Looking back at the 1Q 10Q, they had privately issued a bunch of stock to consultants and for the settlement of debt around 6-7 months ago. That stock became free-trading over the last 1-2 months, and likely has a lot to do with the reduction in the stock price over the last month.
There is one more large private stock issuance that is going to become free-trading soon, 877K shares on 10/22. These shares were issued to settle debt, so it looks like the market is assuming that they will be dumped onto the market when that becomes possible.
Hopefully the company is lining up appearances at the various investment conferences that typically take place in the coming months, to create some buying demand that will soak up that supply.
The company looks to be on a pretty sold financial footing at this point, having generated > $2M of cash flow before working capital changes last quarter. Given that, by all indications, cash flow will be increasing significantly in the next few quarters, they should be in a good position to pay off the $5M of debt that is coming due in the 2nd half of this year. So the days of them having to issue stock for the settlement of debt should hopefully be over. Maybe they could even stop issuing stock for payment of consulting services, and pay cash instead.
They have a hefty amount of debt on their balance sheet but $50M of that is at very low interest rates, something like 4% on average I believe. Assuming they continue to improve their financial performance, it should not be long before they would be in a position to refinance their highest rate debt, the 16% debt with their senior lender.
