Borislav Tonev

CodeSmart Holdings Inc (OTCBB:ITEN) Gets Melted Despite The PR Action

by Borislav Tonev September 10, 2013
3ITEN.pngOn July 15 CodeSmart Holdings Inc (OTCBB:ITEN, ITEN message board) registered its first relatively active trading session after the name and ticker symbol change. Back then, the stock opened the day at $7 and slid down to $6.79 after six and a half hours of trading. Yesterday, ITEN registered another red session and after 15% in losses, it closed the day at $3.35 which means that in just one month and three weeks, the ticker has incinerated around 52% of its value. Not the best of starts for a company that will supposedly make millions of dollars one day, but what could be causing the catastrophic fall?

Well, the real problem is, it's still very difficult to say whether ITEN really are onto something. They have drawn an interesting business plan and they are seemingly ready with the CodeSmart University - the online platform that is supposed to teach coders and clinicians in the art of ICD-10, the new coding system that will soon be used throughout the world. An interesting plan, but that's just about it.

A quick Google Search reveals that lots of websites offer some kind of education in the aforementioned system and a large portion of the sources of knowledge are completely free. This means that the competition is stiff and while the management team seems mightily optimistic about the future, there's little in terms of cold hard facts to suggest that ITEN has the upper hand.

The latest 10-Q (the one covering the second quarter of 2013), for example, is a typical penny stock affair. Here are the figures once again:

  • cash: $261 thousand
  • current assets: $264 thousand
  • current liabilities: $1.2 million
  • quarterly revenue: $24 thousand
  • quarterly net loss: $1.9 million

As you can see, there is a working capital deficit that hovers around the $1 million mark and while they showed us that they're capable of generating revenues, the expenses during the reviewed quarter are overwhelming. In addition to this, when you have the above figures in mind, you'll see that the targets set by the company back on July 3 ($6 million in revenue and $2 million in net income by the end of the year) seem rather chimerical.

So far, we can see that ITEN appears to be nothing but a typical penny stock with a product, some big plans and small financial resources. But are there any other, more particular dangers surrounding the ticker?

8ITEN_logo.pngWell, as we mentioned, the people running the company seem to be quite an optimistic team and they have been putting out numerous forward-looking statements over the last couple of weeks. They even announced one day that Ira Shapiro, ITEN's CEO, has bought $25 thousand worth of shares on the open market just because he's extremely confident in the company's e-learning system. Believing in the product is all well and good, however, it's not only the officers who seem to have a positive attitude towards the future. A couple of Seeking Alpha articles appeared on ITEN's Yahoo! Finance profile recently and for some reason, the contributors who authored them seem genuinely optimistic. There are a few paid reports roaming around the Internet as well, and we reckon that the increased awareness around the ticker might be taking the better of it.

In addition to this, ITEN recently issued a convertible debenture worth $150 thousand which can be turned into common stock with a 35% discount. The holder of the note is an unnamed accredited investor and if he/she decides to convert the debt into shares and release them on the open market, he/she could be in for some quick profits. Unfortunately, retail investors probably won't be able to share his/her joy. Most likely the regular trader will be left counting the losses, wondering what might have been just like the people who got burned on Blue Fire Equipment Corp (OTCMKTS:BLFR) are doing right now. Make sure you keep all the dangers in mind while contemplating your next move.

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