BioNeutral Group Inc (OTCMKTS:BONU) Nearly Doubles on High Volume

BONU.pngBioNeutral Group Inc (OTCMKTS:BONU) is one of the more curious cases on the OTC Markets. It’s a life science company, but unlike the majority of penny stocks in this sector, BONU actually have a product that is already on the shelves and is generating revenue.

Despite this, traders don’t seem particularly enticed by the idea of investing in this ticker. If you take a look at the performance from the last twelve months, for example, you’ll notice that back in April 2013, BONU was hovering above the $0.06 mark, but by the end of November, it had dropped to its 52-week low of just $0.0004. That is not exactly the performance you’d expect from an operating entity, but that said, there are some issues.

Let’s start with the latest financial statement. It covers the period ended July 31, 2013 and it contains the following figures:

  • cash: $7,802
  • current assets: $29,739
  • current liabilities: $2,432,932
  • quarterly revenues: $3,310
  • quarterly net loss: $1,103,564

It’s clear that although there are some sales and although they are growing both on a yearly and on a quarterly basis, there’s still a very long way to go. At the same time, the cash is running thin while the current portion of the debt is mounting.

This brings us on to the question of convertible notes. There are quite a lot of them and they were issued to entities like Asher Enterprises and JMJ Financials who have something of a reputation for providing toxic debt.

Looking at the conversion features of the notes, we can see that they can be turned into common stock with some hefty discounts and there are things to suggest that this process has already begun. Two amendments to the articles of incorporation have been made between August 2013 and December 2013 which means that the authorized capital has grown from 200 million shares all the way to 4 billion. With that in mind, significant dilution seems all but inevitable.

Then there are the problems with the SEC. We read in Note 10 of the latest 10-Q that back in 2009, the regulatory organ initiated an investigation regarding possible securities laws violations. Apparently, the investigation is still not over but BONU admit that they have incurred and could continue to incur significant costs related to the proceedings.

The ticker also became the target of two paid promotions over the last couple of months. The effects of the pumps weren’t as devastating as the ones seen from other similar campaigns but the threat of future coverage could certainly scare away the more risk-averse investors.

BONU_logo.jpgThe ones who like to gamble, however, are all over BONU at the moment. Two sessions of high volumes dragged the ticker out of the triple-zero levels and pushed it as high as $0.0039. All this without any press releases or developments to get the market fired up. Bear in mind, however, that the stock hasn’t been this high since October and we’re not sure if it will manage to sustain the price for long.

All in all, BONU are trying hard to get their operations going and start generating significant revenues. So far, things have been moving at a tectonic pace, but that might change with the distribution agreements announced a couple of weeks ago. Even so, there are other factors that could warrant some extra caution. A lot of due diligence is, as always, absolutely essential.

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