Bioelectronics Corp (OTCMKTS:BIEL) Gains More Ground

Bioelectronics Corp (OTCMKTS:BIEL) made a few optimistic announcements over the last month or so and the results are evident from the chart on the right. Trading became particularly intense after the FDA announced some reclassification plans on February 21 which should affect the company’s products directly.

Six and a half hours were enough for the ticker to jump out of the triple zero levels for the first time since November and although it showed some signs of hesitation on February 25 and February 26, it still seems to be going strong. Yesterday, it managed to gain another 31% and closed the session at $0.0062 while shifting nearly $1.5 million worth of shares.

Traders on message boards seem excited enough and most of them think that this is just the beginning of a prolonged run in the right direction. Take a look at the comments under our previous articles, however, and you’ll see that not quite everyone is so optimistic. So, who should you trust – the positive views around message boards, or the more bearish comments under our coverages?

As we often say on these pages, your investment decisions should be based solely on your own due diligence and research, and not on what people say on the internet. Nevertheless, we decided to take a look at BIEL and we can see that the stock has some upsides and some downsides.

Let’s start with the positive points. BIEL is an enterprise that develops and manufactures medical devices, but unlike the majority of penny stocks working in this particular sector, they have actually managed to get some products on the market. There are some distribution agreements in place which means that there are revenues in the latest financial statement. What’s more, the Q3 report reveals that the quarterly sales have grown by nearly 370% year over year.

Unfortunately, the financial statement also shows us some bad news. Although BIEL racked up revenues of around $110 thousand during the three months ended September 30, the gross profit from all the sales amounts to just over $5 thousand. Predictably, the net loss is quite disturbing and they don’t seem to have enough cash to battle the $2.5 million working capital deficit.

These are all issues that need to be addressed sooner rather than later, but we should note that they are somewhat understandable for a small cap enterprise that is trying to make an impact on such a huge industry.

There is, however, one problem that might put an even bigger spanner in the works – dilution. No less than five amendments have been made to the articles of incorporation over the last four and a half years which means that the authorized capital has grown from 750 million to 4 billion shares. Nearly 800 million shares got issued between September 30, 2012 and September 30, 2013 and the majority of them saw the light of day as a conversion of debt.

Speaking of which, Note 6 of the latest report reveals that over the years BIEL have borrowed quite a lot of money from entities controlled by relatives of the CEO and we reckon that this particular section of the statement is well worth the read. You should also probably bear in mind that the current portion of the outstanding related party notes payable amount to around $2.2 million (64% of the total current liabilities).

The new developments around the FDA classification process might actually help BIEL solve some of the problems. But will they be enough to resolve all the troubles? We’ll leave it up to you to decide.

BIEL wasn’t the only stock to start the new week with a positive session. Primco Management Inc (OTCBB:PMCM) managed to register similar gains while shifting nearly $700 thousand worth of shares. Bergio International, Inc. (OTCMKTS:BRGO), on the other hand, logged a dollar volume of around $450 thousand, but unfortunately, it lost 40% of its value along the way.