KonaRed Corp (OTCMKTS:KRED) Issues A Letter To The Shareholders
On Tuesday KonaRed Corp (OTCMKTS:KRED) published a new corporate update. In it the CEO of the company talked about some of the highlights around the company since the start of the year and many of the events were rather promising. KRED finished 2014 with a 39% increase in net sales, their products are now available in over 5000 store locations and new products are expected to be launched. KonaRed plan to extend their Nutraceutical Performance Powders line while also launching two products for the functional food market.
The shareholders update certainly reinvigorated investors and on Tuesday KRED surged upwards by 14.5% and closed at 15 cents per share. Yesterday the stock gained another 7% and reached $0.1605 but the performance showed some alarming signs. The ticker opened the session at $0.16 and as we said closed almost at exactly the same price. Interest in the company, however, continued to increase and the daily volume of nearly 1.3 million shares surpassed the monthly average by close to 10 times.
KonaRed may not be the typical pennystock venture but that doesn’t mean they are not a risky choice. Despite the encouraging results for 2014 KRED’s financials show some concerning trends. The financial report for the first quarter of 2015 contained the following numbers:
• $240 thousand cash
• $951 thousand total current assets
• $943 thousand total current liabilities
• $239 thousand net revenues
• $544 thousand net loss
Compared to the same period last year the reported revenues decreased by nearly 50%, 46.1% to be precise, while the net loss increased by $38 thousand. The accumulated deficit of the company is approaching $17 million.
In our previous article we warned you that KRED had entered into a convertible debt purchase agreement with Group 10 Holdings, LLC, which allowed Group 10 to convert their note into common shares at a sizable discount to the market price. Well, the company managed to repay the note in its entirety and now has no further obligation to Group 10 under the debenture. Furthermore, in June, KonaRed entered into a purchase agreement with Lincoln Park Capital Fund, LLC, which should provide them with sufficient capital to fund their operations for quite a while.
Under the terms of the agreement KRED can sell $10,250,000 of stock to Lincoln Park. Although the corresponding dilution of the common stock may by quite massive investors should be pleased to learn that there are no upper limits to the price that Lincoln Park may pay for the common shares and that the purchase price will be based on the prevailing market price of the stock without featuring any fixed discounts.
Before deciding whether to put your money in KRED or not one more thing should be taken into account – the fact that the company has been frequently targeted by paid pumpers. At the start of 2014 a massive $2.3 million promotion for the stock was launched and since then pump newsletters have often touted KRED. The latest email alerts were issued yesterday by The Stock Commander and TheNextBigTrade. The Stock Commander has been previously compensated by $45 thousand to pump the stock while TheNextBigTrade bagged $15 thousand for their services.
