Hybrid Coating Technologies Inc (OTCMKTS:HCTI) Announces First Commercial Order
Last Friday Hybrid Coating Technologies Inc (OTCMKTS:HCTI) issued their first press release in close to two months announcing a definitive exclusive distribution agreement with a US based coatings distributor. The identity of the distributor wasn’t revealed but the PR did contain some important details. Under the terms of the agreement the distributor will pay $160 thousand for a preliminary order of one 20 foot container of HCTI‘s coating products. In order for the limited exclusivity to be retained over the next three years a minimum of $4 million worth of coatings must be ordered.
With the PR being issued a couple of hours after the end of Friday’s session the stock felt the effects of the news during yesterday’s trading. Investors were definitely excited – HCTI‘s stock opened with a gap up at 0.0037 and quickly moved to a high of $0.004. The majority of the 44.5 million shares that changed hands yesterday were also traded during the early hours of the session. Although the ticker finished the day with a gain of nearly 11% the chart performance wasn’t entirely positive. In fact, the stock lost a substantial part of its momentum and actually closed below its opening price at $0.0031.
While generating a revenue of $160 thousand is massive for HCTI it alone won’t be able to improve the company’s financial state by much. Especially when you take a look at the latest quarterly report and see that at the end of June HCTI had:
• NO cash or current assets
• $1.6 million in intangibles
• $6.8 million in current liabilities
• $4 thousand revenues
• $735 thousand net loss
Investors have a lot more to worry about. Since the start of the year the common stock of the company has been diluted severely – between December 31, 2014, and August 26, this year, the outstanding shares ballooned from 44.1 million to over 336 million. In order to accommodate such an enormous amount of issued shares HCTI had to increase their authorized amount several times – up to 150 million shares in December 2014, to 650 million shares in May 2015, and finally up to 1.6 BILLION shares last month.
If you are wondering the main source of the dilution has been the outstanding convertible debt of the company. As we have been warning you 114 million shares have been issued at an average conversion price of $0.0021 while 128.8 million shares were priced even lower at $0.0018.
In addition some investors may have hoped to see a different announcement last Friday. Back in August HCTI informed the market that it is finalizing the negotiations with its Fortune 500 partner and that it expects to execute the agreement by the end of September. Well, nearly a month since that date there have been no updates about the progress of the deal.
If the company is able to successfully close the announced commercial agreements things could start moving in the right direction rather fast. The risks surrounding HCTI are not to be taken lightly though. The potential for even more underpriced shares to see the light of day and the lackluster financials demand the use of caution.
