.
If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.
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