3SOF

QuoteI told you, (Vanilla Blender) it has a taste of a medicine.. my wife even said so Undecided... I should e-mail Bravo about this Angry

E-mailing them about this would be a good idea. Are there any others flavors you or your wife fid that has a funny taste? I only found the vanilla bb to be funny tasting, but I still haven't ried all od the products (I'm getting there though)

The scheduled call today lasted approximately 30 minutes.

May I suggest that you also call the CFO and other management with your questions.
This way the notes relayed below can be further expanded as we move forward.
Please do not make any investment decisions based on the notes below.

The CFO was kind to grant me 30 minutes.  He is a friendly and articulate person.

Jeffrey J. Kaplan
Chief Financial Officer
Bravo! Foods International Corp.
[email protected]

Jeffrey Kaplan joined Bravo! in October 2005 as CFO. Kaplan's career spans over 20 years as an entrepreneurial Chief Financial Officer of public companies. In previous posts, Kaplan has been directly responsible for closing over $1.3 billion in transactions including underwritten public offerings, numerous PIPE transactions, strategic acquisitions, and bank financings. As Executive VP and CFO at Rare Medium Group, Kaplan completed a $186 million underwritten public offering and more than $70 million in private placement funding.
   

Throughout his career as CFO, Kaplan has been responsible for building and developing corporate finance and administrative staff to handle growth and he has implemented budgeting and forecasting disciplines to manage growth. During Kaplan's tenure at Clabir Corporation, a conglomerate that owned 37 restaurants and 100 convenience stores, the Company brought the popular Klondike(TM) ice cream bar to the national market.

Kaplan also has substantial experience implementing and managing successful investor relations campaigns and coordinated securities analyst coverage for a number of public companies. Kaplan graduated from Brown University and holds an MBA from New York University.

"I am excited to join Bravo!'s management team. With Bravo!'s aseptic packaging, the Masterfood license (Milky Way, Starburst and Three Musketeers), and Master Distribution Agreement with Coca-Cola Enterprises, Bravo! is positioned to become a major player in the category.

Jeffrey J. Kaplan
Chief Financial Officer

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* This is my best effort to relay information from the call.  Please understand that many items are subject to interpretation.  

-  The CFO confirmed that after costs, BRVO gets 18.9 million from the 20.25 million equity financing.

-  8 institutions were involved with the financing after over 30 were interviewed.

-  The CFO seemed certain that 85 % of the investors were to be long term.  And he is guessing that the remaining are also long term holders.  He explained that Roy and management interviewed many investors to try and get a group that would invest for the long term.  (that said, they can change their mind and sell BRVO shares, but they apparently told management they will allow the growth story to develop).

-  BRVO lost (.04) cents per diluted share last quarter
This equates to nearly 5 million dollars
Back out the Non Recurring Finder's Fee to CCE of 3 million and Jeff confirmed that BRVO is losing around 2 million per quarter.

-  The 6-7 million projection for this quarter could not be directly commented on except that we will know more on the January call.
 
-  The tone of the call was such that the 70-100 million revenue mark for 2006 is a best case scenario.  The CEO, Roy, may be overly optimistic.  He wants to be honest and give a forecast that involves all of the irons in the fire working out.  Roy does not want to sandbag a forecast.  * This surprises me considering his brokerage background because it sets up for a disappointment to offset exponential growth.  So they may have to narrow the forecast.

On the other hand, others involved with the company may wish to underpromise and overdeliver.  It was discussed that any revenue increase will be exponential.  But shooting for 70-100 million and hitting say, 50 million would disappoint expectations (even though this is amazing growth on growth !)  Jeff obviously would not give me direct numbers even though I asked for them multiple times.  He said that forecast is in the process of being evaluated.  He said this will all be discussed at the January meeting.  It did seem to me that the 70-100 million will be scaled back to a more realistic goal.

Jeff understands that events can surface that are out of BRVO's control.  Take the hurricanes for instance.  And Jasper equipment may not always work at full capacity.  So a buffer is recommended for any projection.  And it does not seem that any buffer is in place at this time.

-  My personal opinion from the call is that the 6-7 million for this quarter will not hit.  And the 70-100 million forecast is very steep considering the evaluation of all the notes.  I bet they guide down to be more realistic moving forward.  I expressed the concern of missing by 20% like the past quarters.  He understood that management needs a track record of delivering to build investor confidence.

