Millennium Healthcare Inc (OTCMKTS:MHCC) Sinks Back Down
It all started at the end of last month when Millennium Healthcare Inc (OTCMKTS:MHCC) announced that they expect to register more than $6 million in revenues for the third quarter of 2014. This is a massive improvement on the figures logged during the previous periods and apparently, the pumpers decided that the word needs spreading around a bit.
A few no-compensation emails were sent out and with their help, the stock managed to break through the $0.40 per share barrier. Everyone seemed very excited back then, but right now, the atmosphere is quite a bit different.
Out of the last six sessions, only one ended in the green for MHCC and after losing another 7% yesterday, the stock is sitting at just $0.24 per share. This means that in a matter of a little over a week, MHCC managed to wipe out 40% of its value and it also means that right now, it’s back at the levels occupied before the announcement of the Q3 revenues.
If you take a closer look at the historical figures you’ll see that the slide began on November 14 – the publishing date of the actual Q3 report. In light of this, you might be thinking at the moment that something has gone wrong and that MHCC‘s estimates were not really in line with what the actual 10-Q shows.
We’re happy to report that this is not the case. Here’s a summary of the most important figures as of September 30:
- cash: $178 thousand
- current assets: $9.6 million
- current liabilities: $14.5 million
- quarterly revenues: $6.3 million
- quarterly net loss: $3.8 million
So, MHCC‘s estimates were correct and, perhaps more importantly, they managed to register some truly meaningful revenues for the first time in the company’s history.
Naturally enough, a question pops up: “If the revenues are up to par, then why is the stock losing ground?”.
The truth is, reaching these sort of sales was a rather big milestone for MHCC, but unfortunately, the rest of the statement is not particularly convincing. They have managed to improve the margins, but profitability is still nowhere is sight and the $5 million in working capital deficit could bring a lot of headaches in the near future, especially with the modest cash reserves. There’s one more problem and it appears to be a big one.
Many OTC companies are struggling to find non-dilutive ways of keeping their operations going and it would appear that MHCC is no exception. The number of issued and outstanding shares grew from just over 63 million on December 31, 2013 to more than 92 million on November 4. The majority of the newly printed shares (about 23.3 million) were issued in exchange for various services and, for reasons that are not very clear, the 10-Q fails to explain how they were valued.
Whatever their price is, if the dilution continues, MHCC might have a hard time making another move in the right direction.
