Why I Short Sold This $180 Million Company With $8,000 In Revenues, ZERO Cash, Owes $3 Million & Whose Stock Is Up 2,000% In One Month
Posted by Timothy Sykes on Wed 30th of Sep, 2009 03:08:49 PM
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I guess the title kinda gives it away, huh? The last 2 Penny Stocks I’ve shorted have dropped 75%+ before being halted by the SEC…is this one gonna make 3 for 3? As always TIMalert subscribers get my real-time-trade alerts within seconds of me making an actual trade and oddly-well-done (I say oddly because penny stock research is a joke) research reports like the one below first, get ready for a whole new feature-rich website next month and signup already and stop being such a penny stock sucker/bagholder like those still invested in SpongeTech Delivery Systems, Inc. (SPNGE)!
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I’ve shorted 2 sketchy stocks in the past few weeks, Genova Biotherapeutics, Inc. (GVBP) and EMERGENT HEALTH CORP (EMGE), both fell 75%+ off their highs and were halted by the SEC within a few days of my research becoming public. This latest stock Nutra Pharma Corp. (NPHC) isn’t AS sketchy (no clear sign of paid stock promoters) so I doubt the SEC will halt it, but what I found does lead me to suspect this stock can drop 50%+ in the next few days and weeks, which is why I shorted 10,000 share sat .845 this morning
Before we get to all the fascinating dirt, here are the risks: despite NPHC being a carcass of a company with a market of $182 million despite having no cash whatsoever so they must report in their SEC filing from August "Based on our current cash position, we have insufficient funds to accomplish our operational objectives for even one month." that has had to constantly borrow $ from its CEO, who also happens to be on the board of directors of the company’s sole US marketer and distributor, XenaCare Holdings (XCHO), for their only product which they’re currently pushing Coboxin (pain releiever based on cobra venom….talk about selling snakeoil), another company with literally ZERO cash, NPHC could easily put out another fluffly press release talking about how their unique pain reliever is gonna takeover the pain reliever industry.
Now I can and will quote from SEC filings and try to bring in reason and facts all day long, and be dead on in my research but I can and will get squeezed if NPHC, or some shareholder of NPHC decides to hype the coming launch of this product by paying some stock promoters in cash or stock, forcing me to take profits or cut losses, basically I’d do anything to get out of the way of any serious pump.
But aside from that risk, here are more facts.
NPHC has surged from 5 cents/share to $1/share in the 30 trading days between now and August 18th, 2009, due to a dozen or so fluffy/full of hype press releases about the company’s upcoming pain reliever (I won’t feature the PRs because their contents are meaningless considering both NPHC and their exclusive marketers and distributor both have ZERO cash on their balance sheets meaning they are desperate to raise cash at any price and given the situation, I’m not sure anyone is willing to do that.
Look at NPHC’s income statement: quarterly revenues of $8,000 and quarterly losses of $500,000+…ttheir balance sheet shows ZERO cash and $3 million in accounts payable…it’s horrendous and that’s why the only person funding this carcass is its CEO, as per SEC filings:
On July 30, 2009, the Company completed a private placement of restricted shares of its common stock, whereby it sold 2,720,000 shares at a price per share of $0.025. The Company received proceeds of $68,000 in connection with the sale of these shares. The Company also granted one (1) warrant for each share sold which gives the investor the right to purchase one (1) additional share until December 31, 2012 at an exercise price of $0.10 per share.
On July 14, 2009, the Company’s president Rik Deitsch loaned an additional $227,000 to the Company for working capital purposes. As a result of this additional loan and accrued interest, the Company owed Mr. Deitsch $1,837,512 as of July 31, 2009.
NPHC’s quarterly report filed on August 19, 2009 does not even mention the company’s amazing pain reliever "Cobroxin", which is the cause of their stock surging 2,000% over the next month
In an August 26th press release, NPHC and XCHO agree that XCHO will be the exclusive marketer and distributor for Cobroxin because as NPHC CEO Rik J Deitsch says:
“We are pleased to be working with XenaCare as our exclusive US marketing and distribution licensee for Cobroxin,” commented Rik J Deitsch, Chairman and CEO of Nutra Pharma Corporation. “For the past several months, XenaCare has continued to commit significant time, industry expertise and financial resources towards the launch of Cobroxin. We look forward to working closely with them as they complete the initial roll-out of Cobroxin to retailers across the country,” he added
Rik, who is also on the XCHO board as of March 13, 2009, must be mistaken because XCHO has ZERO Cash as of June 30, 2009 as per XCHO’s August SEC filing on page 20:
Cash Flows for the Six months ended June 30, 2009. Our cash and cash equivalents decreased $361 to $0 as of June 30, 2009 from $362 as of December 31, 2008.
