PURE Bioscience (OTCMKTS:PURE) Goes Through an Overhaul, Hits a 52-Week High
As the chart on the right could suggest, PURE Bioscience (OTCMKTS:PURE) and its shareholders have gone through quite a lot over the last few months. First, the stock got delisted from NASDAQ for failure to comply with the regulations. This prompted a complete change in the management team. Even some of the company founders resigned and new people with impressive resumes took the helm. A new sales team was also put in place and everyone’s hoping to see PURE‘s share price go further up and possibly even reach the $5 plus levels that it occupied back in 2007. So, what are the odds?
Well, as we mentioned, the new management team should bring in quite a lot of experience and a definite plus point is the fact that the shareholders won’t need to wait for years until the end of the development stage. PURE have been on the market for a while now, they have the technology, the products and a market that, although competitive, is quite large. Their cleaning solutions use a clever silver-based antimicrobial agent that is supposed to kill nasty bacteria and viruses from all sorts of surfaces within seconds, in addition to providing a full day’s worth of residual protection. So, the product is there, the technology is clever, the people who steer the boat seem to know what they’re doing and, as an added bonus, the ticker appears to be on a winning spree, registering 52-week highs nearly every day. Before you get too excited, however, there are some things you need to consider.
Let’s start with the financials. Everyone is currently expecting the annual report for the twelve months that ended on July 31 and the management team were kind enough to inform us that they plan to publish it after tomorrow’s closing bell. It, along with the conference call that will be held should give us a better understanding of where the company stands. We don’t have it yet, however, so we decided to check out the 10-Q for the quarter ended April 30 and see what they had back then. Here’s what we found:
- cash: $410 thousand
- current assets: $1.3 million
- current liabilities: $1.5 million
- quarterly revenue: $258 thousand
- quarterly net loss: $1.5 million
- accumulated deficit: $68 million
What draws the attention the most is the lack of consistency in the results. The quarterly revenues for example, have increased when compared to the corresponding period of 2012, but when you check out the figures for the nine months ended April 30, you see the exact opposite. On the bright side, some cost-cutting measures are now in place which means that we see a reduction in the net loss. They didn’t have a whole lot of cash, though, and to battle this, they completed a couple of private placements. That’s where two potential problems can arise.
We read in the 10-Q that in April they sold 1 million shares at a price of $0.40 per share. Another agreement was closed last Monday when a total of 2.3 million shares were sold at a price of $0.75 per share. On the one hand, this causes some severe dilution and the report also hints that more stock could see the light of day in the near future. On the other, although not ridiculously discounted, the shares come rather cheap compared to the current price and the temptation for a quick profit might be quite big. Offloading the newly issued stock on the open market could cause a devastating drop in the value.
That’s why, although PURE seems like a much more solid investment option compared to other small cap ventures like Pan Global Corp (OTCMKTS:PGLO) (whose two-day run is only attributable to the paid promotion), there is still a considerable amount of risk involved and weighing the odds carefully is an absolute must.
