Manhattan Scientifics Inc. (OTCMKTS:MHTX) With a Steep Correction
Manhattan Scientifics Inc. (OTCMKTS:MHTX) has been around for a while, but until recently, the long-term shareholders didn’t have much to shout about. The stock was thinly traded and the price action was minimal. On June 10, however, the company issued a press release and all this changed in an instant.
MHTX announced that they have delivered their ground-breaking cancer measurement instrument to The University of Texas and said that this step will be “pushing the limits of cancer detection“. We certainly hope that this will be the case and apparently, so do investors.
A Seeking Alpha contributor and SeeThruEquity set themselves the task of spreading the word around and the resulting excitement put MHTX among the most heavily traded stocks in Pennyland. It registered no less than eight consecutive green sessions during which it gained nearly 70%. On Friday, MHTX hit its 52-week high of $0.1795 and finished the day at $0.1699. Many people thought that this is just the beginning, but yesterday, the ticker slipped and wiped out nearly 20% of its value while shifting more than $480 thousand worth of shares.
The question that’s tormenting the minds of investors at the moment is: “Is this simply a consolidation that is a natural part of the prolonged run, or is this a sign of something worse to come?“.
The performance over the following weeks should give us a definitive answer. In the meantime, all we can do is have a look at MHTX‘s latest 10-Q and see what the pros and cons are.
Here’s what the company had at the end of the first quarter:
- cash: $1.7 million
- current assets: $1.9 million
- current liabilities: $2.1 million
- quarterly revenues: $180 thousand
- quarterly net loss: $1.1 million
The cash position was strengthened after a recent private placement which means that there’s one less issue MHTX need to worry about at the moment. When you compare the figures above with the ones recorded at the end of Q1 of 2013, you’ll see that there’s been a drop in revenues and you’ll also note that the net income has turned into a rather big net loss. We should mention, however, that this was all because of the increased focus on developing the cancer detection instrument which should be ready to go now. As you can see, things don’t look too bad, but unfortunately, there are a few issues.
The liabilities section of the report tells us that the debt has grown quite a bit during the last twelve months and when you read through the notes accompanying the statement, you’ll see that some of it consist of convertible notes that can be turned into common stock at rates that are way below the current market price.
If the conversion takes place, the dilution could put additional pressure on MHTX and the recent increase in the number of authorized shares might suggest that some notes are about to be turned into stock.
MHTX‘s shareholders can hope that the positive developments around the company will be enough to offset any potentially dilutive actions, but unfortunately, at least for now, guarantees are nowhere to be found. That’s why doing your due diligence and weighing the risks carefully is absolutely essential.
