Thursday, July 7, 2022

NutraFuels Inc (OTCMKTS:NTFU) Shares Pop on Debt Conversion

NutraFuels Inc (OTCMKTS:NTFU) is a classic momentum play for OTC traders to ride up and possibly back down at some point. Revenues are declining and debt has been steadily growing without cash growing alongside. That’s normally a difficult recipe for longer-term success. However, the company just made an announcement that makes this quite an interesting situation at present: NTFU has converted all of the company’s short and long-term outstanding debt and is now a debt free company.

According to the press release, NutraFuels claims to have converted approximately one million nine hundred thousand dollars, which was all of the company’s existing short and long-term outstanding debt to become a debt free company. This was accomplished through the conversion of debt to equity. Most importantly, “All of the outstanding short and long-term debt was held by the company’s shareholders, which are insiders that have supported the company and its operations over last several years.”

NutraFuels Inc (OTCMKTS:NTFU) bills itself as a company that manufactures and distributes oral spray nutritional and dietary products to retail and wholesale outlets.

The company’s products include sleep spray to support a healthy sleep cycle and improve the quality of restful sleep; energize spray to enhance energy, and restore vigor and vitality; and garcinia cambogia spray, an appetite and weight management spray.

It also offers NRG-X extreme energy spray to enhance energy and stamina; headache and pain spray to relieve headaches and pain; and hair, skin, and nails spray to nourish and encourage hair, skin, and nail growth.

The company sells its products to retailers, distributors, and private label customers, as well as to consumers through its Website under the NutraFuels name. NutraFuels, Inc. was founded in 2010 and is based in Coconut Creek, Florida.

According to company materials, “NTFU was founded in 2010, to manufacture, distribute and market a line of oral spray nutritional dietary products to consumers, retailers and wholesale outlets. Oral spray delivery systems are recognized by many as an effective methodology for delivery of pharmaceutical and nutraceutical products. Oral spray delivery is recognized by consumers for its convenience, dosage precision and timely assimilation into the body. NTFU’s product line consists of vitamins and nutrients in an aqueous solution, orally delivered through a non-aerosol pump. NTFU’s products are sprayed into the mouth in the form of a fine mist entering the delicate tissue of the mouth. The nutrients are delivered into the bloodstream and assimilated throughout the body more quickly than traditional methods, avoiding the solubility and absorption problems common with most ingested vitamins and nutritional supplements in pill or capsule form.”

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As noted above, NTFU just converted all of its outstanding debt to equity. As we highlighted, the most important part of this equation is that all the debt was in the form of insiders who were/are also equity holders before the conversion, or this seems to be what we are to understand from the company’s release.

“We are pleased to announce that we are now a debt free company and thank our shareholders who believed in and supported us over the years and held the debt that are confident enough in our business model and progression over the years to now convert all of the outstanding debt into equity in our company,” said Edgar Ward NutraFuels President/CEO.

Now, we get to the real question: the company is clean as a whistle on the balance sheet, but seeing sharply falling revenues. Since the debt has now been converted to equity, are we really to believe that the insiders are going to hold off and ride it out rather than start to market those new shares on the open market in NTFU stock? Remember, shares are up 900% from where they were just 2 months ago, and the stock now is experiencing unprecedented liquidity. While other trends for the company look good, this may be a bit of a concern.

As far as very recent action, the stock has seen about 18% tacked on to shares in the past week. In addition, the company has seen an influx in interest of late, with the stock’s recent average trading volume running 9% above its longer-run average levels. Since we last covered the name, the stock has moved 19.6% higher.

Now commanding a market cap of $71.9M, NTFU has virtually no cash on the books, which had compared with about $1.9M in total current liabilities. However, according to the company, this debt is now gone. NTFU is pulling in trailing 12-month revenues of $331K. However, NutraFuels is seeing declines on the top line on a quarterly y/y basis, with revenues falling at -17.5%. As more color becomes clear on the name, we will review the situation and update our take. For continuing coverage on shares of $NTFU stock, as well as our other hot stock picks, sign up for our free newsletter today and get our next hot stock pick!

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