Investors are not Ecstatic About Guided Therapeutics Inc (OTCBB:GTHP)

About a month ago Guided Therapeutics Inc (OTCBB:GTHP) was hovering around the $0.30 per share mark and, it seemed pretty happy with its valuation. On November 12, however, the 10-Q for the third quarter of 2014 came out, and in a matter of a single day, the company lost more than a fifth of its market cap.

GTHP tried to recover during the following week or so, but it failed, and after announcing the pricing of a $3.8 million public offering, it experienced some more corrections. On Friday the ticker lost another 2.2% which might not sound that bad, but it did it on a dollar volume of around $330 thousand, and we haven’t seen this sort of activity since January. GTHP is currently sitting at $0.22 which means that the market cap amounts to around $17.6 million.

Clearly, investors are not particularly happy with the recent developments, and we decided to see what made them so upset.

Let’s start with the 10-Q. Here’s a snapshot of the most important figures:

  • cash: $42 thousand
  • current assets: $2.1 million
  • current liabilities: $4.1 million
  • sales: $262 thousand
  • net loss: $3 million

If you read through GTHP‘s press releases, you might be left with the impression that everything is going according to plan. As you can see from the financial report, however, this is not exactly the case. In fact, the company stated in the 10-Q that if they are unable to raise sufficient capital during the fourth quarter, they might be forced to curtail their operations.

They are doing something about it. As we mentioned in the first paragraph, they announced a $3.8 million public offering. Unfortunately, the pricing appears to be bothering investors. GTHP first announced that they are planning on raising the cash by selling shares and warrants at $0.225 a piece on November 26. At first, the market didn’t really react to the news, but once the 8-K detailing the deal came out, the effects became obvious.

Apparently, many investors reckon that the offering price should have been higher, and they’re probably quite upset about the dilution that awaits them. Especially in light of the fact that they have already seen some of it. The number of issued and outstanding shares grew from around 71 million on March 20 to just under 80 million on November 4.

Perhaps more worryingly, some convertible notes found in the latest 10-Q suggest that it could expand further in the future. The report tells us that back in April, GTHP acquired some debt from an entity called Magna Equities II, LLC (the more experienced penny stock investors are probably familiar with this name). Magna can now convert the notes at a 25% discount.

At this point, most of the shareholders are waiting for some information from the FDA. GTHP filed an application back in July and said that the regulatory organs should respond before the end of January 2015. If some positive news comes out, GTHP will probably be given a push. Nothing can be guaranteed at the moment, however, which is why considering all the risks carefully before jumping in is essential.

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