Sanomedics Intl Hldg (OTCMKTS:SIMH) Squashed 75% in Three Sessions
The chart performance of Sanomedica International Holdings, Inc. (OTCMKTS:SIMH) has been extremely erratic over the last few sessions. Ever since the company released a PR on October 10, putting SIMH and ‘ebola’ in the same sentence, the price has gone up over 2000%, then receded 75% from its high, making for a dangerously volatile ride.
The company announced that a regional division of the Center for Disease Control ordered ‘nearly 100’ of SIMH‘s contact-free thermometers. This sent traders in a frenzy and SIMH soared wildly, gaining nearly 1000% in a single session, then doubling from those new highs in the next one. Reality caught up with the company on Tuesday as heavy selling pressed SIMH down from its unsustainable new highs.
The company tried to patch things up on the day of the first drop, posting a PR that was largely a lengthy advertisement of the company’s thermometers and their unique position to help detect ebola-induced fever at airports. While it’s true that a non-contact thermometer is a safe and efficient way to do this, the PR never explains what advantage SIMH has over companies that have competitive products that are FDA-approved, cleared for clinical use and priced attractively. One example taken at random is a VeraTemp thermometer that costs about $50 on both Walmart and Amazon. Considering such products have been on the market for a while, SIMH‘s competitive advantage is not really clear. There’s also the matter with the only order reported this month – 100 thermometers in total.
What the company had as of its latest financial report dated June 2014 is a weak balance sheet with under $10 thousand in cash and $1.6 million net loss on quarterly revenues of $56 thousand. This is without counting the debt restructuring SIMH did in late September. Redwood Management LLC purchased SIMH debt from another entity and received notes for $1.4 million that convert “at the option” of the holder. The conversion provisions include two options for percentile discounts for the note holder. The hypothetical worst case scenario would be if Redwood converted on October 10 after the news hit the wire, at a 37.5% discount from the lowest traded VWAP 5 days prior to conversion, then dumped the newly issued shares into the hands of ebola-crazed traders over the following days. This is, of course, speculation and just one possible scenario but it’s also one that could explain the daily volumes that far exceed SIMH‘s last reported outstanding shares and it’s a possibility traders should consider when making decisions.
SIMH is currently 55% up in early trading, propelled by a new press release informing of increased demand of their thermometer, which is driving ‘record sales’ according to the PR. What this means in terms of numbers is unclear. The company stated it’s preparing for ‘heavy inventory requirements’ and cites ‘multiple’ shipments to both the CDC HQ in Atlanta, as well as other healthcare centers.
