BRVO.OB

[David Randolph]

Good morning 

I sent an e-mail to Roy Warren asking him if he could clarify if the warrants to be redeem are CCE's or not. Personally the answer to this won't change my long term view of the company a bit, but I would like to know.

I think investors are thinking «show me the money» on BRVO. They've seen so many OTCBB companies lie and deceive that they want a proof.

And I think it is time to start thinking about profits, not just revenues ... after I get this answer from Roy I'll ask him when he expects to deliver a profitable quarter.

David and Don,

My previous post is totally wrong as I don't understand warrants. I read some articles today and found below statement from http://www.hashemian.com/financial-markets/stock-warrants-183.htm.

"warrants normally carry a long term limit before they expire (such as five or more years) and when exercised, new common shares are issued by the company to cover the transaction"

It seems that the Company has not issued outstanding common stocks for these warrants yet, but to buy back warrants. It costs company $0.19 to redeem each warrants. So this action won't reduce the outstanding common stocks.

Hello huayilu, thanks for your post  You did well, looking for information about warrants.

Yes, this action won't reduce outstanding shares, but it will reduce the number of shares on a fully diluted basis, and like don says, that's what counts for the calculation of the EPS and market cap.

The step BRVO took, to redeem some warrants, tells me the company is in much better financial shape than in the past. It's like they are buying back shares. If they can grow as they wish and don't ask us, shareholders, to increase the number of authorized shares from 300 million, I would be glad. If they could redeem more warrants and finance themselves through their sales and profits, that would be heaven on earth, but I don't ask for that much.

Since I don't have a technical plan for BRVO.OB, let me introduce a fundamental one. For me to keep on holding BRVO.OB for the long term I need three things:

1) The company doesn't ask shareholders to increase the number of authorized shares;
2) Sequential quarter on quarter revenue growth of at least 10%;
3) The expectation of a profitable year in 2007.

For now, I'll continue holding for the long term.

[don]

David: I sent an e-mail to Roy Warren asking him if he could clarify if the warrants to be redeem are CCE's or not.
Excuse me, I had this info and did not have time to post it today. The answer from Roy  is 'no'.
quote:
Q. Roy, if I may add to the email question below: is CCE the warrant holder which BRAVO is buying back from? Thanks Don
A. the source was not disclosed (in the NR, so he cannot disclose it to me)  but I am sure CCE would gladly tell you they were not a seller.  We purchased them from other previous investors. Thanks. rGW

[don]

My second email to Roy asked for further clarification, as follows:
Q. My thought is, Bravo will seek to buy warrants which are exercisable at below the current market price.
Consequently, this is my interpretation:
Assume 1 warrant buys 1 share.
30.3 shares = 30.3 million warrants.
Re-purchase or buyback  price is $5.8 million.
that computes to 19 cents a warrant.
If I assume a market price is 61 cents, then that would imply that the exercise price was 61 minus 19 = 42cents a share.
Would you enlighten us? As, one-half of us thinks this is a great deal and the other half does not know how to interpret it.
Thanks, Don,
A. The buy back of the warrants was a negotiated price.  We looked at the value of the warrants and negotiated a discount that gave the seller cash without having to exercise and gave us the opportunity to redeem the warrants thereby reducing the dilution.  Thanks. RGW
followup Q. Roy, thank you for the information - which does not help me greatly.
Let me be more specific: what is the exercise price for these warrants?
Thanks, Don.
A. I am sorry. I cant give you non-public information. That number has not been disclosed.  You can look at the previous filings and see that for us to buy that many a majority were in the money.  When the actual number is disclosed, I will gladly point you to the document. Thanks. rGW

Final note - look at the part of Roys answer which I have underlined. I don't want to put words in his mouth. But, he appears to be saying that they negotiated a discount, as compared to the amount that was in the money. If so, that would be an extra 'plus' to the deal. Don.

[David Randolph]

Great information don, thanks a lot, let me add 5 points to your rating 

So, CCE is not the seller, which is good news. The company is buying back warrants issued at a low price, therefore reducing dilution, which is awesome news.

Why is the stock down? Probably because of these 2 temporary effects:

2) Traders and investors just runaway when they get the «private placement red flag», and they don't look into details.

