Wellness Center USA Inc (OTCMKTS:WCUI) Brought Back to Life
On November 8, 2013, Wellness Center USA Inc (OTCMKTS:WCUI) registered its 52-week high of $0.80 per share. On October 9, 2014, it logged a 52-week low of just over $0.10. That’s nearly 90% of the value gone after eleven months. The question is: “Why was the stock performance so horrific?”.
To find out, we need to open the latest 10-Q and take a look at the figures. Here’s what the company recorded on June 30:
- cash: $56 thousand
- current assets: $502 thousand
- current liabilities: $982 thousand
- quarterly revenues: $70 thousand
- quarterly net loss: $497 thousand
As you can see, the report is not without its faults. The cash reserves are not exactly confidence-inspiring, there’s a rather big working capital deficit, the revenues are dismal, and the company is still far from being profitable. Once you compare the financials above with the ones recorded during the previous quarters, however, you’ll see that the magnitude of the problem is much bigger.
During the nine months ended June 2014, for example, WCUI registered a total of $175 thousand in revenues and a major portion of them ($102 thousand) came from a subsidiary called CNS-Wellness Florida LLC. For reasons that are not very well explained in the report, WCUI decided to suspend CNS’ operations back in January and at the end of September, they completed the disposition of all the assets related to the now former subsidiary. This means that WCUI will now need to try and make up for the lost source of revenues which, in turn, makes the task of achieving profitability even harder.
All in all, the company has had its problems over the last few months and in light of this, the less-than-impressive performance and the dismal dollar volumes that the stock registered are not that shocking. Yet, on Friday, WCUI suddenly woke up.
It remained flat during the first half of the session, but in the afternoon, it pretty much exploded. In a matter of less than four hours of trading, it managed to gain more than 50% which means that it’s currently sitting at $0.205 per share. At $173 thousand, the dollar volume is not as huge as the ones registered by other penny stocks, but it is much higher than what we’re normally used to seeing from WCUI and, as we mentioned already, it was racked up in a matter of just half a day which is definitely impressive.
The only problem is, nobody can say for sure if the ticker has what it takes to continue its run in the right direction because nobody knows what the reason for Friday’s jump is. The latest press release is now almost three months old, there are no new filings, and we haven’t received any promotional emails since September 19. The discussion on internet forums and social networks is not particularly active and the few people posting there are just as baffled by the sudden volume spike as we are.
The lack of any obvious trigger should certainly warrant some extra caution and before you jump in, you should also bear in mind that there are people who can profit from the current share price. The latest 10-Q tells us that on June 30, there were just over 4 million warrants exercisable at $0.01. It also informs us that on the same date, WCUI had more than $220 thousand worth of notes which are convertible into common stock at a 35% discount from the lowest trading price registered during the twenty-five days prior to conversion. In case you’re wondering, this means that if the note holders want to turn the debt into stock at the moment, they will be able to get quite a lot of shares at just over $0.065 a piece.
