3SOF

Did you read David's email this AM?

"Today I made the though decision of selling all the penny stocks held in the 3 Pennies on Fire Portfolio. You can read the explanation here: Current General Market Overview."

I hanen't found anything that mentions HQSM specifically, but I guess "all" means "all."

When "MoneyTV" announced they would interview Sporns on the floor of AMEX, there were those who posted on the Yahoo boards that the company was about to be listed. I think a fair number of speculators came in on this assumption.

This kind of easily-misread signal is not what I like to see from a company that has my money in their care. But that alone isn't enough to turn me away.

Secondly, however, their IR consultants are placing them with too many financial touts that specialize in the paid pump. That alone, as I've mentioned before, is not of great concern if there is real news behind the PR.

But third, there is the "big news," the LOI. The thing about LOIs is they represent less than a commitment; you can't even call an LOI a promise! And why must this foundation whose intent is funding go nameless? What reason have we to believe that this funding will be on terms that are beneficial to stockholders? The mention of a "foundation" implies a grant -- entirely "free money." Why do I doubt that this is the case?

Does the idea of a foundation grant underwriting corporate expansion not sound "fishy" to anyone besides myself? Granted, they produce "very high quality, toxin-free products and doing tremendous good for communities," but aren't there many non-profits engaged in equally beneficial efforts that are desperate for "funding" (whatever Norbert means by this term).

So it's not a wonder to me that shorts, naked or otherwise, are being attracted by HQSM like flies to u-know-what, and no surprise in the recent downward momentum.

The fundamentals seem still good, but this management style is pushing HQSM nearer to the category of firms like HYRF and EYII.

I've reduced my holdings considerably. I stand ready to re-enter only if there is evidence that real news will replace the hype. Surely the #1 importer of Tilapia must have an occasional contractual win they can brag about? Give me real news, not a LOI from an unamed entity.

If the hype continues, and if the stock gains share-price due to hype, I will be viewing HQSM strictly as a short candidate.

Ameritrade BRVO profile shows:
Market Cap   $78,282,476   
Shares Outstanding  110,257,008

Not all shares are "shares outstanding," value of shares not in the market are not included in "market cap."

The 8k said 140k shares outstanding, so that indicates a market cap around $100m.

Irishman, at the time of the distro agreement, they stated a "worst case" of outstanding shares plus convertibles of 233 million. The 8-k indicates "141,253,757 shares of common stock issued and outstanding and 270,384,233 shares of common stock on a fully diluted basis.  Diluted share base using the treasury method is approximately 230,000,000." Yes, a lot of shares, in any case.

Any growth accomplished in the year to come will also  be a promise of future growth, so your three-bagger could easily be a five-bagger; and, while that's a long-term view, the capacity issue must be addressed in the near-term.

There will be immediate reward when this piece falls into place, which could mean a revisit to the previous high, a two-bagger from here, and not terribly long to wait for it, IMO.

KScott, tripling of production at Jasper, to 7.5 m/month, was referred to as a committment back when the distro agreement was announced.  If nothing else, Jasper may have to grow their capacity, which could be expensive for BRVO, but it's doable.

Hood negotiations continue -- I first heard of them by rumor 2 days before the CC, and at that time the rumor was that the deal was a 50-50 proposition. Plenty of reason for Warren to sound negative on a deal still being negotiated. I'm inclined to think Hood will come around, since capacity growth at Jasper would be a direct threat to Hood's share of the long shelf-life milk market.

At any rate, given today's healthy bounce, I think we have a relatively safe place to stand and watch these short term issues play out. There certainly won't be an announcement "we can't make capacity" any time soon, while positive news on capacity could come at any time.

Lucas, few of today's buyers agreed with you, and the current price is back to where it was just three trading days ago. If revs for next Q are "only" $5 million instead of doubled, I don't think BRVO will be severely punished for that, and with .5 million in orders deferred, I doubt that will happen anyway, unless the production capacity issue looms large.

If a Hood Dairy deal is announced, I would expect a major breakout. Warren sounded negative on this prospect, but if he surprises us with a deal, that will certainly make up for his optimistic guidance.

