Tuesday, August 21, 2012

Short update on Crumbs

Crumbs new 10Q came out and their cash position only fell by a million this quarter. This is good news since they've previously been losing around 2 million a quarter. That bad news they only have 3 million left. At least they got this new risk factor in their 10Q.

Crumbs’ future capital needs will depend on various factors, such as market acceptance of its existing products and any new products that it develops, marketing and sales costs, its ability to reduce operating expenses, and the extent to which it implements its growth and business strategies. None of these factors can be predicted with any certainty.

Unless Crumbs can generate a significant increase in cash from sales, it will not have the financial resources needed to fully implement its growth and business strategies. In that case, Crumbs will need to raise additional capital through public or private financings. If Crumbs were to obtain additional capital through borrowings from third parties, then it would have to pay interest, it could be required to pledge its assets to secure such borrowings, and it could have to agree to financial or other restrictive covenants that would not be favorable to Crumbs. These factors could put a strain on working capital, restrict Crumbs’ operations and/or ability to fully implement its growth strategy, restrict Crumbs’ ability to raise additional capital in other financings, and/or restrict Crumbs’ ability to pay dividends on its outstanding securities. If CBS were to raise additional funds through the sale of equity securities, such as additional shares of common stock, then the ownership and financial interests of existing stockholders could be diluted or otherwise materially and adversely impacted. If CBS were to sell debt or preferred securities, then it might be required to pay regular dividends or make other distributions, which could put a strain on cash flow and reduce cash available for operations and growth. Moreover, any debt or preferred securities issued to secure additional capital could have rights, preferences and privileges that are senior to the rights, preferences and privileges of CBS’ existing securities. The amount of capital that could be raised through the sale of securities would depend on the price at which such securities can be sold, and there can be no assurance that CBS will be able to sell such securities at prevailing market prices. Furthermore, CBS’ ability to sell securities could be subject to, or limited by, the rules of the NASDAQ Stock Market, including the rule that requires stockholder approval of securities issuances under certain circumstances. A meeting of stockholders would delay CBS’ efforts to raise capital, which could impact the price or prices at which it is able to sell securities and, thus, the amount of capital that could be raised, and would require certain expenditures related to holding the meeting and soliciting proxies. Any of these factors could have a material and adverse impact on Crumbs’ results of operations and financial condition. Crumbs’ ability to raise additional capital will depend on its results of operations and the status of various capital markets at the time such additional capital is sought. As a result of the foregoing, there can be no assurance that capital will be available to Crumbs from any particular source or at all, or at the times, in the amounts or on terms that are acceptable to Crumbs. If Crumbs is unable to raise additional capital at the times or in the amounts needed or under acceptable terms, then it might have to delay, scale back or modify its accelerated growth strategy, and its operations could consume its current liquidity resources .

Tuesday, August 7, 2012

Short CRMB

I had a long post about the idea of shorting Crumbs Bake Shop, but was hesitate to go short because I felt just any good news would push up the stock. Well, the good news has arrived -- Starbucks will now sell their coffee at Crumbs Bake Shop.

Is having Starbucks coffee all the sudden going to fix their problems? Nope.  In fact, I think it's far less likely Starbucks will buy them out now. (Which was one of my big worries about shorting Crumbs) Starbucks can now sell their coffee through them without having to buyout their stores. Why buy the cow when you get the milk for free? A press release like the one Crumbs sent out, reminds me of crappy companies sending out press releases whenever they have a business relationship with a major company. You'd think it might be a big deal to their customers, but they haven't twitted about it yet (I'm sure they will, they tweet about everything.) It's not that big of a deal, but the market will appreciate it.

What is a big deal for Crumbs is, every quarter Crumbs loses around  $2M -- and they only have $4M left.