GelStat Corporation

What they do

Gelstat develops and markets over-the-counter homeopathic consumer health products. Its first product, Gelstat Migraine, is a patented OTC homeopathic drug for acute treatment of migraine and migraine-like headaches. Gelstat Sleep, a sleep aid, was introduced on a test basis in 2010 and is still in final development. Current sales and marketing efforts focus primarily on Gelstat Migraine.

Revenue drivers

• Gelstat Migraine — Patented OTC homeopathic drug for acute migraine treatment and the primary focus of sales and marketing. Generated essentially all reported revenue.
• Gelstat Sleep — Sleep aid introduced on a test basis in 2010 and still under final development; expected to be classified as a dietary supplement.
• Website sales — Sales are primarily through the company's website; the 10-K attributes 2008 revenue increases to new website marketing.

Recent performance

For the 2008 third quarter, revenue was $2,238, down from $2,638 in the prior-year quarter due to limited marketing. Cost of goods sold fell to $348 from $2,389, tracking lower unit sales. Selling, general and administrative expenses declined to $44,197 from $55,415 on lower warehouse expense. Interest expense on 7% notes payable was $10,973. For the nine months ended September 30, 2008, revenue rose to $18,293 from $15,869.

Strategy

Management's stated priority is cost-effective development and marketing of OTC and non-prescription consumer health products. The company focuses current sales and marketing on Gelstat Migraine. Gelstat Sleep was introduced on a test basis in 2010 to gather data on product viability. Clinical trials were discontinued in 2007 due to capital constraints, and no research and development expense has been recorded since. The company states it is entirely dependent on outside investments to support operations.

Risks

• Going concern — The 10-K states the ability to continue as a going concern is in substantial doubt absent adequate new debt or equity financings.
• No capital for marketing — Revenue has been limited to website orders because the company has lacked capital for marketing.
• Clinical trial uncertainty — GelStat Migraine has undergone two clinical trials and additional trials may be required; the company discontinued trials in 2007 due to capital constraints.
• Intense competition — The 10-K cites intense market competition that may result in lower-than-anticipated revenues or higher-than-anticipated costs.

Outlook

Management does not provide specific revenue or earnings guidance. The company states that additional clinical trials may be required and that it anticipates proceeding if it has necessary funding. Operations remain dependent on obtaining adequate working capital through outside investments. No recent 8-K events were reported after 2007.