A remote possibility: suppose Warren was deliberately a little too optimistic? Recent share price gains cleaned up the balance sheet, but no one knows how many hedgies were standing by to dump again. This morning's giant sell-off turned that question into past history. Now we know we have strong hands all around.

With his brokerage background, it may be that Warren knew exactly what he was doing.

I bought precisely when you sold (I can't believe I slept through my alarm this AM!), and the world is lookin' good.

I've been chatting back and forth with some BRVO critics on the CCE Yahoo board, some of these guys have real knowledge of the pitfalls BRVO faces dealing with CCE. Here's an exchange I had with one today:

=====================================
Sell...Sell... Sell....
Will not see this price level for at least another 6 months. Bad news in the works.

=====================================
Quarterly rev $3,245,305
Previous Q rev $ 2,448,618
year ago $825,430

yoy increase 293%!

This is all through their own distro channels, of course, CCE distro having started just a few days ago.

The only disappointing aspect of the report is Warren's forward guidance for the Q was $4m revs, the shortfall mostly due to unanticipated capacity issues. He should've known better.

But not being able to make the stuff fast enough is not the worst thing in the world.

"sell sell sell the sky is falling" is not enough. Step up if you have substantive criticism.

IMO, time to load up, you won't see these prices again.

=====================================

Yes but did revenue % gain outpace % spending. Targets are awful high for next few quarters. Currently not sufficent production capabilites in place to meet these heavy targets. Furthermore they are assuming every bottle produced is out the door. I did listen to the last few CC's, they are good at speculating and manipulating rather than facts. Its all hype I will buy at .45.

=====================================

Can't deny that their eyeglasses are a bit too rosy at times, but beneath the spin there's been real, consistent growth. They've got a new guy for guidance and, while he currently is reiterating Warren's numbers through 2006, it would be nice to see him lowball a little in the future. I can hope, anyway.

A $3 million finder's fee for the Coke deal isn't chickenfeed for a co. this size, but that looks certain to pay for itself in short order. Growing capacity quickly is another big expense, but, with the loss in margins in the CCE deal coming back in saved distro costs, that too will be covered quickly going forward.

The share price rise certainly did clean up the balance sheet, and today's cliff-fall had to clean things up further, as well as send the current crop of short-term traders packing (new ones coming in, of course -- as long as its OTC, its a "trading stock").

Worst case scenario, we get bad news in 2 to 3 months, but I don't see how valuation in the very near term can reflect anything other than the strengths outlined above.

"Furthermore they are assuming every bottle produced is out the door."

Unless you think they're BS-ing about deferring .5 million in orders, that seems a decent near-term bet. It will take a while for them to produce more than CCE needs for full distro, and then there's the deferred orders.

The product is marketplace-proven. The only question is whether it can perform as well in vending machines and schools as it has in the c-stores and big box retailers. Some uncertainty there, of course, but I'm inclined to think it will.

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no further response, and since then price has gone from .65 to .71. Daytraders may take it down at the close, but it still looks like we'll see .77 and better in the very near term.

addendum: closing at .70 -- very nice, indicates buyers today are strong. 

No press release yet, but here's part of the financial discussion for the Q:

Results of  Operations - Three Months  Ended  September  30, 2005 as Compared to
Three Months Ended September 30, 2004

One of our  subsidiaries,  Jiahua Marine (which was acquired in August 2004) was
engaged in manufacturing and selling of health and bio-product. During the three
months ended  September 30, 2005 and 2004,  Jiahua Marine  contributed  sales of
$2,593,384 and $1,187,648 to the Group respectively.  The gross profit ratio for
this  segment  was  about  85% for  both  periods  and  the  major  expense  was
advertising,  corresponding to about 33% and 46% of revenue for the three months
ended September 30, 2005 and 2004  respectively.  The net income  contributed by
this segment was $947,164 and $499,429 for the three months ended  September 30,
2005 and 2004 respectively.

