A new stock I’ve taken a tiny position in.
Before I say anything else let me specify, SHOUT even: DON’T take a BIG position in this stock! I’ve taken only a 0.28% position, which is truly tiny. My average position is 4.0%, so this is just one-fourteenth of a average position. My large positions are 8.0%, so this is just one-twenty-ninth of a large position. I REALLY have just a tiny position here.
Okay, now that that is out of the way, I can’t remember how I learned about this company but it may have been through a short article on Seeking Alpha which was attacking it as a “pump and dump” operation, which it may have been at one time for all I know. I’ve seen ads saying “Buy this company” and they did look like crude pump and dump ads. It’s a very little company in Hawaii called KonaRed (KRED), a penny stock, which makes health drinks out of coffee berries, and has started making other products too like health bars.
They had almost no revenue in 2012 and only about $0.9 million in revenue in all of 2013, but in the first quarter they have started to collect a lot, a real lot, of distribution, including store chains like CVS pharmacies and Walmart.
Their revenue for the first quarter of 2014 was $0.4 million (or 46% of what they had in all of last year). They had so much demand that their gross margin fell from over 70% to 25%. (This is to be expected as filling huge amounts of unexpected demand can mean paying overtime, hiring temps, outsourcing production, airfreighting instead of shipping by boat etc.) They lost a penny a share. The second quarter will be bigger, and they’ll continue to lose money. Revenue for the year should at least double. Maybe triple?
They may never make any money. This investment may go to zero, in which case my totals for the year will be 0.28% lower than they would have been. But if they hit, I may make a couple of percent. Obviously, this is not my typical kind of stock. It’s a sheer speculation, which is why my position is so small. I’m buying it because the product suddenly seems to have caught on, but it could die just as fast. If anyone is from Hawaii and has tried it, please let us know. My average buying price was 62 to 64 cents. There’s plenty of volume for taking a small position.
Saul
Here are the notes I made for myself:
Apr 2014
Retail Successes: ?Toward the end of 2013, KonaRed beverages could be found in more than 540 retail locations throughout North America. Additionally, its 100% Hawaiian CoffeeBerry, beverage continued to be used as a branded ingredient in all 32 Jamba Juice locations in Hawaii.
In early January 2014, KonaRed Organic Green Tea was introduced to consumers in 59 ABC Store locations in Hawaii. Those 59 retail outlets also added KonaRed Original to their beverage shelves.
In mid-January, all four commissaries operated by the Defense Dept (in Hawaii?) began selling KonaRed Green Tea and KonaRed Original enabling KonaRed to surpass 600 retail locations within the first weeks of January.
Less than 30 days later, KonaRed expanded its presence in Canada, as it became available in more than 80 Save-On-Foods stores (owned by the Overwaitea Food Group). In mid-March, the Company announced that it had added even more Overwaitea Food Group-owned stores, surpassing 100 retail locations.
Three days later, KonaRed Original became available in more than 2,100 Walmart stores as the Company exceeded 2,800 retail locations.
Distributor Successes:? - During the first week of January, KonaRed announced that it had entered into an agreement with Splash Beverage Group to sell and distribute KonaRed’s products throughout the United States.
During February, the Company announced that it added Nevada’s premier leading wine, beer, spirits and beverage distribution company, Southern Wine & Spirits, to its distribution network to cover Nevada.
The Company also added Blue Coast Beverages and Great State Beverages to cover areas in Boston and New Hampshire, respectively.
Additionally, during February, Haralambos Beverage Company, which services more than 10,000 retail and customer accounts in Los Angeles, San Bernadino, Kern, Riverside, and Orange Counties, and Central Beverage Company, which services more than 3,500 retailers in the eight-county Chicago metro area became distributors of KonaRed’s beverages.
In early March, KonaRed renewed its distribution agreement with Paradise Beverages for KonaRed Original and KonaRed Organic Green Tea for retailers throughout Hawaii, including Whole Foods, Walmart, Foodland, and 7-Eleven, among many others.
"We are pleased with the accomplishments we made during the first three months of 2014. Our growth from roughly 540 retail locations in 2013 to more than 2,800 currently represents an increase of more than 500%. We aim to improve upon these numbers and place our line of Hawaiian CoffeeBerry, coffee fruit products from Kona, Hawaii, in front of as many consumers as possible.
Apr 2014 - announced strong growth in sales during the first quarter of 2014.
Product sales for the first quarter increased by 106% to $413,000 versus $201,000 for the same period a year ago.
The sales were up sequentially over 400% from $77,000. Additionally, our first quarter sales were 46% of our total product sales of $890,000 for all of 2013.
“We’re pleased with our sales numbers during the first quarter of 2014. Our efforts to get our products in front of consumers are working. Successes in the last six months have included acquiring Walmart and Speedee Mart as major clients and we aim to capitalize on our sales momentum in the second quarter.”
Going forward, our goals are to continue sales expansion and translate sales growth into profitability by further tightening costs controls.”
Comparatively, due primarily to additional costs associated with our quick sales growth, cost-of-goods-sold for Q1 were way up, and our gross margin decreased to 25%, versus 71% in the same quarter last year.
The Company’s net loss for Q1 2014 is estimated to be approximately $(995,000), or $(0.02) per share, versus $149,848, or $nil per share for Q1 2013. Adjusted loss, excluding non-cash options grant expenses, the net loss for QI 2014 decreases to $(393,566), or $(0.01) per share. A total of 750,000 options were granted to a director during the quarter and these options vested immediately. The options have a 5-year term and are exercisable at $0.81 per share.
Apr 2014 - Announced that its new On-the-Go Packs and 100% Hawaiian CoffeeBerry® Powder in a Tub is being added to the shelves of four popular retail chains in Hawaii including CVS/Longs, Times Supermarkets, Don Quijote, and Marukai Markets.
The addition of this strong group of retailers is an excellent start for our new line of nutritional products which are yet another way to bring the health attributes of Hawaiian CoffeeBerry coffee fruit to the public.
KonaRed’s On-the-Go-Packs and powders are 100% soluble powders that can be mixed with water or juice or added to a smoothie for extra antioxidants.
CVS/Longs is part of the largest pharmacy chain in the U.S. Times Supermarkets is one of the leading supermarket operations in Hawaii, with 24 locations. Don Quijote is a chain store that carries a wide range of products. Marukai Corporation was the first Japanese retailer to offer wholesale prices and membership system. It has experienced tremendous success, which has helped it expand to California and Hawaii and more than 160,000 U.S. members.