The company has a 'tradition' of high flying plans and subsequent lack of execution. Right now, revenue growth did happen and IMMD deserves credit for it, but that story can't be told next year again unless there are new products or higher demand for the existing products. What follows after trial orders, will customers return and buy again?
In the first forecast, a trial order was expected to generate $100+ net revenue, in the 10-Q for June 30th you can find:
Revenue for the six-month period ended June 30, 2016 consisted of nutraceutical and cosmetic additives ($528,220) and finished cosmetic products ($2,340,055).
Assuming that additives sales are about the same in 2015 and 2016 (565k until Q2/16 vs. 528k until Q2/16), let's assume Q3/16 will be like Q3/15 (845k), so around 800-850k.
Then finished cosmetic products come in at 3.31-3.36M net revenue, divided by 40k trial orders, and we are looking at $84 net per trial order.
Furthermore, in Q2 IMMD stated that customer discounts, returns and rebates approximated $1.05M until Q2, as the amount is netted with gross sales, we are looking at approx. 30% return/discount/rebate rate - doesn't sound great to me.
For additives, IMMD had a gross margin slightly above 70%, subsequently until Q2 the gross margin for finished cosmetic products was slightly below 20% - and this will not be enough to run this business sustainably profitable.
So I'm looking for these numbers to improve. Risk/reward at the current price level isn't attractive for me at least, looks like one will need a lot of patience here. As long as the balance does not improve, I will stay away, will consider a buy around $0.15-0.20.
AI
