Hybrid Coating Technologies Inc (OTCMKTS:HCTI) Tumbling Down Again
On Friday, Hybrid Coating Technologies Inc (OTCMKTS:HCTI) came up with what, at first glance at least, could be classified as a major piece of news. Apparently, a large manufacturer has expressed its intentions to use HCTI‘s technology to produce foam products for major Fortune 500 clients. For reasons that are not entirely clear, the name of HCTI‘s new partner remains a secret, but the press release said that a definitive agreement has been signed which means that a lot of people are expecting an upcoming 8-K form to shed some more light on the deal.
With or without an 8-K, the news is still quite big. The management team didn’t forget to say how huge the industry is expected to be in a few years’ time and the fact that HCTI is going to work with the big boys gives it the chance to really benefit from that growth. Yet, the stock performance doesn’t suggest that investors are trembling with excitement. In fact, instead of going up, HCTI dropped down to a new 52-week low of $0.0027 on Friday and it closed last week’s trading at $0.003 – 16% below Thursday’s value.
Some of the investors are probably quite shocked by the drop, especially in light of Friday’s press release. Others, however, aren’t that surprised because they know that, no matter how good the news is, a penny stock can never stay calm when the underlying financials look like this:
- current assets: $1,821 in cash
- current liabilities: $6,566,064
- NO quarterly revenues
- quarterly net loss: $2,225,488
The people who have gone through HCTI‘s latest 10-Q know that the financials aren’t the only problem. They know that there’s quite a lot of toxic debt which is convertible at discounts that range from 40% to 50%. The management team have taken some actions which could suggest that they’re preparing the stock for what appears to be a massive wave of dilution.
No less than three amendments have been made to the articles of incorporation since the beginning of the year. In January, the company was authorized to issue up to 75 million common shares. Right now, it has the right to print 650 million.
So, there’s quite a lot of pressure around HCTI at the moment and it is standing in the way of a more consistent performance. But can the company do something to change this?
Well, if the management team manage to minimize the effects of the dilution and if they find more suitable ways of funding the operations, they might just weather the storm. That, you have to agree, however, is quite a lot of work for just two employees.