3) Generally OTCBB stocks are out of favor at this particular moment.

Again, thanks for the great info don, I'll continue holding for the long term.

[bigdogs99999]

Great info Don and David - applause to you both!   

On reflection, we should have seen some dilution/financing coming.  The agreement with CCE calls for production capacity of 2,500,000 units per month until April 2006 when the capacity requirement increases to 7,500,000 units per month. 

[don]

If y'all don't mind, I am going to post all correspondence I have with Roy Warren, as soon as I can - .in the interests of minimizing the duplication of questions to him. OK?
latest:
Q. Subject: Re: TIMING OF REVENUE REPORTING
Dear Roy:
can you advise, is there a set pattern for reporting revenues or units shipped?
In other words, can we expect monthly revenues/shipments of cases to be disclosed?
You did this occasionally, in the past.  Naturally, we are all ears about how revenue growth is progressing. Will Bravo disclose, monthly, by News Release?


A. HI, we do not plan to report monthly at this point. When we have given monthly information it has been when we were reporting a quarter and had detail on the current month to share as an update.  We will let you know if that changes but I doubt we will begin to announce results monthly. Thanks. rGW

[David Randolph]

Thanks for your post and info 

Maybe I didn't send my e-mail to the right address, because I didn't got any answer from Roy. What's the e-mail you've been using Don? Thanks.

Perhaps now investors are looking into the details of the last 8-K filing from BRVO, which was quite positive in my opinion. The stock rebounded but volume was low.

I would like to know when BRVO's management is looking for a profitable quarter and year, but probably I should wait for the guidance they've promised in January.

I'll continue holding for the long term.

[don]

Maybe I didn't send my e-mail to the right address, because I didn't got any answer from Roy. What's the e-mail you've been using Don? Thanks.
David: I used <Roy Warren <[email protected]>>.
BUt only when I have specific questions for him, rather than IR, which is Jamie Dryer at:
<jamiedryer <[email protected]>.
Good question to ask - which fiscal quarter will provide  positive cash flows from operations/free cash flows. Don.

[don]

This is a copy of some private correspondence I had in the past day or so. . Since it summarizes my thoughts, as of today, I thought I would share. Excuse the verbosity! Don.
What are your thoughts on the financing deal ?
I like it, in particular because (i) it puts more stock into hands which are stronger than previously. By previously, I mean the debt which was convertible at 12-16 cents. That stuff, you just know they are going to blow it out the door, at current prices;
(ii) we got a double expresso deal here; not only did we get funds in to the company to finance expanded bottling/packaging capacity, but some of the funds were used to mop up some of those 'cheap' shares. As a consequence, I believe that we will see less sell-off's. Interestingly, as a part time trader, that does not suit me!
Will the shares be sold to market like before Nobody, not even Roy knows how these investors will act. Roy maintains that he sought out 'quality' investors. I do think that this type of investor will not sell for a 20% profit. I think they would be buying for a multi-bagger. If I am correct, that means, once again that this 20million shares are in strong hands. Even a 3 bagger, for a buyer at 50cents - that could mean you will not see any selling by these new investors, until the stock hits 1.50, at least.
Do you have a full position or looking to add at a lower price
I sold off some other stocks, so that I would have some cash available to buy more Bravo - then I chickened out. At 60cents, I was looking at most of my earlier cash profits being eaten up and technically, the stock looked weak.  At 70 my long term holding is almost in the money and my trading position is, of course, in the money. I would probably buy more, on a short term basis, regardless of what price, just prior to the announcement of the next quarter's results. At that time, based on my interpretation of remarks by Roy, I anticipate that the company will disclose additional information about current month shipments, which will look extremely good, by comparison with any prior months shipped volume. That would be a time when the stock will start getting noticed.
Summary: I am scared to add at lower prices. I will only add, at any price, it does not matter, so long as it is close to the release of news....that is - so that I can sell on news.
What is your short (end of year) mid 6 months-1 year) and long term guesstimate for BRVO
You know, I don't think picking a date, like Dec 31, is relevant to where the stock price will be at. At best, I am guessing - because I do not have margin percentages for the new regime (sales to CCE). When I do obtain the next quarterly revenues and gross margins, I will do an extrapolation to forecast earnings - and develope a valuation based on earnings fundamentals. I am not a great believer in applying another company's stock price as % of sales per share, to develope stock value estimates. It is just too early in the game. I mean, one has to accept that the deal with CCE could fizzle out - it is a possibility.
To try to answer, using my parameters:
I will present it this way: stage and stock price should be at
Lets say we are at Stage 3 ( Bravo has product, product development, a marketing plan and is ramping up production and sales).
Stage 4: (Bravo has a huge increase, e.g.  in sequential monthly and quarterly volume shipped - something like 80-90% of its bottling capacity (has anyone done this yet?). $1.40
Stage 5: (Bravo has $1million positive cash flow (PCF) from operations. My definition of PCF excludes money spent on expanding plant capacity (which is a capital cash item anyway) and money spent on marketing (we are building brand recognition). $5
Stage 6 Bravo has earnings per share. To get a stock price, use a PE of 8.
I think that it would be misleading to try to figure out eps, at this time, not until I see the next quarter.
Stage 7: Once we see 4 sequential profitable quarters - then I would anticipate the market to value the company at a
PEG of .75
Stage 8: Once we see 2 sequential profitable years - then I would anticipate the market to value the company at a
PEG of 1.50 which means that the stock price will double from stage 7.
I regret if this is not as helpful as you might want it to be. But, I asked myself an interesting question before I wrote this post: am I at a point where I will recommend this stock to my friends? Answer; no - the price is too volatile, the risks too great. So, if we are not yet at the point in time where I will recommend the stock to my friends, who are totally risk adverse, then I will not recommend that you add at this stage. Not unless you are prepared to risk more of your capital. Don.