-  Next CC will probably be mid to late January.  A press release will come out announcing the event sometime in January.

Don-  I specifically asked your question.  " What is management budgeting as a gross profit margin for CCE revenues?"

-  Jeff explained that CCE places pressure on the margins.  So the margins will shrink going through CCE rather than selling directly to say Sam's.  He went on to say that it will be made up in the following categories.

A.  BRVO saves close to a dime on average in trucking fees.
Simply put, they can send it to one location (CCE)
Paying for a platt delivery here and there is what gets expensive.

B.  No Brokers are involved in going through CCE, saving approximately 4 % brokerage commission.

C.  CCE pays the slotting fees.  So BRVO is now saving the amount paid to grocers for shelf space, etc.  CCE covers the cost and also has much better exposure for the products.

-  80% of the total volume for BRVO is CCE.

-  Margins are set in stone and will be evaluated (1) year from August.

-  At the end of the day, margins will shrink, but BRVO will come out the same or a little ahead on the savings addressed above to the bottom line.

-  The question that I posed was why CCE went from a deal that would give them 51 % ownership and controlling interest in BRVO to ultimately much less ? Jeff explained that Coke does not want any bottlers to own brands and that BRVO is glad it worked out this way.

-  Jeff mentioned they have people in place to try and get the suppliers cost down.

-  BRVO has to cover 10% of the total cost for the production with Jasper
Jasper will spend 50 million on a take or pay contract ramping up for production.

-  The Dairy Farmers of America (COOP) owns 45 % of Jasper and 12 % of BRVO.

-  Pertaining to Capacity

A.  Jasper is slated to get to 7.5 million in April.  The machines are in place but FDA approval is needed as well as down lines.  

B.  BRVO is controlling shipment locations.  They understand that running out of product where there is a demand is not a valid model.  For instance, not all Sam's have the product.  It will be increased as production elevates on a controlled basis.

C.  Jeff said he has not seen the data on reorders yet to make any comments.

BW- pertaining to your question about marketing and deals

1.  We discussed the idea of getting into schools.  He said the Marvel drinks would not be the product.  It would be the Milky Way. etc. as they are much healthier.  Jeff said they have made progress in the school arena but did not have any figures or time table to share.

2.  CCE and BRVO are working on a vending bottle for January.  CCE wants to ramp this up significantly first of the year to roll out a substantial amount of vending machines.

David's Questions

1.  Do you expect to expand to continental Europe in 2006

-  We will make an effort to expand to Europe.  But the Eurpean changes in CCE leadership may delay this a little.  It will be more realistic to assume 2007.

2.  Catalyst Research says 2006 EPS 10 cents. Can this be confirmed.  This would be an earnings multiple of 6, very hard because CCE puts pressure on margins.

-  Jeff said he is not aware of the Catalyst Research estimate.  He also said that we will get a better picture of the number during the January call.

3.  Do you plan to ask shareholders to increase from 300 million shares

-  Jeff did not directly answer the question.  However, he said it will be considered in order to secure future deals.  

4.  Do you expect positive net income in 2006

-  Yes, positive without the amortization.

I hope this contributes to the board.  Thank you for those that forwarded questions to ask. 

We will know more in January.

-Jeff-

Also the Starburst Strawberry Smoothie ----> same....Medicine Taste....

Milky Way ---> Thumbs up
Starburst Peach ---> Thumbs up.... but my 10 years old cousin doesn't like it..
Starburst Orange ----> It's OK
Blenders-- Milk & Cocoa ----> Taste like Milky Way

Have you guys taste the Nestle Vanilla?--- wow... i mean WOW ...It's taste so good
No heart feelings for BRVO holders, this is only my opinion

Good job Jeff,  applaud for the Hardwork you've done..

Great job Jeff!
The answers seem to be less spectacular (still impressive), but maybe more realistic.

Applauding you, Jeff!
That was a very generous effort on your part. I do not think that I can re-engineer the CCE margins, based on the way Jeffery answered your question. I wonder if that was his intention?
I mean, he must have a number, which is his forecast for what gross margins will be, on CCE sales? Why would he not disclose it?
I may make the time to contact him. Again, no detracting from your work - we have a lot more information to work with than we had before. The most criticical, in my view is your 'feel' for the softness of the original 2006 revenue estimates. Working with erroneous revenues, it wouldn't matter how accurate the margin estimate is ! Don.

