The Stock Braniac and KINBASHA GAMING INTL (PINK:KNBA) Play Ball

We go through a lot of financial statements a day and all belong to companies traded on the OTC Markets. It is extremely rare to see a note in them saying “numbers in thousands unless otherwise specified”. It does happen every once in a while, however, and we just can’t help but think that we have finally found a company that is actually rather well off. Is this the case with KINBASHA GAMING INTL (PINK:KNBA)?

Well, it should be. They are a Pachinko operator in Japan and they say that they currently have 21 operating parlors. You don’t know what Pachinko is? We’re not too sure, either, but we read a lot and from what we could understand, it’s something like Pinball and the Japanese absolutely love it. Researchers say that it supposedly generates 5 times the revenue of Las Vegas. Reading this, our excitement grew even more intense.

It’s not all good news, though. If we have to paraphrase a famous thought, “With a lot of revenue come a lot of expenses”. It’s a mantra that some people often forget and this seems to be the case with KNBA. Indeed their revenues are in their millions, but the fact remains that when they put in all the costs, they end up with considerable losses. Here are the most important numbers in a nutshell:

• cash: $6 million
• current assets: $150 million
• current liabilities: $182 million
• revenue (Q2 and Q3, 2012): $49 million
• net loss (Q2 and Q3, 2012): $2.2 million

Of course losses are never easy to overcome and that’s why many companies who find themselves in such a situation seek a way out by borrowing money. That’s what KNBA did as well, but, unfortunately, things didn’t work out quite as planned. As of September 2012 KNBA had a total of $166.5 million in debt, $125 million of which was in default. The penalty fees are also mounting by the week, which further deepens the crisis.

Instead of trying to dig themselves out, however, KNBA seek publicity. They issued a press-release according to which an independent financial analyst called Patrick Murphy has published a report on KNBA and has predicted that their price per share will reach as high as $2.50 in the coming year. With so much debt and no actual income, that’s dubious enough, but there is one more detail, because of which we struggle to believe Mr. Murphy – the fact that he has received a not-inconsiderate $8,500 for the report from no other than KNBA themselves. As if that wasn’t enough, Mr. Murphy has written reports on many small cap companies like, for example, Global Security Agency Inc. (PINK:GSAG). His opinion on GSAG was published on January 31 and it was also extremely positive. The next trading session, however, saw GSAG‘s price take a massive 31% drop.

The Stock Braniac also received a compensation amounting to $5,000 for the email on KNBA. They have taken a rather steep compensation for touting shares before, however this is not that important. What’s more important is how the promoted stocks perform after the pumps, and the answer is “not well”. To give you a clear example, we have included LifeApps Digital Media Inc (PINK:LFAP)’s chart. The Stock Braniac hyped their shares back around December 14 and you can see what has happened since then.