Diamonds aren’t necessarily a shareholder’s best friend
In a warehouse a few blocks from the defunct Pittsburgh Brewing in Lawrenceville, Mark Lucero’s 3-year-old vodka business is trying to take root.
So far, Blue Diamond vodka, the flagship label of Mr. Lucero’s Vodka Brands [ ticker: VDKB], has generated only red ink: a firstquarter loss of $31,896 after a 2016 loss of $266,451. The $47,265 in sales that Vodka Brands rang up last year fell shy of the $75,000 Mr. Lucero estimates his company paid in expenses related to being a publicly traded company.
Securities filings caution investors that Vodka Brands’ operating losses are expected to continue, which raises “substantial doubt about the company’s ability to continue as a going concern.”
The filings also disclose that Blue Diamond competes with White Diamond vodka, which is made by Better Brands Inc., a private company owned by Mr. Lucero. White Diamond is made by the same Estonian distiller and is sold to distributors for $12 a case less than Blue Diamond, according to a securities filing.
“Mr. Lucero’s other business interests are in conflict with our interests and those of our minority stockholders,” Vodka Brands disclosed in an April filing. “We have not entered into employment agreements with Mr. Lucero prohibiting him from engaging in activities that compete with our business.”
Perhaps that’s because Mr. Lucero, formerly a financial adviser for about 20 years, owns 81 percent of Vodka Brands’ shares. He downplays the conflict between his Blue and White vodkas.
“The market’s so big, I don’t think it’s much of a factor,” he said during an interview.
The 66-year-old executive got out of the securities business in 1995. Mr. Lucero said he then entered the pay phone business until cell phones taught him the concept of technological obsolescence.
He began traveling for business and leisure in Eastern Europe, where he discovered the vodka business. Mr. Lucero toured distilleries in the region and set out to improve on their processes, something he thinks Vodka Brands has done in conjunction with its Estonian distiller.
Mr. Lucero wanted Vodka Brands to be a public company because that makes raising capital easier and gives investors a way to cash out their investment. The company’s securities filings indicate it plans to fund operations by using cash on hand and issuing more stock. So far, the company has issued about 12.5 million of the 100 million shares authorized.
The company’s thinly traded stock is used to pay Mr. Lucero’s $900 monthly salary. That amounted to 9,000 shares priced at 30 cents per share during the first quarter. Company filings also disclose that Vodka Brands gave the owner of its 33rd Street offices 10,000 shares last year in lieu of rent and paid another $800 in shares for storage space in Imperial.
Vodka Brands sold 147,500 additional shares during the first quarter that were priced between 30 and 40 cents per share, raising $55,000, according to a company filing. That’s about $1,800 less than
the cash the company burned during the quarter.
The company’s pink sheet-traded shares were priced around $1 on Friday. Over the last year, they have traded as high as $3 in mid-November and as low as 35.5 cents per share in late February.
Vodka Brands has sold its products to distributors in Pennsylvania, West Virginia, Tennessee and Mississippi. Mr. Lucero said Pennsylvania is the biggest market, but he is working to find outlets in other markets and to introduce new vodkas. Diamond Girl, which will sell for $4 to $5 less than Blue Diamond’s $20 price, will hit the shelves soon, he said.
While Mr. Lucero wants to talk to the state about selling more vodka, Pennsylvania wants to talk with him about the $874 in 2014 personal income taxes he owes, according to a tax lien filed March 2 in Allegheny County Common Pleas Court.
“That’s the first I heard of it, when you told me,” he told the Post-Gazette. “Obviously I wouldn’t have let it go that far if I knew about it.”
He was aware of the $6,378 in unpaid real estate taxes and interest he owes to Allegheny County, Pittsburgh and the Pittsburgh school district for 2013 through 2015.
“They were just delivering the tax bill to the wrong address, so I knew nothing of it,” he said, adding that the bills will be paid. We can all drink to that.