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Saturday, July 08, 2006

Imagenetix (IAGX) revisited

IAGX (sec) Imagenetix, Inc. Nutraceuticals and skin care stuff. Their leading product is Celadrin. I looked at this company here.
In a double blind, matched pair topical cream study, conducted at the University of Connecticut, 100% of the osteoarthritic subjects on Celadrin® showed significant improvement in just 30 minutes and cumulative benefits throughout the remaining 30 days of the study. Patients were assessed for range of motion, pain levels, timed up and go, timed stair climbing and muscular endurance tests. Significance was demonstrated in every test.
I have no idea how good/accurate that study is. But you just can't beat bovine tallow oil for what ails ye. It's been approved by the Government of India in Jan 2005, but 96.6% of revenue is within the US.

The company has to restate their Q2 and Q3 results for 2006 due to warrant expense.

10-K: period ending March 31, 2006 restated
10.7 million shares on June 28, 2006
5.2 million options and warrants outstanding. These are mostly old. Granting lately has been somewhat reasonable.
Still, I'll assume 20 million totally diluted shares.

In June 2005 they filed a lawsuit against ABCO Laboratories (a vendor), breach of implied warranty of merchantability, intentional interference with a contractual relationship, unfair competition. They settled in April 2006 by paying them $125K for inventory they held etc. I guess it was one of those "best defense is a good offense" sorta things.

Revenues for the period ending March 31, 2006 were up only 1.0%. Gross margins are 46% (43% in prior year). They had a big net loss due to a huge jump in G&A and consulting expense.

The G&A increase was due to stock options and warrants expensing, some increase in sales commissions, and a writeoff of a Puricell infomercial (yuck). G&A going forward should be somewhat lower. The consulting increase was due to clinical research, selling, changing accountants twice, litigation expense, and a PR expense. This should go down in the future.

Tax benefit due to loss.

Celadrin has only one supplier! They have a 22% customer as well as roughly three 13% customers!

Directors and officers own 30% of the company.

Assets are largely cash (much of it was raised via selling stock recently). Current ratio is insanely high. $4.3 million in net cash. I'd expect them to make about $800K per year going forward. Cash flow from operations is positive due to AR and noncash expenses (options and warrants). Capex is reasonable. Finance includes paying back a related party loan to the company (line of credit of $1 million, interest rate of 12%).

I figure the stock is worth about 60 cents. I don't like the company much.

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