The other principal  activity of the Group was the  manufacturing and selling of
aquatic  products.  The revenue  contributed  by this segment was $5,919,597 and
$6,477,639 for the three months ended September 30, 2005 and 2004, respectively.
The gross  profit  ratio of this segment was at 21% and 28% for the three months
ended  September  30,  2005 and 2004,  respectively.  This  segment  contributed
$781,805 and  $3,516,708 to net income for the three months ended  September 30,
2005 and 2004, respectively;  in 2004, there was a non-recurring recovery of bad
debt which affected results materially.

For the three months ended  September 30, 2005 revenue  increased by $847,694 or
11% to $8,512,981.  This compares to $7,665,287 for the corresponding  period of
prior year.  The increase  resulted from improved  performance by the health and
bio-product  segment in 2005; the sales in the aquatic product segment decreased
by $0.6 million  compared to the third quarter of 2004 but it was covered by the
increase in sales of health and bio-product at $1.4 million. In third quarter of
2004,  the  production in the  aquaculture  product  segment  resumed from major
renovations of our factory during the first half of 2004, as customers  required
more products after the long renovations  period of 2004. . The 2005 increase of
revenue from the health and bio-product  segment was due to the fact that in the
current  quarter,  sales  included  three months of operating  results of Jiahua
Marine,  compared to one and a half month of operating results in 2004 as Jiahua
Marine was acquired in August 17, 2004.

Cost of sales increased by $490,440 or 11% to $5,065,821 from $4,575,381 for the
three months ended September 30, 2005, as compared to the  corresponding  period
of the prior year.  Approximately  78% of the increase was due to the  increased
activities in the health and bio-product  segment as that segment operated since
the  acquisition  of Jiahua Marine from August 2004.  The overall  percentage of
increase  in cost of sale is almost the same as that of  revenue,  supporting  a
stable gross profit ratio in our company.

$3.25 m is a huge shortfall from Warren's recent guidance. Warren's explanation that orders were pushed back to favor CCE orders is satisfactory enough, but it still offers the question of how accurately Warren estimates the ability to execute, the production capacity bottleneck should have been better anticipated.

Still, it's great growth, and they're standing by Warren's previous q4 and 2007 numbers.

Tomorrow should be interesting. Luck to all.

Thanks much! You saved me from pulling a trigger, was very tempted to take half my profits.

Quote from: fill_the_gap on November 07, 2005, 10:33:31 AM

-  Norbert also said they qualify for the AMEX.  He would not say whether or not they are going from BB to AMEX now, but he said it was the goal.

AMEX requires a bid price of $3, or pretax annual income of $50m.

Prospect of a reverse split in the 10:1 range doesn't make me very happy.

Quote from: fill_the_gap on November 07, 2005, 10:33:31 AM

-  Norbert also said they qualify for the AMEX.  He would not say whether or not they are going from BB to AMEX now, but he said it was the goal.

AMEX requires a bid price of $3, or pretax annual income of $50.

Prospect of a reverse split i the 10:1 range doesn't make me very happy.

Roy Warren opened the CC for the distro agreement with forward guidance of $3.6 to 4 million for this Q, 6 to 7 million for next, and for 2006
70 to 100 million dollars in gross revs
According to the guy who handles the education market, the numbers for that channel were "astronomical...numbers that we never dared think about," with a promise of specifics at end of Q.

Warren was also very clear in stating that he does not expect to take any financing option that will affect the float or the share price in the near term, and that details of financing will be provided during the next cc.

I doubt that the forward numbers are yet familiar and accepted to investors; now that the distro deal is in effect, IF the above is all confirmed, and IF the hedgies are really done with selling, I think we may now see the real effect of such guidance.

I don't doubt that we'll see some "selling on the news." Taking some profit does seem the safest thing to do.

But I think trading out entirely may prove to be short-sighted.

BRVO may move well "ahead of itself" before it again becomes cheaper.

Sold today @ 4.48

About to meet the 50 day MA, good chance for a bounce there.

Nobody is "following" Jim Cramer. I mentioned him as a factor -- like the price of crude, or the presence of hurricanes. To deny that he moves markets is to trade with blinders on.

But the fact that everyone seems eager to focus on him, instead of on the stock, suggests that you guys are a little fixated.