Not to mention XCHO has revenues of only $71,689 for the first six months of 2009 and despite have $300,000 of product placed with customers…the company’s inability to raise sufficient cash to effect…well, you get the picture…I won’t quote anymore, here you can read the August 19 SEC filing page 19 blurb below:
Comparison of the six months ended June 30, 2009 (“Q209”) to the six months ended June 30, 2008 (“Q208”) Revenues . Total net revenues increased $5,047 or 7.6%, to $71,689 (Q109) from $66,642 (Q108)… The Company has approximately $300,000 of product placed with customers, however sales of SunPill™ remained suppressed during Q209 as a result of the Company’s inability to raise sufficient cash to effect the marketing promotions necessary to generate significant sell thru.
On September 3rd, XCHO says in a hugely fluffy press release they’re going to market the heck out of Cobroxin:
“The campaign, which is budgeted at approximately $550,000, is scheduled to run through December and will appear in Arthritis Today, Prevention, Health, Star, Woman’s World, Soap Opera, and Self magazines.”
How can a company with $0 cash on their books, down from $361 a year earlier, find $550,000 to market product that neither company even discussed the development of before August 2009 when NPHC’s stock surged 2,000% giving NPHC a $180 million marketcap?
On top of that, I’m not even sure the stock price rise is due to anticipation of this new pain reliever…in the months leading up to and especially just a few days before this stock surge, there were several people with huge financial motivation to see the stock price spike…from that damning SEC filing in August on page 5:
During the six months ended June 30, 2009, the Company borrowed an additional $319,530 from its President, Rik Deitsch, increasing the total amount owed under to Mr. Deitsch to $1,604,448. This demand loan is unsecured and bears interest at a rate of 4.0%. Included in the amount owed to Mr. Deitsch is $184,264 of accrued interest.
4. STOCKHOLDERS’ DEFICIT
From January 1 through June 30, 2009, the Company completed private placements of restricted shares of its common stock, whereby it sold an aggregate of 1,400,000 shares at a price per share of $0.025. The Company received proceeds of $35,000 in connection with the sale of these shares.
The Company also granted one (1) warrant for each share sold which gives the investor the right to purchase one (1) additional share until December 31, 2012 at an exercise price of $0.10 per share.
5. STOCK BASED COMPENSATION
On March 30, 2009, the Company authorized the issuance of 1,000,000 shares of its restricted common stock to two consultants for services rendered. These shares were valued at $0.02 per share and accordingly the Company recorded stock based compensation of $20,000. These shares were issued on April 1, 2009.
On June 4, 2009, the Company’s Board of Directors authorized the issuance of 1,500,000 shares of its restricted common stock to a consultant in exchange for services rendered. These shares were valued at $0.03 per share which was the fair market value of the Company’s common stock on the date of grant. The Company recorded stock based compensation of $45,000 in connection with the issuance of these shares.
On June 4, 2009, the Company issued 5,000,000 shares of its common stock to a consultant for services rendered. These shares were issued pursuant to an effective registration statement on Form S-8 and were not subject to a vesting period. The fair market value of the shares on the date of grant was $0.03 and accordingly the Company recorded stock based compensation of $150,000.
So on this company with ZERO cash and with $8,000 in quarterly revenues and $500,000+ in quarterly losses, the CEO is owed millions (when does his loaning this company run out?), 8. 9 millions of shares were issued at .02, .025 and .03 cents/share to investors for $35,000 in cash and more importantly, "to two consultants for services rendered" in March and "to a consultant in exchange for services rendered" in June, that mysterious language commonly reserved to mean THE HIRING OF STOCK PROMOTERS.
This is all what I found in just a basic SEC filing review….soooo much dirt on this company, it’s scary…no way does this company deserve a $180 million marketcap, $90 million, let alone $45 million would probly even be too much, but there is technical support at 50 cents/share so if I don’t get squeezed by these professionals, my goal will be to cover in the 55 cents/share range for a decent $3,000 profit.
If I do get squeezed by some press release or excessive mysterious trading volume, I might just look to hedge my short position by buying in another account…can’t let these precious 10,000 shares short get away so easily….but I would also like to add to my position too…gotta see judge based on the price action.
If you like this research report, definitely contact me so I can add your email to a special list for my upcoming penny stock research service that will do the hardcore digging exactly like this.
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