Thoughts1.Just spewing out some of my thoughts about SCG. It is a good spec play going forward for sure. The fact that the company is generating much more revenue yearly in sales is a key factor. It is showing that more and more people are using their services which means the company is growing. But, and here is the but, the company is not profitable. Those who are not familiar with SEDAR or financial statements, do not confuse Sales with Profits, and do not be thrown off here by those claiming this company is generating profits.
2.You can see that the company has a net loss of $1,104,459 compared to 2009 loss of only a $13,531. So the company has actually dug a bigger hole from the previous year. What is the cause for this even though the company is generating so much more revenue?
Well you can see that yes, the revenues have increased from 84 mil to 103 mil.... but at the same time Cost of Sales have dramatically increased as well from 79 mil to 97 mil...giving the company only a miniscule increase in Gross Profit from 2009 of $934,080 compared to an increase in Revenue of $20,219,714.
_______________________________________________________________________________________
SelectCore Ltd.
Consolidated Statements of Operations and Deficit
Years Ended December 31, 2010 and 2009
2010 2009
(Note 20)
Revenue $
103,223,423 $
84,003,709
Cost of sales97,948,583 79,662,949
Gross profit5,274,840 4,340,760
Expenses
General and administrative 4,611,331 3,763,836
Interest 496,443 286,341
Debt financing costs (recovery) 1,052,916 (27,100)
Foreign exchange gain (114,205) (297,470)
Stock based compensation - 343,000
Amortization of property and equipment 307,814 260,684
Amortization of intangible assets 25,000 25,000
6,379,299 4,354,291
Net loss(1,104,459) (13,531)
Deficit, beginning of year (12,315,484) (12,301,953)
Deficit, end of year$ (13,419,943)$ (12,315,484)
_________________________________________________________________________________________
3.Anyway, saying all that to say this... Taking a position in any stock on the market is a risk... Do you believe that the company will continue to grow and generate more sales? Will more and more people start using SCG's prepaid credit cards? Personally I think yes....but at the same time and I'll just quote the company
"The Company has negative working capital at year end, which raises a question as to the ability of the Company to continue as a going concern without additional equity or long-term debt financing.
The ability of the Company to sustain its ongoing operations is dependent upon its ability to obtain a
sustainable level of profitability from operations or to raise sufficient financing enabling it to rectify
its working capital deficiency"
Basically, can SCG start managing its capital better in the future, stop diluting the share structure and start generating even more sales in order to be profitable? I don't know... Can't answer that question, but I surely hope so because the potential for SCG to grow is very much there due to the products they offer and judging by how their peers have done like GreenDot. But, before anyone starts comparing an elephant to an ant take a look at Greendot's brief financial statements.
https://www.pymnts.com/green-dot-reports-first-quarter-2011-financial-results-20110428007028/