Guided Therapeutics Inc (OTCBB:GTHP) Corrects on Record Volume
At first glance Guided Therapeutics Inc (OTCBB:GTHP)’s correction of 3.96% yesterday may not seem that scary. There are two factors that make things far more alarming though. First, the drop took place on a traded volume of just below 10 million shares while the monthly average stands at a little over 1.3 million. And second, GTHP suffered a red close despite the fact that they issued a new PR after two weeks of silence.
In the press release the company announced that it had reached a licensing agreement with Shenghuo Medical, LLC. Under the terms of the deal the Chinese company will have to pay $200 thousand in near-term payments, provide funding to secure Chinese regulatory approval and pay royalties for the sale of disposables in exchange for the exclusive sales and manufacturing rights of GTHP‘s LuViVa Advanced Cervical Scan for China as well as additional Southeast Asian countries. Shenghuo could also potentially provide $1 million for the advancement of the LuViVa towards FDA approval.
The news definitely made an impact and at the start of yesterday’s session GTHP‘s stock actually surged upwards on some rather intense trading. The momentum disappeared in mere minutes, though, and the ticker wiped its gains.
GTHP have been having a hard time forming a more prolonged upward trend despite the company reporting record revenues for the first quarter of the year. In its previous press releases GTHP even stated that for 2016 the generated revenues could reach somewhere between $3 million and $5 million. For now, however, GTHP‘s financials fail to inspire much confidence. At the end of March they had:
• $56 thousand cash
• $2.05 million total current assets
• $6 million total liabilities
• $262 thousand revenue
• $130 thousand net income
For a pennystock to achieve a positive bottom line is far from an easy task but it should be noted that the main reason GTHP managed to do it was a $1.4 million change in the fair value of warrants. Adding the extremely limited cash, massive working capital deficit, and the accumulated deficit of over $122 million makes the picture even grimmer.
When deciding whether to put any money into GTHP or not you should also take into account the potential dilution of the common stock. Just a couple of months ago, on February 24, the company performed a 1-for-100 reverse split that left it with approximately 3.15 million shares as of March 7. As of May 17 that number had already surpassed 29.8 million shares.