Cytosorbents Corp (OTCBB:CTSO) Ends the Week with a Bounce
On August 12, Cytosorbents Corp (OTCBB:CTSO) published the 10-Q covering the second quarter of 2014. Back then, the stock was sitting at $0.30 and in light of the decent figures presented by the report, a lot of people expected to see it move up. Instead of doing that, however, it faltered and just two days later it was hovering around $0.26.
Last week we saw something similar. The Q3 results were published on November 12 and we should note that while they’re not perfect, they’re far from terrible. Here’s what CTSO recorded on September 30:
- cash: $433 thousand
- current assets: $8.9 million
- current liabilities: $1.5 million
- quarterly revenues: $1.1 million
- quarterly net loss: $1.5 million
The highlight of the report is, without a doubt, the revenue figure. It has grown by an impressive 32% year over year and by 13% quarter over quarter. Sales of Cytosorb, CTSO‘s flagship product, have exceeded the $1 million mark for the first time and during the conference call, the management team noted that they’re feeling pretty happy about this.
Yet, once again, while the figures weren’t that bad, the stock performance was. CTSO was already on a red streak when the 10-Q came out and the 5% drop registered during Thursday’s session goes to show that the statement did nothing to cheer investors up. The stock managed to bounce by around 6% during the final session of the week, but it’s still sitting at $0.22 per share which, as you might have calculated already, is about 26% below the levels occupied before the Q2 report. So, what could be the reason for this?
Once you take a closer look at the last two 10-Q’s, you’ll see that the number of issued and outstanding shares grew from around 310 million on August 6 to more than 581 million right now. That’s a lot of dilution and the management team must have an excuse for it. Naturally enough, they do.
It all has to do with their aspirations to up-list the stock to the NASDAQ Capital Market. They wanted to simplify the share structure a little bit and that’s why, they decided to convert most of the preferred shares into common ones. According to them, once the up-listing process is completed, the lack of preferred stock will make CTSO more attractive for institutional investors.
That might as well be the case, but right now, it would appear that the regular shareholders are not ecstatic about the move. They also seem somewhat skeptical about the 25-for-1 reverse split which should be completed really soon.
Upgrading the ticker to one of the national exchanges will be almost impossible without a reverse split and the management team went to some great lengths to explain to the shareholders how it’s all a mathematical exercise and how people’s investments won’t be affected. Even so, CTSO said themselves that they can not give guarantees around the post-split performance or around the success of their up-listing application. And the uncertainty, it seems, is making shareholders nervous. Since we mentioned the shareholders, we should probably note that, despite the shaky performance, some of them could be in quite a favorable position at the moment.
While many people have been spending $0.30 per share or more in order to buy some CTSO stock, others have been getting it at much lower rates. The Q3 report tells us that during the first nine months of 2014, some note holders converted a total of $1,843,000 worth of debt into 17,532,720 shares of common stock. This means that the average conversion rate comes in at a little over $0.10 per share and it also means that the aforementioned note holders are faced with a dilemma at the moment: should they cash in on the 100%+ profits right now by unloading their holdings on the open market, or should they stick with the company and hope for a brighter future. CTSO‘s performance should give us an idea of what their decision is.
