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PDFWhen that video first surfaced in the fall of 2007, NNLX was still focused on increasing hydrogen production with the help of grape juice while allowing Nutra Pharma (OTC: NPHC.OB) – the company’s former partner – to pursuebreakthroughs in its current business of diagnostic technology. (NPHC’s own volatile rally, staged late last year, has already come to an end.) Back then, NNLX’s stock had almost doubled in a month but still fetched only 15 cents a share. Since moving into the medical arena and converting a barn-like structure into a “clean room” for producing diagnostic testing kits (with the construction project captured in yet another YouTube video), however, NNLX has seen its stock rocket more than 200% in recent weeks to pass $1 a share.
Even Bret Barnhizer – NanoLogix’s own CEO – cannot explain that move.
“We don’t promote our stock,” Barnhizer told The Street Sweeper in an interview on Thursday. “We don’t need this … We just hope that people don’t get hurt.”
NNLX peaked near $1.50 earlier this week, fueled by a paid promotion that rankled company management, although the stock has quickly fallen back toward the $1 level. Even at that price, however, NNLX still boasts an estimated market capitalization of more than $100 million – despite its meager revenue and ongoing losses – that rivals the market values assigned to some companies that actually report profits.
Meanwhile, in some ways, NNLX looks like the same company that traded for mere pennies a couple of years ago. Back then, NNLX still counted patents held by Russian scientist Sergey Gazenko – the only company leader with experience in the medical arena – as its primary assets. Barnhizer, a veteran of the oilpatch, had already taken over as CEO of the company. Moreover, an Ohio newspaper indicates, Barnhizer was already forecasting big orders for NNLX diagnostic testing kits that he’s still waiting on today.
In the fall of 2008, Barnhizer told the local Vindy newspaper that NNLX had fielded a potentially huge order – of 7,000 testing kits a week – from an unnamed company with billions of dollars in revenue. NNLX employed just a handful of administrative workers in its two-room office at the time, the newspaper noted, while the company’s stock had fallen over the past year to 6 cents a share. Even so, the newspaper reported, Barnhizer was already predicting a surge in NNLX’s product sales – and a heightened interest in the company’s stock – as a result of that initial order.
“Once the customer announces its results in scientific journals, Barnhizer figures demand will explode and he will need hundreds of employees,” the newspaper stated at the time. In addition, “Barnheizer said he expects investor interest to build once a major corporation adopts NanoLogix’s technology.”
Instead, NNLX continued to generate little revenue and – until last year – no real jump in its share price.
Hard Numbers
NNLX’s latest financial report, while neither audited nor up-to-date, offers a snapshot of the company’s operational performance. According to that filing, NNLX generated about $20,000 in sales and $535,000 in expenses – resulting in a sizable loss – for the period ending on June 30 of last year. More than half of those expenses resulted from stock-based compensation and cash salaries and fees, while only $55,000 went toward research and development costs associated with the company’s technology. After all of that, the company ended the period with just $35,000 in the bank.
When asked about its current financial position, NNLX told The Street Sweeper that the company has since raised $1 million to cover its expansion plans. NNLX used some of its resources to convert an old building into a clean-room manufacturing facility that’s supposed to be ready for big orders very soon. This time around, NNLX has predicted that it will hire just a dozen workers – rather than hundreds -- to meet its upcoming demand. Despite those scaled-back expectations, however, NNLX has seen its stock price skyrocket since the company wrapped up that modest construction project about three weeks ago.
Of course, a recent stock promotion may have helped. Earlier this month, The Stock Alert began touting NNLX as “an exciting long-term investment opportunity” that could deliver “momentous” profits to those who acted early. According to its own disclaimer, however, the tout sheet pocketed $65,000 – with hopes of collecting $75,000 more – for its NNLX recommendation. It also revealed that it might personally trade the stock before, during and after its publicity campaign.
Interestingly, The Stock Alert identified D3 Communications LLC as the firm that paid for that promotion. Last fall, The Stock Alert collected payments from the same firm for touting Red Branch Technologies (OTC: RBTI.PK) – an obscure renewable energy company that currently trades for a penny a share – as well. When promoting RBTI, The Stock Alert actually portrayed its picks as better investments than many household names.
“When was the last time a BLUE-CHIP stock made YOU a MILLIONAIRE?” The Stock Alert demanded. “Huge returns, like 200% to 400% short-term and 1,000% to 2,000% long-term, do exist and are earned every day by only the smartest investors with the right information who act quickly and decisively.
“The Internet Revolution taking place right now has allowed us to bring YOU into the behind-the-scenes world where the rich and famous make hay,” the tout site added, “and give you the information that could make YOU rich!!!”
History Lesson
To its credit, NNLX immediately distanced itself from The Stock Alert and even urged the tout sheet to stop using its logos. (The Stock Alert has since removed the NNLX report from its website entirely.) Compared to other penny-stock outfits, the company also issues relatively few press releases on its own.
In fact, the company’s CEO loudly blasted stock promoters – and the day traders that follow them – during a recent interview.
