Hybrid Coating Technologies Inc (OTCMKTS:HCTI) is as Shaky as Ever
In their latest 10-Q Hybrid Coating Technologies Inc (OTCMKTS:HCTI) said that they will have “significant sales by the end of 2015”. By the looks of things, they are working hard on fulfilling their promise.
Ten days ago, they proudly announced that they have received their first commercial order. A US coatings distributor, the name of which remains unknown, has ordered $160 thousand worth of coatings and has also expressed its intention to earn limited exclusivity. In order to do that, the anonymous distributor will need to order $4 million worth of products within the next three years.
That is a massive piece of news and yet, the chart suggests that investors aren’t too impressed. The performance wasn’t exactly perfect during the first session after the press release and since then, it has been even more underwhelming. At one point last week, the ticker dropped to just $0.002 per share which is precariously close to the 52-week low and although it managed to bounced back to $0.0028 on Friday, this is still far from the run most people expected when HCTI dropped the news.
There are still plenty of supporters who don’t see anything wrong with the disappointing moves displayed by the stock over the last few sessions, but it’s fair to say that there are also people who are wondering what’s going on. Let’s find out.
The truth is, no matter how good the news, it’s not easy to trust a company that has the following figures in its latest 10-Q:
- NO cash or current assets
- intangible assets: $1.6 million
- current liabilities: $6.8 million
- quarterly revenues: $4 thousand
- quarterly net loss: $735 thousand
As you can see, on June 30, HCTI‘s bank account was completely empty, but two weeks later, this was no longer the case. On July 15, the company issued two convertible debentures and received $70 thousand. The conversion provision allow the debenture holders to turn the debt into stock at discounts ranging from 40% to 50%.
This was added to the toxic debt that had been accumulated before the end of Q2 and the effects on the share structure are now pretty visible. Between June 30 and August 27, HCTI was forced to convert $237 thousand worth of notes and debentures into 129 million shares which works out at a conversion rate of $0.0018 per share.
The exuberant stock printing brought the O/S count to around 300 million on August 12, but despite the fact that this will still quite a long way away from the authorized cap of 600 million, the majority shareholders decided to raise the A/S count to 1.6 billion.
All of this might hint at what could very well be a massive wave of dilution sweeping over HCTI in the coming months. This is something you should be aware of if you are willing to take the risk and put your money on the line.
