Borislav Tonev

RedChip Companies, Inc. Aid Chromadex Corp (OTCMKTS:CDXC)'s Run

by Borislav Tonev September 9, 2013
6CDXC.pngIf you take a quick look at our previous articles on Chromadex Corp (OTCMKTS:CDXC, CDXC message board), you'll see that they have had something of a relationship with paid promoters SmallCapNetwork and RedChip Companies, Inc. over the years. There were some emails as well as some research reports all saying that CDXC is a huge and successful company in the making. Of course, the touting was not done for free and the peculiar thing is, the company paid for the promotions itself. As you can see from the chart on the right, the results aren't particularly satisfying.

Back in January 2012, the ticker made an impressive run moving from around $0.60 all the way to $1.10 but it soon slid back down and by the beginning of March, it was back where it started. Pretty much the same thing happened in September 2012 and the behavior from the last couple of weeks suggest that CDXC might be giving it another go. Eleven trading days and not a red session in sight is indeed quite a performance, but the question on everyone's mind is: "Will the ticker manage to sustain the higher price this time?".

To find out, you have to look into what is causing the winning spree and while the 10-Q covering the second quarter of 2013 did give some promising news (at least at first sight), it alone isn't enough to draw so much attention. RedChip's disclaimer states that their latest campaign on CDXC ended on January 19, but despite this, the ticker is still featured on the promoter's website and there are still some interviews with Frank Jaksch, the company CEO roaming around the internet. All in all, some people are currently trying to raise some awareness around the stock, and we're pretty sure that the shareholders are wondering if the ticker is now resilient enough to cope with the pressure. A quick look at the latest financial statement suggests that this might just be the case. When you go into the details, however, things aren't quite as bright.

Unlike many other biopharmaceutical penny stocks, CDXC are ready with their products and they have managed to complete the commercialization process. They have been able to sustain an adequate working capital for some time and a steady stream of revenues was established years ago. The big problem, however, stems from the huge expenses. Every single one of the reports published prior to the latest 10-Q has sported a net loss which means that as of June 29, they had a $29 million accumulated deficit. Yet, the Q2 statement presents us with the traditionally strong balance sheet, as well as a net income for the first half of 2013. Here's a summary of the most important figures:

  • cash: $826 thousand
  • current assets: $6.2 million
  • current liabilities: $3.3 million
  • revenue (March - June): $5 million
  • net income (March - June): $478 thousand

By contrast, the same period of 2012 resulted in $4.4 million in proceeds from sales and a net loss of around $8.4 million and we're quite sure that the newly issued figures did play their part in the ticker's run from $0.74 to $0.96. Is it all good news, though?

Well, there are a couple of things to consider. While they managed to register a profit for the first half of the year, the second quarter ended with a $989 thousand net loss and if you read the notes accompanying the statement, you'll see why. The positive cash flow for the period between January and June was due to CDXC selling the BluScience retail consumer line to an entity called NeutraSci on March 28 which resulted in gains of around $2.8 million. There have been no further asset purchase agreements to help with the income statement and it's plain to see that without such deals, they are still unsuccessful in keeping the colossal expenses at bay.

GRLT.pngThis means that long-term growth is still really hard to predict and when you have in mind the fact that RedChip Companies, Inc. are once again quite optimistic about CDXC, you'll see that the threat of corrections is getting more and more real. Grillit Inc (OTCMKTS:GRLT) and Nuvilex Inc (OTCMKTS:NVLX) are two tickers that showed us what can happen when the stock is unable to withstand the pressure exerted from the increased awareness. GRLT crashed heavily on Friday and while NVLX's descend is not as sharp and violent, the losses are still just as painful. That's why, considering all the risks carefully before making any investment decisions is an absolute must.

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