Fuse Science Inc (OTCMKTS:DROP) Back at Square One

It’s fair to say that things have never been going smoothly for Fuse Science Inc (OTCMKTS:DROP). The company started its business a while ago and it showed us that it’s capable of generating revenues, but unfortunately, the sales figures were never really consistent and the losses were rather huge. Q2 of 2014, for example, ended with just $57 thousand in quarterly revenues (an 80% drop year over year) and an operating loss of more than $2.2 million.

Dilution was another problem for the company and its shareholders. According to the latest 10-Q, between September 30, 2013 and June 30, 2014, DROP managed to print around 190 million shares for various reasons which means that in August, the total O/S count sat at well over 400 million.

Something had to be done and we’re happy to report that the now-former management team sprang into action a couple of months ago.

First, they tackled the share structure and performed a 1 for 200 reverse split on August 27. Usually, penny stock investors are not particularly ecstatic about this sort of actions, but in DROP‘s case, a split was all but inevitable.

Then, about a month later, the company reached an agreement to acquire a controlling interest in an entity called Spiral Energy Tech Inc. – a development stage technology company focused on the renewable energy sector. The acquisition, as the press release suggested, was supposed to expand DROP‘s operations.

Yet, investors don’t seem impressed. If anything, they appear to be quite angry about the move. The ticker dropped from over $0.30 per share at the beginning of October to less than $0.002 on November 10. We’ve been around penny stocks for long enough and we’ve seen many horrific crashes in our time, but we should note that few of the catastrophes we’ve witnessed come even close to what DROP did in a matter of just five weeks.

It’s time to see what caused the massive crash.

For one, the whole acquisition of Spiral Energy appears to be shrouded in mystery. As we mentioned already, when they first announced it, DROP said that with Spiral on board, they will be “expanding the operations”. Just a few days later, however, the former management team resigned and left the company in the hands of the people running the new subsidiary. Not surprisingly, people are now wondering whether they’re invested in a biomedical or a renewable energy company and the whole uncertainty is apparently making them nervous.

Speaking of uncertainty, the press release about the reorganization mentioned a $1.6 million financing agreement but somehow, it failed to give us any details on how it will be completed.

Then we come to the people who are now in charge of DROP. The new CEO, for example, is called Ezra Green and it’s safe to say that he is well known in Pennyland. He was once at the helm of a company called Clear Skies Solar (CSKH) but he failed catastrophically with getting it off the ground and back in July, the stock was revoked by the SEC. People fear that the same thing might happen to DROP and we should note that, at least as far as the share structure is concerned, Mr. Ezra is not off to the best of starts with his new OTC venture.

Immediately after the reverse split in August, the number of issued and outstanding shares was sitting at just over 2 million. By the beginning of October, it had grown to nearly 52 million.

The daily trading volume over the last few days has been hovering comfortably above the 100 million mark and last week, it even reached 380 million which goes to show that a huge amount of stock has seen the light of day over the last few months. We know that as a part of Clear Skies’ acquisition, DROP issued 150 million shares, but the question of who got the rest of the newly printed stock remains unanswered.

This, we reckon, is just one of the many things you need to consider while making your investment decision.