Baristas Coffee Company $BCCI files ‘audited’ quarterly financial statements

While accounting in real companies is usually boring, penny stock accounting is almost always exciting, whether it is a $100m+ market cap company with fewer total assets than I have in my checking account (like GHIL), companies with financial statements so badly faked as to make me suspect brain damage rather than intent to defraud, and now the case of the unaudited “audited” financial statements, courtesy of Baristas Coffee Company (BCCI).

First, I should thank the intrepid researchers on the Investorshub Due Diligence Fraud and Support Team message board for bringing this to my attention. Janice Shell was the first to notice the problems with the quarterly financial statements published yesterday by BCCI. See some of the replies (and more replies) to her post. The problem is that while the statements clearly state in multiple locations that they are audited, there is no auditor letter included with them. Furthermore, they are quarterly financial statements, which are generally never audited (though they normally pass auditor review). It is possible that the statements were audited and the company forgot to include the auditor letter. Perhaps worse is that the ‘audited’ statements don’t match the prior period unaudited statements. The starting cash ($0) on January 1, 2014 is different than the ending cash on Dec 31 ($43,645). And the intangible assets (which make up almost 95% of the company assets) drop by over $4 million between periods with no treatment on the income statement.

The CEO of Baristas Coffee Company, Barry Henthorn, doubled down on the ‘audited’ claim by issuing a press release this morning stating in part (emphasis mine):

Baristas Files Audited Financials – Moves Forward With Uplisting to Senior Exchange

Jun 05, 2014
OTC Disclosure & News Service

SEATTLE, June 5, 2014 (GLOBE NEWSWIRE) — Baristas Coffee Company, Inc. (OTCPK:BCCI), announced that it has completed its audited financials which meet PCAOB standards and has filed its first set of audited financials. The filing of audited quarterly financials for the period ending March 31, 2014 can be viewed at under Filings and Disclosures. Baristas will be filing amended audited 10K and 10Q financials for years 2012, 2013 in the next week. Subsequently the Company will be filing its Registration Statement and will become fully reporting and will up list accordingly to a senior exchange.

CEO Barry Henthorn stated: “Becoming fully audited was among the most significant steps towards moving to a senior exchange and becoming a fully reporting public company. All legacy adjustments are now reflected according to PCAOB auditing standards and only revenues that were completely verifiable through the audit were recognized. In addition all stock based compensation has been reflected appropriately of which the Company does not foresee any upcoming substantial issuances. The processes and accounting review policies are now in place to allow all future revenues to flow to the books of the company and to produce and review timely audited financial statements.”

It is quite possible that Baristas Coffee has actually had a real audit done on its financial statements but it makes no sense to me why they would put out their Q1 2014 financials prior to restating their financials for the last two years. If these financials are not produced soon then I believe Barsistas Coffee is at risk for an SEC trading suspension.

On a side note, DKM CPAs, which Baristas Coffee Company lists as it “accountant or auditor” in the filing yesterday. DKM previously received a nasty-gram from the PCAOB (PDF) two years ago.


Disclaimer: I have no position in any stock mentioned above. I have no relationship with any parties mentioned above. I have submitted my concerns to the This blog has a terms of use that is incorporated by reference into this post; you can find all my disclaimers and disclosures there as well.

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