Shareholders Remain Confident In Advanced Cell Technology, Inc. (OTCBB:ACTC)
As is the case with most of the companies that we review on these pages, Advanced Cell Technology, Inc. (OTCBB:ACTC)’s share price often moves when some positive news comes out. A classic case in point is an article that was published by Reuters on May 15 where ACTC‘s CSO, Dr. Robert Lanza spoke about some good results from the clinical trials. His words were confirmed by the company in an official press release on May 23 and in a few short sessions the ticker jumped from around $0.072 all the way up to $0.09. A few red sessions followed and by June 06 it was back to $0.077. This is typical penny stock behavior, but there are some things that make ACTC stand out from the crowd.
The most striking thing of all is the confidence that the shareholders show. Putting that much trust in a development stage pharmaceutical company is by no means easy and we have seen many penny stocks with plans of selling life-saving treatments for terminal diseases fail miserably. The people who suffered the most were, of course, their shareholders, but as far as ACTC is concerned, it would appear that investors are ready to take the risk.
Another thing that differentiates ACTC from the rest of the life science ventures on the OTC Markets is the financial statement. It’s not perfect but they do have some cash at the moment and they did announce back in September 2012 that a $35 million funding commitment has been signed. Here are all the important financials from the latest 10-Q covering the first three months of 2013:
- cash: $4.1 million
- current assets: $4.7 million
- current liabilities: $15.4 million
- quarterly revenue: $87 thousand
- quarterly net loss: $6.4 million
You can see pretty clearly from the figures above what we mean by “not perfect”. The losses are quite significant and so are the liabilities while the revenues are pretty dismal. This should change with the commercialization of their stem cell technology. The only problem is, this particular field of science is in such an early stage of development that even ACTC are not 100% convinced that they’re going to make it. The latest report, for example says that “(the company) does not expect to have any therapeutic products available for sale for a period of years, if at all”. One thing is for sure – if you want to be an ACTC shareholder, you need to have strong belief in their expertise and you need to be extremely patient.
But let’s have a look at what is happening while everyone is anticipating some developments around the clinical trials. We’ve already written a few articles on ACTC over the years and one thing that is recurring in virtually all of them is the high salaries that the members of the management team receive. The company CEO, Mr. Gary Rabin’s base salary for 2012, for example was around $652 thousand and he also received around $390 thousand as a cash bonus. Other executive officers also pocketed substantial compensations for their work and considering the colossal losses, the payroll expense seems a bit steep.
Unfortunately, this is not the only issue shareholders have to swallow. We read through the report for the first quarter of 2013 and we can see that throughout the years ACTC have had some legal issues including some problems with the SEC which resulted in $3.5 million in penalties. The most recent complaint is dated October, 2011 and the plaintiffs claimed losses of around $22 million due to the nature of the company’s transactions. An agreement for the settlement of the case was reached in January, but unfortunately, it’s not particularly favorable for ACTC or its shareholders. A total of 80 million common shares valued at $0.056 per share were issued as well as $6 million worth of convertible debentures. They will need to pay a total of $2 million in quarterly installments as well, which will have an effect on the future net losses.
All in all, the people seem to keep their hopes high for ACTC right now, but there are some issues surrounding the company. A definite plus point is the lack of paid promotion which means that drops similar to the one Prince Mexico SA Inc (OTCMKTS:LUVE) experienced a couple of weeks ago are unlikely. Yet, we’ve seen that while confidence is high, volatility is still a factor and we reckon that you should definitely consider it before making any investment decisions.
