On the generally bearish mood for Digital Angel Corp. (NASDAQ:DIGA) stock over the last year, yesterday it looked like a press release could revive some investor hopes for profitability in the observable future.Yesterday the stock closed 2.24% up at $0.46 on extreme daily volatility and blasting volume of over 536,000 shares traded. This is an enormous value as compared to an average volume of 79,000 for the stock and it led to the price breaking up its upper trading band shortly after the market opened. This has not happened over the last three months and could be a good signal for the declining stock price to finally start going up.
According to the press release from yesterday, Digital Angel got its line of electronic identification tags using HDX technology approved by the USDA. It looks like the management’s intention to now concur new markets managed to revive investor enthusiasm for a while and let them forget about the not so encouraging news around Digital Angel coming out recently.
Around two weeks ago new 1.125 million shares of common stock were registered with the SEC pursuant to the Digital Angel Corporation 2003 Flexible Stock Plan. With the previously registered 2.875 million shares, the company may have a total of 4 million new shares outstanding, which is already a severe dilution threat for the current shareholders.
Now they can hope that the additional cash raised will be properly used in the ongoing restructuring process that is supposed to end up by the end of the year. As part from that, the company has been selling out its non-core businesses to focus on the animal identification market, which is also what yesterday’s press release was related to, explaining the positive reaction of the market. However, the optimization changes in the corporate structure resulted in modest improvements so far.
First quarter financial results did not suggest the business is growing, losses did not appear to get improved over the last four quarters and the latest cash flow from operations was negative. The company barely has enough cash to pay out its short term financial obligations, but hopes to finance its future activities with cash flows from operations, from a revolving credit facility and from the sale of additional business units.
As the revenues were also declining over the last nine months, the market appears still not optimistic that this negative trend will soon reverse.
