What? What does that even mean? This stock is dropping based on the fact the company loses money by burning through cash. Trading it is very risky as it is difficult or impossible to predict the up and down swings. There is little concrete reason for any upswings as there is no value in this company.
It is pretty simple, the stock was at 1.74 at the end of trading on December 31 and 2.62 at the close on March 31.This caused a 1,308,954 change in the value of the options that are held in the company.This number was placed as a charge against earnings.
The GAAP number that was backed out to show the non GAAP profit of 293,011 was the change in the value of the options.
If the rest of the numbers for this next quarter are similar to the last, even the cash burn, the traders who look at the bottom line will likely jump at the number.
Lets see, a 300,000 in operational profit and instead of a 1,308,954 charge because of the rise in the value of the options they get over a 1 million dollar gain on the bottom line as long as the stock price does not rise too much before the end of June.The value of the options have fallen so far from 2.62 a share to 1.90.So a million dollars gets added back to the bottom line of the GAAP numbers because of the change in the value of the options without the company doing anything at all.
While I would not put a large part of my portfolio on these types of bets, you would be surprised at how often this trade plays out favorably because the average investor does not dig too deeply into the numbers.