NuGene International Inc (OTCBB:NUGN) Fall Below $2

Finding a stable venture on the OTC market is not an easy task. NuGene International Inc (OTCBB:NUGN), however, shows that even if you do find such a company it may still be an extremely dangerous choice.

Let’s start with the fact that NUGN are offering real products and are generating respectable revenues – the latest quarterly report showed that for the three months ending June 30 the sales of the company surpassed half a million. Compared to the same period last year the revenues grew by 153%. A rather amazing achievement but unfortunately the rest of the balance sheet deteriorated at an even greater rate.

At the end of June 30, 2014, NUGN reported a net income of $15,500 while now they incurred a net loss of $771 thousand. Quarter-over-quarter the pattern is the same – the revenues increased by $50 thousand while the losses grew threefold up from $240 thousand.

If you dig deeper even more red flags start to crop up. For months NUGN was touted by a $4.4 million hard mailer pump. The artificial hype created by the promotion pushed the stock to unrealistic the highs $4.25 allowing the owners of the 11.1 million free trading shares that they bought at a split adjusted price of $0.0033 to reap millions in profits.

Without the help of the pump the company simply couldn’t sustain its overly-inflated market cap. Even at the moment the company’s fundamentals still can’t justify the $76.7 million market capitalization.

NUGN were also named as a one of the defendants in a complaint filed by Stemage Skin Care LLC, a North Carolina limited liability company. Investors might also want to take a look at the latest 8-K filing. It reveals that an option to purchase up to 1 million shares was granted to each of two employees of the company. The options have a strike price of $1.50 and have a cashless exercise feature.

If the company manages to keep its expenses in check and at the same time continue to expand its operations it might be able to stop its stock from crashing even further down the chart. For now though the volatility of the ticker should not be underestimated. Do your own due diligence and adjust your trades accordingly.

After dropping by 7.6% on Monday and closing at $1.9 in early trading today NUGN are trying to recover sitting 1.5% in the green at $1.97.