PF Hospitality Group Inc (OTCMKTS:PFHS) Calms Down and Carries On
A grand total of $110 thousand has been paid for the pump of PF Hospitality Group Inc (OTCMKTS:PFHS) so far. A lot of money means a lot of touting and the sixteen emails that have hit our inbox since the beginning of the promotion have definitely affected the stock performance. On Tuesday, PFHS logged its first properly active session since the reverse split from July and yesterday, it added another 5%, finishing the day at a little over $0.68 per share.
So, third parties are paying money for a promotion and people are willing to listen to the far-fetched promises from the emails. That’s not news. What is news, however, is that PFHS isn’t the company it used to be.
At the end of Q2, it had no cash or assets and it was in the mineral exploration business. On July 1, however the company completed the acquisition of Pizza Fusion – a pizza restaurant franchisor that has presence in the US, Dubai, and the United Arab Emirates. Yesterday, in a press release that was peculiarly timed considering the flurry of promotional emails flying around, PFHS said that in addition to the already established Pizza Fusion brand, they will try to launch a new concept called Shaker & Pie.
Predictably, there’s a new management team as well and they’ve decided to turn PFHS into a fully reporting entity. At the beginning of the month, they filed a Form 10 statement with the SEC and thanks to it, we can see what the new subsidiary’s situation was mere hours before it got acquired by PFHS. Unfortunately, things weren’t perfect. Here’s a summary of the figures:
- cash: $82 thousand
- current assets: $93 thousand
- current liabilities: $1.1 million
- nine-month revenue: $273 thousand
- nine-month net loss: $160 thousand
If you do a quick calculation, you’ll see that between September 30, 2014 and June 30, 2015, Pizza Fusion has been generating an average of $1,000 per day in revenues. That’s not much. More worryingly, 37% of those revenues were logged thanks to a settlement agreement with a couple of franchisees who decided to close their restaurants during the period.
In actual fact, the number of Pizza Fusion franchised locations decreased from 11 in September 2013, to 9 in June 2014, to 7 in June 2015.
Some will probably find a silver lining in the $1.3 million borrowed under a debenture agreement which was closed after the completion of the merger. Indeed, the money should give the company a little room to breathe. The debenture is convertible into common stock at a 35% discount to the market price, however, and that could put some pressure on the ticker.
Speaking of convertible debt, this is not our first article on PFHS. We covered it when it was still traded under its previous ticker symbol – KHGT. It had just announced the upcoming merger with Pizza Fusion and the reverse split that was going to accompany it. It had also announced that $65,600 worth of debt is about to be converted into 40,000,000 shares of common stock (an average conversion rate of just $0.0016 per share). If you check out our article, you’ll see that we were wondering whether that conversion will take place before or after the reverse split. PFHS‘ Form 10 has the answer. It says that the conversion was completed on August 25 – exactly two and a half months after the reverse split.
