How Far Will Hybrid Coating Technologies Inc (OTCMKTS:HCTI) Go?
After sitting flat at $0.0038 for three sessions in a row on minimal interest from investors the stock of Hybrid Coating Technologies Inc (OTCMKTS:HCTI) has been exploding up the chart recently. Yesterday it gained another 27.2% reaching a close at exactly $0.007. Over 21.7 million shares got traded throughout the session.
At first glance the impressive ascent seems warranted. After all HCTI did announce a definitive agreement with a Fortune 500 partner that is expected to be executed by the end of September. With the end of the month coming closer and closer it is no wonder that investors are jumping in anticipating a new PR. Furthermore at the start of August HCTI also entered into a definitive agreement with a large foam manufacture who has several Fortune 500 clients among which are Nike, New Balance and Adidas.
Impressive as these agreements may be they are the only positive thing around HCTI. Even a cursory due diligence will reveal that currently the company is simply riddled with extremely dangerous red flags. Just take a look at the latest financial report. According to it as of June 30 HCTI had:
• $1.6 million total assets
• $6.8 million total current liabilities
• $4,103 revenues!!!
• 735 thousand net loss
It should be noted that the entirety of the reported assets consisted of intangible assets. This means that at the end of the quarter HCTI not only had ZERO cash at hand but they had absolutely no current assets at all.
The lack of resources has forced HCTI to fund their operations primarily through external finance sources leading to a massive amount of debt substantial part of which can be converted into shares at discounts to the market price ranging from 40% to 50%. The sheer number of shares that could be issued through conversions is staggering and the dilution of the common stock has already began. Back in December 2014 HCTI increased their authorized shares from 75 million to 150 million. That was not enough, however, and in May another increase was implemented – this time to 650 million shares. Thanks to this decision between June 30 and August 26 114 million shares were issued at just $0.002 while another 128 million shares came into existence at an even lower average price of $0.0015.
The dilution could continue for quite a while longer. In July HCTI sold two new convertible notes in the aggregate amount of $72 ,500 while just last week they increased the A/S yet again so now they can have up to 1.6 BILLION common shares.
The dangers around HCTI are far from negligible and even if you believe in the potential of their products and that the definitive agreements will be executed successfully you should still use caution when trading the stock. Do your own due diligence and never put unaffordable sums of money on pennystocks.
