CATASYS INC COM USD0.001 (OTCMKTS:CATS) Surges

tags: CATS

Last Friday throughout the entire trading session just 1,200 of Catasys Inc (OTCMKTS:CATS)’s shares got traded. When trading resumed after the holiday investors showed a bit more interest but the daily volume still remained below 10 thousand shares. Yesterday, however, all that changed and CATS saw over 265 thousand of their shares changing hands, the biggest volume for the company since October 2015. The intense buying propelled the stock up the chart to a close at exactly 80 cents per share and a daily gain of 21.2%. Can the sudden spike in interest be attributed to the new PR that CATS issued before the start of the session?

Yesterday the company announced the launch of its OnTrak solution in the state of Virginia, the latest in several similar press releases since the start of June. In around a month the states in which the company has operations have increased from 13 to 18. In addition, CATS reported a 175% increase in enrollment in its OnTrak programs as well as a 68% increase in revenues for the first quarter of the year compared to the same period in 2015.

Underestimating the risks surrounding CATS is not advisable, though. Despite the revenue growth the financial state of the company still fails to inspire much confidence – as of March 31, 2016, Catasys had:

• $262 thousand cash
• $1.3 million total current assets
• $13.7 million total current liabilities
• $728 thousand revenues
• $4.3 million net loss

The cash position of the company is particularly depressing with the quarterly report stating that as of May 12 CATS had a balance of just $78 thousand cash on hand. Historically the required funds for the company’s operations have been raised through the sale of shares and notes to affiliated entities. Last year 8.2 million shares priced at just $0.30 were sold for approximately $2.5 million in proceeds. This year $900 thousand, amount subsequently increased by $400 thousand to $1.3 million, were raised through a promissory note issued to Acuitas Group Holdings, LLC, a limited liability company owned 100% by the CEO of CATS. As part of the note agreement warrants for the purchase of 650 thousand shares at $0.47 per share were also issued.

If it hasn’t already CATS will soon need to once again look for outside sources of funds which could have a negative impact on the performance of the stock. Use caution and do extensive due diligence before committing to any trades.