Great job Jeff. Thanks for your hard work.

Terlisa: I agree the nestle tastes better, but BRVO's products are much healthier with amazingly less calories and much more protein & vitamins. So its trade off, but in todays health conscience society I believe its a plus.

Being the call is end of January, I am not sure what can keep the price up near term ? Seems it may fall when the reality of the forecast hits.  We will see.  It is for the patient investor.  Near term, I cannot see much happening.  The guess is that they guide down numbers and then miss by at least 20% this quarter.  But I have been wrong many times before.  I like BRVO into 2007 and beyond but will be more cautious with any short term money.

I wrote Roy to tell him about the Vanilla Blender - If someone tries that they will never try another of their products.  It was evil.

I also suggested marketing it to the Spanish community.  At the 7-11 I went to, they had no problem-o shelling out $2 for a chocolate milk.  (they bought a Quik - I will work on my Spanish so I can better sway them in the future)

Quote from: fill_the_gap on December 20, 2005, 11:10:15 PM
C.  CCE pays the sliding fees.  So BRVO is now saving the amount paid to grocers for shelf space, etc.  CCE covers the cost and also has much better exposure for the products.

Applause to you Jeff.  GREAT information!  One of the reasons I have liked the CCE deal so well is the hope that CCE would be paying the slotting allowances.  For those not into distribution in the grocery arena, virtually every manufacturer pays grocery stores "slotting allowances" which is essentially making a payment for shelf space.  For many grocers, one cannot get shelf space without such payments, and some grocery chains literally hope to break even from the sale of products and rely on slotting payments as the profit.  Thus, the amounts paid are sometimes fantastic numbers.  If you imagine your local grocery store and the amount of shelf space that Coke has (which is usually as great as any single product line), you can then see the marketing power that CCE has, and the ability CCE will have, if it so chooses, to get Bravo products on the shelf.  That is why I personally like this company so well ... it immediately has one of the most powerful product placement companies in the United States placing the product - quite a feat for a new company. . 

Heck:

I saw the Coke guy today at the convenience store - I know this guy.
He knew about Brvo products and said that he had tasted some - said they were too sweet for him but the flavor was good -  He said that kids will like them  -- Then he told me that they only had a few cases and they were all stolen from the warehouse.

The Slammers were stolen from the warehouse  -  somebody likes them.

We had an ugly sell off today on BRVO.OB. I'm worried about it. Let me make a bear case on BRVO, so I can open my mind to all possibilities:

- Today the company issued a Form SB-2, saying the following:

«This prospectus relates to the resale by the selling stockholders up to
58,004,688 shares of our common stock, including the following:

      o     40,500,000 shares of our common stock;

      o     up to 15,492,188 shares issuable upon the exercise of common stock
            purchase warrants at $0.80.

      o     up to 1,012,500 shares issuable upon the exercise of common stock
            purchase warrants at $0.50; and

      o     up to 1,000,000 shares issuable upon the exercise of common stock
            purchase warrants at $0.05

      The selling stockholders may sell common stock from time to time in the
principal market on which the stock is traded at the prevailing market price or
in negotiated transactions. The selling stockholders may be deemed underwriters
of the shares of common stock, which they are offering. We will pay the expenses
of registering these shares.»

This Form is related to this news we had on November the 23rd: Bravo! Foods International Enters Into Agreements for $20.25 Million Private Placement of Common Stock -

So, nothing new, but people are worried that investors in BRVO are not so long term investors, although management says they are.

More from this report:

- «Our new product introduction and growth expansion continue to be expensive
and we reported a net loss of $3,016,987 for the year ended December 31, 2004
and a net loss of $3,799,926 for the year ended December 31, 2003. In addition,
we had a net loss of $7,485,371 for the nine months ended September 30, 2005. We
have suffered operating losses and negative cash flows from operations since
inception and, at December 31, 2004, we had an accumulated deficit, a capital
deficit, are delinquent on certain debts and have negative working capital.
These conditions give rise to substantial doubt about our ability to continue as
a going concern.»

- «Our Independent Auditors Have Expressed Substantial Doubt About Our Ability to
Continue As a Going Concern, Which May Hinder Our Ability to Obtain Future
Financing.»

