Well… the 10-K has been released… and the stockholder/upfront meeting has concluded. What is in store now for the company???
There appears to be 2 opposing aspects of the company at play here. #1 being the glitz, glamour and excitement of Hollywood, that appeared to play out last night at the “Upfront” star-studded Hollywood bash. And by many accounts, last night’s PunchTV party seemed to go extremely well. Then, after the successful event… then came the #2 aspect… the financials in the form of the 10-K. Unfortunately, there are differing opinions on just how good the 10-K was. But clearly it was not representative of the glitz, glamour, and excitement of the upfront, nor, in our opinion, did it fulfill the excitement of the CEO’s statements of being the best 10-K he has ever worked on.
For those who are staunch PNCH supporters… they thought the 10-K was great. For those that look at PNCH as an investment only, there was considerably less enthusiasm. From a purely business standpoint, the 10-K described a company struggling for revenues, and cash starved. Cash starved apparently in part because the 10-K listed almost $450,000. in upper management compensation. Many cite this as excessive, for a “development stage” company (although they have actually graduated from that formal status), showing only $195,000. in revenue for the entire year of 2012. Granted, this is over 600% increase over fiscal year 2011, but in the real world you can’t spend increases… only the 195K. And it will take a LOT more than 195k in “revenue” to satisfy the obligation of the top executives at 450K. There were other concerning financial aspects of the 10-K, but we will let you read it and decide for yourself. See the full report here.
Now, in all fairness, this IS a fledgling company, and as such it is expected (and some say acceptable) for the company to have less than stellar financial reports while in their growing and expansion stage. Most growing companies are cash starved with less than stellar financials. Where PNCH differs from most of these other companies was mentioned in the #1 aspect above… namely the glitz, glamour, and excitement of Hollywood. We believe this is an important aspect of this growing company that needs to be taken into consideration when evaluating the company overall. Its called momentum. By most accounts the momentum was clearly evident last night at the Upfront party. Will the momentum be enough to carry the company to net profitability… who knows… but there’s a better chance of that happening WITH momentum, than without it.
Investing is a speculative business. It is also a risk-based business. Usually the higher the risk, the greater the return. In short, investors are speculating that a small investment today, with a company that has an unknown future, will some day be a big well established company producing tons of revenue, thereby making their investment a profitable one, i.e, Apple, Microsoft, Google, etc., as they were once small fledgling companies at one time, who’s future was questionable. Although PNCH today is struggling (i.e the lack-luster 10-K), the cost per share is extremely low because the risk is high that you will end up with a worthless investment. However, when you add in the momentum aspect, it becomes somewhat more likely the business will survive, and prosper, because its fairly easy to see there is excitement surrounding the company, and that will draw revenue to it.
Because of this excitement and momentum is an investment in PNCH safe… of course not, each investor needs to evaluate the data on the company and make an informed decision about investing in the company. Although we are not entirely pleased with PPS to date, we feel confident that the company will some day do very well and make our investment profitable. Although we are long-term investors and therefore do not expect immediate profits on our shares. For those of you who may be more short-term investors, you need to determine if this rate of growth fits into your investment strategy. As many have said… this is not a stock to “flip” for a quick profit. If you’re a flipper at heart, this stock will likely disappoint you.
So… where are we at today… well, about where we were yesterday. The PPS is still fluctuating under a penny, and will likely stay close to that in the near future. Perhaps there is some good news on the horizon that will kick-start the PPS upward, but lacking a substantial catalyst to get new investors excited, we are in for more of the same for a while yet. As the successive financial reports come out, and they carry better and better numbers, we feel the PPS will increase along with the revenue. Till then… we wait !