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Anthony Alfidi

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Wellness Center USA In The Pennies

Anthony Alfidi

Anthony Alfidi, Individual Investor

I am a private investor. FULL BIO

Wellness Center USA In The Pennies

Wellness Center USA(tickerWCUI) is one of those micro-cap companies that only deserves a look long enough to move along. It reminds me of why I am always so skeptical of penny stocks. The company occupies several verticals related to health care that should theoretically cross-sell products and services. Theory is different from reality.

It is strange to see such a small-cap company organize its primary product lines as stand-alone corporate subsidiaries. It would be cheaper and easier to focus on one thing and spin off whatever isn't working. The company states on its website that it seeks to acquire other health care companies. They should really try to grow what they already have before buying something else. Too many different products will distract management's attention from scaling, because each thing scales into a slightly different vertical.

The current management bios made me chuckle while shaking my head. I certainly did not expect to see the same two bios listed twice on a single-page website. I am not interested in leaders who took previous companies through reverse mergers in unrelated industries. I have seen such maneuvers before and they rarely add the kind of value that comes from organic growth. It's really funny to hear an executive bio mention numerous publications and inventions under development. Yeah, I've got plenty of ideas in development too, but it won't drive revenue to my Web properties until I actually publish the stuff.

The company'sPsoria-Shieldis some kind of UV treatment for skin conditions. Independent sources can tell us whether UV treatment is effective.The National Eczema Association thinks UV therapies are somewhat helpful in remittive therapy, but the treatments require frequent outpatient visits that may not always be covered by insurance.The National Psoriasis Foundation thinks UVB works well with other therapies, but then again so does natural sunlight all by itself.The NCBI archived an article on narrowband UVB's apparent effectiveness in nonpsoriatic conditions.The science behind this therapy type is somewhat encouraging but not conclusive enough for some insurance companies' reimbursement methods.Read Aetna's positions on various UV therapiesto see the difficulty of building a business model on therapies still considered experimental in many cases..

Wellness Center USA's unaudited 10-Q SEC filing dated August 25, 2015 showed cash on hand of US$126K and current liabilities of over $959K. They had better earn some serious income ASAP to pay that off, but that will be difficult with a net loss for the quarter of over -$525K. The financial statements also showed an enormous amount of goodwill from their acquired companies. I am usually disappointed to see small companies portray intangible assets so optimistically before they have successfully monetized their primary products.Read what the company says in its own 10-Q about how it must continually raise new capital because of its burn rate.Shareholders will see further dilution.

I don't know why the "investment professionals" who sent me information about this company still have me on their contact list. They should know by now that I don't invest in penny stocks with difficult earnings histories.

Full disclosure: No position in WCUI at this time.

This article originally appeared on the the Alfidi Capital Blog on 01/15/16.

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