Delcath Systems, Inc. (FRA: DV32 previously NASDAQ: DCTH) is having a relatively strong day in the market today, which is surprising considering the SEC filings the company recently released. Before we get to the details here, we’d like to extend a thank you to our partners at Trade Ideas for being the first to alert us to the gains. Currently DCTH is trading at $0.053 per share after a gain of $0.003 per share (6.00%).
DCTH Plans On Raising $64,500,000
In a form S-1 filed with the SEC, Delcath Systems informed investors that it plans on raising $64,500,000 through the use of a registered offering, further diluting the company’s stock. In a separate form 8-K, the company explained that this move was needed to keep some convertible note holders happy following the failure to obtain approval for a reverse split. Of course, an amendment to agreements with convertible holders was outlined as well. That’s all legal jargon explaining that the company (and its horrible management team) is further diluting shares. As if that wasn’t bad enough, the company outlined some pretty horrible risks – things like the accountant’s concern for their ability to survive as a company and the fact that they don’t see themselves generating any real revenue any time soon. Oh, and there’s that one bit about the fact that investors are likely to lose their ENTIRE PRINCIPAL INVESTMENT in the company. The bottom line is that the S-1 is bad enough, the dilution is bad enough, but now the company is blatantly screaming to investors “GET OUT WHILE YOU STILL CAN.”
Don’t believe me? Here’s a link to the S-1, read it in its entirety to see it for yourself.
Here’s An Outline Of What The Company Calls Risk Factors
First, DCTH lightens the mood with a pretty little disclaimer:
“This offering and an investment in our securities involve a high degree of risk. You should carefully consider the risks described below, together with the financial and other information contained in this prospectus, before you decide to purchase our securities….”
The disclaimer goes on another few sentences, but you get the gist. DCTH is saying in a polite way “Hey, there’s some serious SH*T ahead… you might want to run.” But wait… it gets better!
Then, Delcath Systems goes on to explain that their own accountant has serious concerns about their ability to continue financially:
“Our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern.”
Really? No kidding… your own accountant? The company goes on with a long drawn out paragraph that pretty much says, “Our accountant says we’re screwed… up, we’ve screwed the pooch!”
Let’s move onto the next heading shall we?
“We do not expect to generate significant revenue for the foreseeable future.”
But they are happy to take your investment. How bad can it get? The company goes on another tangent about woe is me and we’ve got the financial blues, and we can’t make any money…. yada, yada, ya… on and on in the risk statement. Have you decided to start running yet? OK, let’s keep going!
In the next heading, the company goes on to explain that their capital resources are running dry, stating:
“Continuing losses may exhaust our capital resources.”
You’ve got to be friggin kidding me! I had no idea that running a business that wasn’t making any substantial revenue while taking extravagant trips on private jets and paying ourselves ridiculous salaries as management would lead to the potential exhaustion of capital resources! This is laughable. Let’s get management to cut salaries in half… better yet, lets make them fly coach. I’ll bet those capital resources will last a bit longer!
And the final we-really-did-it-this-time statement!
“If we cannot raise additional capital, our potential to generate future revenues will be significantly limited since we may not be able to further commercialize CHEMOSAT and Melphalan/HDS, complete our clinical trials or conduct future development and clinical trials.”
Yup, we’re getting to the end here. Once again… we’re running out of money, the sky is falling, I want to fly to Vegas… give me money!
OK, I’ve Been Harsh
At the end of the day, I know I’ve been a bit harsh in this post, but there’s no other way to be. The management team at DCTH is an absolute joke. They have taken their investors for granted and continue to do so. They are blatantly telling you in their risk statement that if you haven’t started to run already, you’re late, get on the bandwagon folks. The only thing that’s worth gleaning from the S-1 or the 8-K is “WE ARE SCREWED!” The only thing that can save the company now is to license out CHEMOSAT, which it can’t do. At the end of the day, it’s time to get out!
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