“I’d really like to confront some of these people in person,” Barnhizer declared. “They’re creepy … I don’t like them. I don’t like the whole mentality.”
Still, NNLX itself has raised investor hopes in the past. Shortly after Barnhizer joined NNLX as a business consultant in 2006, for example, NNLX proudly announced that it had received $1 million from an unnamed investment firm to accelerate its efforts to transform hydrogen into a viable fuel source. Although NNLX had already gained control of Gazenko’s medical patents by then, the company clearly indicated that its future rested in the red-hot alternative-energy sector instead.
“We consider this funding essential for positioning the company as a potential partner with the energy industry in their efforts to transition from a fossil fuel-based economy to one in which the dependence upon those fuels is replaced by the use of alternative energy,” Barnhizer stated at the time. “This funding is one more step along the path to a clean-fuel hydrogen-oriented economy, and we are excited to be at what we view as the center of that effort.”
Just three months later, in November of 2006, NNLX proclaimed that it had already discovered a way to increase hydrogen production by combining a mixture of switchgrass and grape juice. The company still listed hydrogen production as its primary focus at that time.
By March of 2007, however, NNLX had radically changed its plans. With Barnhizer installed as its new CEO, theVindy newspaper reported, NNLX shifted its focus away from energy projects – which had attracted Barnhizer to the company in the first place – and decided to exploit its medical patents instead.
NNLX faced a possible dilemma, however. The previous year, NNLX had inked a deal that gave NPHC control over dozens of valuable medical patents. The month that Barnhizer took over as CEO, in fact, NNLX collected its first royalty payment from NPHC as promised under that deal. Barnhizer himself celebrated the new revenue stream while predicting a “long and rewarding partnership” with NPHC. Near the end of 2007, NNLX even followed up byexpanding its licensing agreement with NPHC and cheering when the new test kits finally hit the market the following year.
With NPHC later defaulting on its royalty payments, however, NNLX managed to regain full control over its medical patents ahead of the planned commercial launch of its own diagnostic testing kits. Ironically, the month before NPHC returned those patents, the company’s stock rocketed on news that it had changed its own business plans.
“This company (NPHC) has been hyping their stock up 2,000% with cobra venom that acts as a pain reliever,”marveled Timothy Sykes, a professional investor who regularly profits on the violent price swings that can often characterize classic “pump-and-dump” schemes. And “NPHC’s CEO, Rik Deitsh, has NEVER talked about pain relievers until just last month.”
Sykes had already placed a bet against NPHC, by shorting the company’s stock, when that Oct. 1 report first appeared. The stock, which had peaked at 99 cents just two days earlier, soon lost half its value and now trades for 40 cents a share.
Deadly Potion
Meanwhile, NNLX now looks to capitalize on all of the company’s medical patents itself. Even before NNLX won back those patents, in fact, the company had already announced a “revolutionary” new diagnostic testing kit of its own.
“If I hadn’t taken over, the technology would have never come to the market; nothing would have happened,” Barnhizer told The Street Sweeper this week. “Everyone’s into our stuff. It’s the only new thing going.”
NNLX markets “ultra-fast test kits” that can be used in the rapidly growing bio-defense and healthcare industries. Last year, for example, NNLX announced that its tests could identify anthrax – a deadly substance that’s considered a possible terrorist weapon – four times faster than more conventional technologies. By doing so, however, NNLX reminded some of the fly-by-night companies that pounced on the anthrax “opportunity” following the 9/11 attacks.
Vital Living Products, a former Bulletin Board stock, stands out as a prime example. Shortly after the terrorist attacks,Smart Money noted back in 2001, Vital Living announced that it would soon start selling home-testing kits capable of detecting anthrax. Fueled by terrorist fears, Smart Money reported, Vital Living saw its stock rocket 4,000% to $2 a share on the news. But the FBI soon raided Vital Living’s offices, the magazine added, and the company’s stock came crashing back to earth.
By the following year, media reports show, Vital Living had already stopped selling the anthrax tests because the company could not prove that they actually worked.
“It’s situations like these that demonstrate just how dangerous it can be for investors to pour money into the stocks of companies with shaky operating histories and small public profiles,” Smart Money cautioned back in late 2001. “Just because a company seems to have a good story to tell – in this case, fending off deadly anthrax bacteria – doesn’t mean an investor should throw money at its stock.”
To be fair, NNLX announced its own test long after the anthrax frenzy died down. Still, with its sketchy history and its unaudited financials, the company clearly ranks as a high-risk investment.
NNLX trades on the lowly Pink Sheets, after all, which is viewed by many as a hotbed for possible fraud. Although the company’s stock chart looks a lot prettier now than it did on that YouTube video three years ago, the background music – celebrating the lure of easy money – remains the same. If investors lose money on NNLX going forward, that song could sound almost taunting down the road.
“There is nothing quite as wonderful as money,” the Monty Python song proclaims. “There is nothing quite as beautiful as cash. Some people say it’s folly, but I’d rather have the lolly.
“With money,” it cheers, “you can make a splash.”
* To contact Melissa Davis, the author of this story, please send an email to editor@thestreetsweeper.org.
