Fuse Science, Inc (OTCMKTS:DROP) Getting Closer To A New 52-Week Low
Things have really been busy around Fuse Science, Inc (OTCMKTS:DROP) in the recent months. They published the report for the first calendar quarter of 2013 on May 15 and while it’s not perfect, it shows a year-over-year increase in net sales of around 134%. Then on June 12 they said that they expect revenues coming from the third fiscal quarter of 2013 to be three times as much as the aggregate proceeds from 2012. In addition to this they announced that they have managed to retire around $1.9 million worth of debt. On Thursday they said that the sales of the current quarter are going rather well, they announced some new products hitting the shelves and they also said a few words about the new technology that they are developing – a way of delivering Estradiol and Estrogen for women suffering from hormonal imbalance through a roll-on application. Apparently, the clinical tests are going well and the market is quite lucrative.
All this resulted in DROP hitting and intraday low of $0.068 during the early hours of Friday and finishing the session a further 5% below the previous close. The price is getting precariously close to the 52-week low of $0.0665 and it’s fair to say that shareholders might have a reason to be weary right now.
Not least because DROP seem to be moving in the right direction in terms of sales and operations as a whole, but somehow the ticker’s performance is failing to reflect all this. That said, it’s not all good news.
As we mentioned in our previous article, even if DROP manage to achieve the projected revenues, the losses are so huge according to the latest financial statements, that the increased sales will be nowhere near enough to offset them. And while we can’t be 100% sure, it would appear that traders and potential investors are following closely the developments around the notes that DROP issued back in March.
You can see from the latest 8-K that the Series B warrants issued by the company as part of the agreement were altered and the conversion price was changed from $0.076 to $0.055. A closer look through the older SEC filings reveals that this is not the first time DROP amended the notes. On June 12 the same exact warrants were exercisable at $0.094 before the 8-K form came out and changed this figure to $0.076. When you open the 10-Q, you will see that the original conversion price was $0.17. That is quite a discount considering the fact that DROP‘s shares haven’t been below the $0.06 mark for quite a while now.
In addition to this, the retirement of debt will certainly make the next quarterly report look a lot better than the current one, but at what cost? Well, it would appear that DROP didn’t have the necessary cash at the time and because of this they issued a large amount of shares in order to pay off the debt. DROP‘s printing press has been working so hard, in fact, that the number of outstanding common stock has increased by over 65 million shares in just six months. That is quite a lot of dilution, especially considering the constant losses and it’s also an opportunity for the note holders to make some quick money by flooding the open market.
Which, coincidentally is what other people have done with Creative Edge Nutrition Inc (OTCMKTS:FITX). FITX‘s main focus is also sports nutritional products and just like DROP, they have shown us that they’re capable of generating revenues. Despite all this, the losses are so heavy that FITX have been forced to shift quite a lot of common shares. The results are pretty clear. Back in September the ticker was comfortably above the $0.01 per share mark. Right now, around nine months later, they are deep in the double zero territory. Whether this will happen to DROP remains to be seen, but we reckon that despite the progress they have been making, a potential investment still hides its risks, which is why it pays to be extra careful before making any decisions.
