Trading activity around Vodis Pharmaceuticals Inc. (CNSX:VP) stock has picked up the pace, depicted by high turnover in traded shares. However, a 100% plus price rally in recent weeks has come as a surprise given the weak underlying fundamentals.
Despite rallying by more than 100%, the stock is still engulfed in a steep bear trend after coming under immense selling pressure in the first half of the year. The stock is also down by more than 50% for the year.
All attention now is on whether the bulls have what it takes to continue pushing the stock up. While they remain in control in the short term, the underlying bear trend affirms the fact that bears could jump in any time.
After the recent spike high, the stock faces immediate resistance at the $0.40 level on further movements on the upwards. A breach of the critical resistance level could open the door for the bulls to push the stock to the $0.60 level.
Any sell-offs should experience support at the $0.16 level. A breach of the support level would leave the stock susceptible to further declines on a continuation of the long-term bear trend.
What Does Vodis Pharmaceuticals Do?
Vodis Pharmaceuticals casts itself as one of North America’s foremost brand names when it comes to medical and recreational marijuana. The company has operations in America and Canada where it has master grow teams. The company is currently in the process of exploring expansion opportunities as it looks to expand its wings into other countries as well as in the U.S.
Health Canada License
The recent rally has caught many investors by surprise, as it has come at the backdrop of no substantive updates from the management team. The last piece of information about the company’s operations came in July, of which by now is already priced in.
In July, Vodis Pharmaceuticals achieved a significant milestone as it became a certified, licensed producer under the Access to Cannabis for Medical Purposes Regulations. The confirmation paved the way for the company to obtain a much-needed license from Health Canada that would allow it to cultivate Cannabis in the country.
Vodis Pharmaceutical has already carried out upgrade works at its delta facility in anticipation of the Health Canada license. The upgrades include the installation of specialized wall finishes as well as the development of production and processing areas.
“This is an important milestone that gets us closer to obtaining a cultivation license at our Delta facility. We are very excited about the path forward and creating the shareholder value that we set out to achieve,” said CEO, Ivan Miliovski.
The company is yet to issue an update on where it has reached with the Health Canada License application. License approval would allow the company to engage in large-scale cannabis cultivation and production, to take advantage of the expected growth in the cannabis sector. Canada has already legalized recreational use, expected to open up new sales opportunities.
Vodis Pharmaceuticals also finds itself in a dire financial position despite commanding a market cap of about CA$7 million. Soaring debt levels raises serious concerns about the company’s financial health and its ability to continue operating as a going concern. Its debts currently stand at CA$1.98 million, mostly made up of near-term debt.
A cash balance of about of CA$328,930 all but paints a clear picture of the torrid financial state the company finds itself in. It is still unclear if the company is generating any revenues that would go a long way in helping offset the debts.
Low cash levels also mean that the company’s operational efficiency could experience significant challenges going forward. The company may have to take in more debt just to remain afloat. Taking additional debt is unsustainable. The fact that the campy is still unprofitable should continue to arouse concerns among investors.
Vodis Pharmaceuticals is in big trouble despite the recent spike higher. The spike faces a lot of uncertainty given the weak underlying fundamentals. Management failure to issue substantial updates on ongoing operations or long-term plans also leaves a lot to be desired.
For the stock to continue surging, then a groundbreaking development must take place to justify the recent spike. Until then, it might be wise to take a back seat when it comes to Vodis Pharmaceutical’s investments.
We will be updating our subscribers as soon as we know more. For the latest updates on CNSX:VP, sign up below!
Disclosure: We have no position in CNSX:VP and have not been compensated for this article.