The most covered news was the recent earnings announcement made on April 3, 2017, so we assessed these numbers. According to the company, gross revenues for the first quarter of the year was $5,000,000, which “exceeds the most recent projections by almost 10%“. The fact that these figures were better than expected is what excited traders and explains the recent upside in the share price. However, we need to check what is going on with the other financial figures. Here are the numbers:
Cost of Goods Sold: $3,237,212
Gross Profit: $1,880,224
Net Income: $392,655
We were glad to see that the company showed a profit at the end of the quarter. At the end of the day, showing great revenues does not fit for anything if the company is not able to adjust costs to deliver profit. We checked most of the financial figures reported and we did not see anything remarkable to note. It was a good quarter. The company did a good job, and traders profited from the market move. Furthermore, the balance sheet was also disclosed. These are the most relevant numbers:
Account receivables: $2,630,974
Total Assets: $7,019,459
Accounts Payable: $2,000,513
Total Liabilities: $3,901,205
Total Equity: $3,118,254
Shares Outstanding: 1,238,961,054 shares
Additionally, the balance sheet looks stable. The company is financing its operations with the help of its providers and the company did not issue an absurd amount of shares. All looks goods on this side. The most relevant reaction to these financial figures from the business executives of ACGX was said by the COO and General Counsel of the Alliance Creative Group, Paul Sorkin:
“We are very proud of our team’s significant accomplishments. The $5,000,000 threshold exceeded all of our internal goals. Many of our projects are progressing well and we hope to have continued success moving forward. Our top priorities continue to be focused on growing the overall company, diversifying our revenue streams, and leveraging our shared resources while looking for ways to grow faster and create long-term value for our shareholders, investors, and employees.” Source
Everything looks good, but what about shareholders dilution?
Start-ups in general finance their operations using equity and sometimes convertible debt. That is a fact. Traders looking for more boring returns and not willing to get exposure to dilution risks may be more interested in other more mature businesses. This is a company that is delivering outstanding returns. Thus, the securities involve some risks.
The company was able to obtain financing from investors issuing the following loans:
Note Payable – Golden State debenture: $128,112
Note Payable – Auto Loans: $40,530
Note Payable – STL Notes: $234,763
Convertible Notes: $234,763
That is a lot of money. Isn’t it? Yes, but as compared to the amount of assets that the company was able to obtain and generate is not; that is $7,019,459 in total assets. Hence, the risk of shareholder dilution is low as we don’t expect that noteholders will convert their shares and exit the company.