- «As of December 7, 2005, we had 181,753,751 shares of common stock issued
and outstanding and convertible debentures outstanding that may be converted
into an estimated 31,329,273 shares of common stock at below market prices,
convertible prefered outstanding that may be converted into an estimated
8,047,038 shares of common stock at below market prices outstanding warrants to
purchase 64,291,697 shares of common stock and options to purchase 11,958,459
shares of common stock. All of the shares, including all of the shares issuable
upon conversion of the debentures and upon exercise of our warrants, may be sold
pursuant to a currently effective registration statement or pursuant to Rule
144. The sale of these shares may adversely affect the market price of our
common stock.»

This means that on a fully diluted basis, the number of outstanding shares is 181,753,751+31,329,273+8,047,038+64,291,697+11,958,459 = 297,380,218 

No wonder the CFO said the following when fill_the_gap asked:

Quote3.  Do you plan to ask shareholders to increase from 300 million shares authorized?

-  Jeff did not directly answer the question.  However, he said it will be considered in order to secure future deals.

With 297,380,218 shares outstanding if all derivatives are converted, the market cap is 297,380,218*$0.577 = $171,588,385

And probably management is already thinking about asking shareholders to increase the number of shares authorized, because they're at their limit. This was one of the pre-conditions I set to continue holding the stock for the long term, that they don't ask shareholders to increase the number of authorized shares 

I feel really sad when I read fill_the_gaps comments saying the company will miss its internal forecasts for the 4th quarter and will probably significantly guide lower on 2006 revenue projections. I know this will happen because over the last conference call they said that to meet the revenue range of $70M - $100M they would need international expansion. Now the CFO said they won't expand internationally in 2006, so revenue projections will probably come in at around $50M.

This is a serious matter, because high revenue growth expectations is what is keeping the stock so «high». Even if they can sell $50M of product in 2006, BRVO would still have a P/S Ratio of 3.43.

I wonder if the best case scenario isn't build into the stock price, considering the market cap of $171,588,385. And there are significant risks.

What do you think about this bear case? Pretty strong isn't it?

What have we got for a bullish case?

- Exponential revenue growth and a product.

But, unfortunately revenue growth isn't as strong as we and the company expected.

Working capital just turned positive in 2005, so I believe those «going concern» remarks do not apply for BRVO's future, at least over the short term:



I see three factors pushing BRVO lower over the medium term:

1) General weakness on OTCBB stocks

2) Lower revenue guidance ahead

3) Probably management will ask shareholders to increase the number of authorized shares from 300 million, allowing them to dilute even more shareholder value.

I feel sad I had to leave the stock decline to deal with these issues. The bull case is always much more compelling when we own the stock, and it's hard to keep our mind open to all possibilities.

I think bankruptcy isn't a possibility, but BRVO can go down 50% or more due to not so high revenue expectations. A market cap of $85M probably is more acceptable for 2006 expected revenues of $50M than $171M.

I'm sad to let BRVO go as a long term investment, but I can't fall in love with any stock, especially when I'm letting a profit turn into a loss 

Therefore I'll take the dificult action of selling BRVO.OB around tomorrow's open, I'll keep monitoring the stock and will think of buying it back when all the bad news is out and the technical trend turns bullish again.

So goodbye now to BRVO ... lucky i sold it last month rally with nice profit

Woe!! This is sad indeed.  This will go down as the stock I`ve held for the longest time this year without a profit.  Tomorrow's volumn will be light, I hope everyone can get out without taking the stock down a good 50%.

Just want to write down some thoughts, correct me plz if I'm wrong:

1) There's nothing new in this report.

2) We knew there were a lot of debentures and warrants that could be converted.
But I can't believe that we'll see a situation very soon where all the warrants/debentures will be converted. So if 50% of them gets converted, we might have 250M outstanding shares.

3) They did have the intention to buy some warrants back? So we can expect less dilution?

4) Some warrants can't be exercised under 0.80$? So that should give us some time.

5) We have a working capital of 18M now and will lose on average 2M per quarter. I don't see a reason why they would need refinancing.

6) I already expected less spectacular numbers, but (as I said before), they remain impressive.

So I expect, as we saw in November, a stock that will rally until the mid 70's in the days before the new CC and a sell off afterwards. I'll keep 'em untll then.

Good luck, and again please don't hesitate to correct me if I'm wrong, I'm still learning everyday