BizAuctions Expands, Remains Risky
BizAuctions Inc. (BZCN) is a stock to watch during the economic downturn as businesses look to increase sales by selling their excess inventory, overstocks and returns on eBay Inc.’s (EBAY) online auction platform, but remains a risky play given its recent financials.
BizAuctions Inc. [[BZCN.PK]] provides commercial eBay liquidation services primarily to retail stores with excess inventories, overstocks, and returns, while also purchasing inventory at a praction of the price for the purposes of liquidating it for a profit. The company’s clients have included some of the nation’s leading retail names at the forefront of their industries.
BizAuctions addresses a $60 billion excess inventory problem facing U.S. retailers by sending trucks to pick up pallets of excess inventory, sell the inventory on eBay or in its owned store, and collecting a percentage-based fee. Retailers can then get rid of old styles, decrease inventory levels, and free up valuable storage and retail space for new product.
In May, BizAuctions opened a new retail concept in order to liquidate clothing inventory from their own holdings from liquidation contracts and other companies on consignment. Based in San Diego in the Chula Vista Center, Lucky7 opened on May 29th and has seen consistently increasing sales with a solid base of repeat customers and new customers looking for great deals.
In June, BizAuctions signed a consignment liquidation agreement with Nexia Holdings [[NXHD.OB]] to liquidate its Black Chandelier clothing retail operations. This is the first contract that the company has obtained that entails products being sold through its new Lucky7 stores. And so far, the company has reported moderately growing sales.
During the first quarter, BizAuctions reported a net loss of $246,931 on sales of $812,988 for the period ended March 31, 2009. Gross margins dropped from 18.2% to 11.6% versus the same period last year, but SG&A expenses dropped from $324,005 to $233,131. Meanwhile, the company’s number of outstanding shares increased from 101.6 million to 176.1 million.
BizAuction’s balance sheet also remains a little risky with a quick ratio of 0.26, which shows that its liabilities far exceed its assets. Meanwhile, the company reported only $32,019 in cash on its books at the end of the quarter. As a result, the company’s auditors issued a “going concern” as it will likely have to raise additional capital to fund operations going forward.
In the end, BizAuctions is quickly ramping up its retail operations, while also keeping its eBay operations alive and kicking. However, the company’s somewhat troubled financial statements may be a cause for concern to long-term investors, who may want to wait on the sidelines until solid profits begin to materialize.
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