Creative Edge Nutrition, Inc. (OTCMKTS:FITX) Sinks Further Despite Report

74FITX_chart.pngYesterday the delayed quarterly report of Creative Edge Nutrition, Inc. (OTCMKTS:FITX) finally came out. Despite the sensational figures posted in the filing, FITX ended yesterday’s session nearly 18% down – the stock’s biggest percentile drop for the past two months.

The part of the filing that immediately attracts attention is the balance sheet that now sports millions in cash and even more millions in revenues. Here is the brief number rundown of the figures reported as of March 31:

  • $3 million in cash
  • $6.5 million in current liabilities
  • $5.1 million in quarterly revenues
  • $2.8 million in quarterly net profit

Where did this juicy revenue figure come from, considering FITX still hasn’t launched its grow op facility in Lakeshore, Canada? The answer is further down the report. The company described selling a 7.5% interest in the net revenue interest of its facility against the sum of $5 million. This was just a fraction of the 25% revenue interest FITX intends to sell for a total of $20 million.

What’s a little strange in this instance is that the company recorded the $5 million under revenues, even though this does not constitute operating or ‘regular’ revenue. Who bought the 7.5% interest is also not known. The origin of the appetizing number is explained near the very last page of the report. Judging by the immediate reaction of the market, traders were not exactly thrilled by the revenues reported either.

FITX also stated that there were no subsequent events to report in the period between the quarter’s end and May 20 when the filing was made public. However, a press release coming on May 12 stated that the company purchased a 25-acre site located near its first facility, to use it as a research and development complex. Why this purchase is not detailed in the report as a subsequent event is not too clear.

The company further announced that the BoD decided FITX will no longer use Facebook as a platform for keeping shareholders informed and will exclusively use press releases for that purpose. This would have been a refreshing turn of events, if only FITX would stick to its plan. Two days after the announcement there was a letter posted on the company’s Facebook page, composed by FITX‘s chairman and sent out to SEC officials. The email communicated the chairman’s disagreement with the Commission’s ‘handling’ of the pot sector of the OTC Markets. The email blames the new SEC investor alert focused on the risks of MJ stocks for the ‘unjustifiable’ drop of FITX‘s share price.

34FITX_logo.jpgThe general sentiment of the letter seems to echo a growing delusional attitude among traders who seem to believe the SEC and the federals are on a witch hunt that aims to destroy the MJ sector. When investors start making up conspiracy theories involving the chief institution looking out for their protection and safety, it may be high time they stick their head out of the green mist and take a sober look at things.

The recent price movement of the stock may also be related to a scalding interview with FITX‘s CEO Mr. Bill Chabaan, conducted by Mr. Chris Parry. In addition to dropping a couple of F-bombs, Mr. Chabaan also said he never made claims that FITX will be building the ‘world’s largest’ production facility in any press release. This statement seems to be contradicted by the existence of the press release dated March 21, 2014, titled “FITX announces private funding for the build out of the world’s largest and most advanced legal cannabis production facility”.

FITX is currently another 10% down in early trading.

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