Good News For GelTech Solutions, Inc. (OTCMKTS:GLTC)
Yesterday’s sessions started just like any other for GelTech Solutions, Inc. (OTCMKTS:GLTC). There was a short dip a few minutes after the opening bell, but everything was pretty much uneventful. Then, around 10:30 AM the ticker made an impressive run and about an hour later it hit its intraday high of $1.55 per share. Then it settled down but it still managed to close the session at $1.41 which is around 11% higher that Tuesday’s value. The volume was also pretty impressive – more than 292 thousand shares – ten times the three-month average. There was a pretty good reason for this as well.
We’ll get to that in a minute, but first let’s take a look at the basics. GLTC is a small cap company and according to their OTC Markets profile, they’re still in the development stage. That said, when you take a look at their website and SEC filings, you will beg to differ. They have developed two main lines of products – the first one is called FireIce and it’s a water additive that is supposed to make extinguishing fires a lot easier and the second one goes by the name Soil2O and it’s a dust suppressant solution.
When you open the latest financial report covering the first quarter of 2013, you will see that both products are already on sale and they’re generating revenues. The rest of the figures don’t look too bad either. Here’s a summary of the most important ones:
- cash: $530 thousand
- current assets: $1.2 million
- current liabilities: $1.4 million
- quarterly revenues: $84 thousand
- quarterly net loss: $861 thousand
You can see that while the current liabilities exceed the current assets, the deficit is not that dramatic. Certainly, it’s not as bad as the ones we’ve seen from other penny stocks like NanoTech Entertainment, Inc. (OTCMKTS:NTEK) ($1,384,490 in working capital deficit) and Premier Brands, Inc. f/k/a Tracksoft Systems Inc (OTCMKTS:BRND) ($4,829,532 in working capital deficit). The only really big problem that we can see in these financials is the rather dismal amount of sales that GLTC have managed to generate over the first three months of 2013. Is that about to change, though? It would appear so.
At exactly 10:30 AM yesterday a press release hit the websites and it’s quite a big one. So big, in fact that it triggered the trading frenzy that we talked about in the first paragraph. According to the announcement, Consolidated Edison, Inc. (NYSE:ED) seem to like GLTC‘s FireIce water additive and they plan on expanding its use in their operations. What’s even more impressive, Con Edison have provided GLTC with some funding for the research and development of a special delivery system that would ensure a more safe working environment for their workers and according to the press release, ED have placed their first order yesterday. No details are disclosed so far, but if GLTC manage to pull it off, they could be in for some massive growth. Are things really so simple, though?
Well, a deal with a company as big as ED will certainly do a lot to GLTC‘s credibility. It should also boost revenues (although we’ve yet to find out how big the increase will be). Once that’s done, however, they will need to start thinking about profitability. And looking at the financial statement, there are some worries. GLTC said that during Q1 of 2013, they incurred higher operating expenses compared to the corresponding period of 2012 and even the increase in sales wasn’t enough to offset them.
There is also a pending lawsuit that could put a chink in their armor and they seem to be rather generous with the share issuance (around 7 million new shares saw the light of day in just twelve months), which could cause some dilution in case profits are delayed further.
In conclusion, we should say that while there are a few niggles, GLTC looks like a much more solid enterprise compared to other penny stocks. But it is still a penny stock and it has the inherent volatility. Back in March, for example, the ticker made an impressive run fueled by some optimistic press releases but around March 20 some frantic selling ensued and within just four sessions, half of the value was gone. Make sure you have this in mind while you’re considering the risks of a potential GLTC investment.
