Millennium Healthcare Inc (OTCMKTS:MHCC) Bounces On Acquisition News
The stock of Millennium Healthcare Inc (OTCMKTS:MHCC) has been disappointing investors for quite a while. Well, disappointing may not be the right word – MHCC has been giving investors nightmares as the ticker has been unable to stop sliding lower and lower down the chart. Recently out of 11 consecutive sessions the stock managed to close in the green a single time.
Last Thursday the stock closed at $0.0105 but during the session it actually slid below the 1 cent per share mark and registered a new 52-week low of $0.0091. Compared to its high for 2015 of over 20 cents per share posted in January the stock has so far wiped more than 93% of its value, and the losses only grow bigger as you go further back the chart.
Yesterday, however, MHCC’s stock suddenly reversed its downwards direction and closed the trading session with an impressive gain of 26% at $0.0133. Investors showed renewed interest in the company and the daily volume surged above 16 million traded shares while the monthly average for the stock stands at 1.69 million traded shares.
The bounce that formed as a result of MHCC reaching such record lows was further boosted by a new PR published before the start of the session. In it the company revealed that it had signed a Letter of Intent to acquire HealthPath,LLC., a developer of a cloud-based software for Medicare’s Annual Wellness Visit. The deal is expected to be completed within 15 days after an exploratory due-diligence period.
Although rather exciting the PR didn’t mention how MHCC plans to pay for the acquisition which is an extremely important question. Despite generating respectable revenues the financials of the company are not exactly confidence-inspiring. For the first quarter of 2015 MHCC reported:
• $21,811 cash
• $5.8 million total current assets
• $9.7 million total current liabilities
• $678 thousand revenues
• $2.3 million net loss
It should be noted that $5.2 million of the current assets of the company consist of accounts receivable. In addition at the end of the period MHCC had a working capital deficit of $3.9 million and an accumulated deficit of $78 million.
The dilution of the common stock is another serious red flag that shouldn’t be ignored. At the end of 2013 MHCC had around 63 million shares but by December 31, 2014, that number had grown to 128 million. As of May 19, this year, the outstanding shares of the company had almost reached 190 million. The majority of the recently issued shares, 53,1 million issued in April and May, came into existence as a satisfaction agreements and releases with various warrant holders of the company. An 8-K filing from May details these agreements stating that warrants for the purchase of 3,650,000 common shares will be exchanged for an aggregate of 237,200,000 common shares. The company also increased its authorized shares from 200 million to 350 million.
With the recent changes in its management team and the planned acquisition of HealthPath MHCC will try to improve its situation. The new CEO has stated that he plans to transform the company from a distributor of medical devices into a technology-based company. Will this be enough to offset the numerous red flags though? It is up to you to decide.