[twodachsie]

Wow Don. Awesome analysis. Applause! I'm in long since mid July, so I'm currently down around 40%. But I'm hopeful that patience will pay off with BRVO.

[David Randolph]

Thanks for your fundamental thoughts don, applause 

Monday BRVO rose 10%, today it went down 5%. Will it go up or down tomorrow? I don't think it matters all that much for us long term investors in the stock.

I think a perfect role model for BRVO might be HANS, which is also in the beverage business (a little different, but quite the same business model and growth prospects at the start, I believe). HANS rose 28 fold over the last 2 years  , but the company has been around since 1985 !

The all time low for HANS was $0.32, made in March 1996. From there to today's close the stock rose 262 fold 



Am I willing to hold a stock for 9 long years? For this kind of return, you bet I am !

But, will BRVO be able to achieve this, somewhere in the future?

I don't know, I think the possibility is certainly there, for BRVO to reach a market cap as high as HANS, which is $1.86B. But, from current levels that's something like a 10 to 15 fold increase, not 262 fold ...

But, if we consider that the all time low for BRVO.OB was $0.045, if the stock were to rise 15 fold from current levels (the stock price would be $10 then), that would mean a 222 fold increase from the low set in December 2003.

Don's thinking in terms of stages for the company is an excellent idea, I may add that we can use HANS to compare stages and stock prices. What was needed for HANS to rise from $0.32 to $84? Which were the right steps? Did the company become profitable before the big rise? Was it an OTCBB company like BRVO.OB is now?

I'll spend the next few updates trying to answer these questions, comparing BRVO.OB and HANS. Any help would be welcome 

[Fré]

As David proposed, we might try to compare Hans and Bravo. I looked at Hans' first available Sec-filling and compared sales with the last quarter of Bravo.

Here's my modest contribution:



         
Bravo latest quarter gave revenues of $3.2M.
                           
                                                                2005           2004
                                                                   ----             ----                                                                  

Revenue - unit sales                         $  3,245,305     $    747,198   
Revenue - gross kit sales                                    -             78,232   
                                                               ------------     ------------   
Total revenue                                      3,245,305          825,430   
Cost of sales                                      (2,360,884)        (628,747)   
                                                                ------------     ------------   
Gross margin                                            884,421          196,683   
Selling expenses                                    1,727,531          652,622   
Product development                                  84,690           33,932   
General and administrative expense        905,487          551,299   
                                                              ------------     ------------   
Loss from operations                           (1,833,287)      (1,041,170)


In the first available sec filling (march 1996), Hans had net sales of $7.3M (1995: $5.4M)

