their mfg costs are a direct expense since they do not have
their mfg costs are a direct expense since they do not have any plant or equipment to deal with. all contract costs so rather easy to account for. Veal has given updates to laid in cost per bottle and they have been in past 10Qs/10Ks. they continue to decrease and will continue to do so as the volume increases until they flatten out at max production volume discount.
SG&A is relatively small as they do not have many on the direct payroll (Veal, Adamson, a couple of sales people, and maybe admin?) and the rest of sales/marketing is handled through SMS. much of the salary from the insiders has been deferred per past filings. that will obviously increase as cash flow strengthens. they also do very little in terms of general advertisement and have resorted to giveaways, festivals, small vendor shows, etc and co-oping vendor space with partners when applicable to keep costs down (Vegas shows where they had the dual booth). they have been pretty saavy at getting press through BevNet, social media, TV shows, LTCG SM network, etc to help further the brand at a low cost.
licensing fees are with LTCG as i think they ended the agreement with WB for the Hangover Movie /characters.
i would not expect a profit as all of the net margin would probably be funneled back into advertising/marketing, short term debt payoff (still have convertible debt to close out), and future production runs where terms are extended (unlike foreign terms where half is paid up front which is where the foreign deals are very lucrative starting out - dramatically helps cash flow).
when they do start showing net income - they have significant accrued losses to offset future gains and eliminate income tax (40% on net income) for probably several years which will also help cash flow.
as others have stated - net income is not a driver right now. while profitable growth is crucial long term for any business - right now revenues and brand building are critical. at their target laid in costs (approaching $0.20/bottle) and selling anywhere from probably $0.90-1.40 based on volume - that still allows significant margins to drive significant profitability.
3
Hangover Joe's Holding Corporation (HJOE) Stock Research Links
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