                                                                 1996            1995
                                                                   ----------      ----------
NET SALES                                             $7,370,581      $5,433,697

COST OF SALES                                         4,607,953       3,256,761
                                                                   ----------      ----------

GROSS PROFIT                                          2,762,628       2,176,936

OPERATING EXPENSES:
Selling, general and administrative           2,489,904       2,290,591
Amortization of trademark license
and trademarks                                           125,424         124,158
Other expenses                                           74,291         126,374
                                                                     ----------      ----------

  Total operating expenses                         2,689,619       2,541,123


Link Bravo filling (nov 2005): http://secfilings.nasdaq.com/filingFrameset.asp?FileName=0000910647%2D05%2D000303%2Etxt&FilePath=%5C2005%5C11%5C14%5C&CoName=BRAVO+FOODS+INTERNATIONAL+CORP&FormType=10QSB&RcvdDate=11%2F14%2F2005&pdf=


Link Hans filling (may 1996): http://secfilings.nasdaq.com/filingFrameset.asp?FileName=0000912057%2D96%2D009059%2Etxt&FilePath=%5C1996%5C05%5C10%5C00%5C&CoName=HANSEN+NATURAL+CORP&FormType=10%2DQ&RcvdDate=5%2F10%2F1996&pdf=

[David Randolph]

Thanks for this start Fré 

We see that revenues, although lower at BRVO, are growing much faster than HANS in 1996.

For the 9 months ended in September 2005, HANS sales were $250M. BRVO.OB sales were $6.56M, but BRVO expects sales in the range of $70M to $100M in 2006 and $170M for 2007.

One interesting thing we can think about is: if sales for HANS and BRVO one day are equal, will the market cap be the roughly the same?

BRVO needs to continue growing extremely fast, so it can pay its debts and possibly buy back some more of those low priced warrants. The company's expectations for the 4th quarter are of revenues of $6 to $7M, that is as much as in the rest of 2005. I hope they can deliver and they can start reducing their losses from operations.

I continue to believe in BRVO.OB's growth story, I'll keep on holding for the long term.

[boatguy]

Some very good Bravo info.

Catalyst Research (pdf)

http://www.catalystresearch.com/research.htm

[boatguy]

From the pdf 10-21-05

Risks and Mitigations


Risk: Consumers may not adopt and embrace BRVO's flavored milk drinks.

Mitigation: BRVO products appear to gain market acceptance as evidenced by increasing revenues. In
addition, its Slammers ® milk drinks were featured in the September issue of Progressive
Grocer magazine as an "Editors Pick" for one of the best new dairy products of the year.
Management is utilizing a number of recognized brands to market their products.


Risk: Entry of a large competitor breaking through barriers to entry.

Mitigation: BRVO is implementing a "first to market" strategy working to erect branding, expertise in
packaging and production, and distribution as barriers to entry.


Risk: The CCE distribution agreement may be cancelled after two years resulting in disruption of
increasing revenue trends and stunting growth.

Mitigation: Should the CCE agreement be cancelled, BRVO may have to achieve substantial market
presence sufficient to remain viable. BRVO may provide a growth opportunity for CCE which
it may not be willing to jeopardize.


Risk: Production is dependent on an agreement with a limited number of production lines and a
limited number of suppliers such as Jasper Products.

Mitigation: BRVO represents a revenue opportunity for Jasper Products.


Risk: BRVO's financial statement will come under increasing pressure should growth accelerate,
increasing demand for working capital, and possibly the need to seek additional equity and debt.

Mitigation: Rapid sales growth and partnering with CCE for distribution increases bankability and ability to
obtain additional financing.


Risk: High rates of revenue growth coupled with difficulties securing debt may result in dilution from
additional equity financing.

Mitigation: Management continues to "clean up" the balance sheet and is cognizant of both investor
attitudes toward dilution and large numbers of shares outstanding relative to financial results.


Risk: Achieving success by increasing revenues may increase operating risk for execution of BRVO's
business plan preventing it from exploiting its market opportunity.

Mitigation: BRVO has partnered with established milk producers and beverage distributors. In addition, the
current opportunity and ongoing success represents an attractive opportunity for employment
for adding to the BRVO's staff and executive team.