Pie, I'm not sure I agree that we are being "set up" here, that set up was done a long time ago with convertible financing, which like a great many small companies, was the only option available to them at the time. They currently have $15.8M in convertible debt, and in 2013 they had to take charges of $15M on their P&L for the increase in fair value of outstanding warrants and convertible stock. Now that they are actually growing into a viable company, and if they want to go mainstream, they must get rid of all that toxic financing overhang.
From the 10K: "We have outstanding options, warrants, convertible debt and convertible preferred stock that, when exercised or converted, could result in the issuance of up to approximately 99.9 million additional shares of common stock."
From the offer: "Q8. Why are you conducting this Offer?
Our capital structure restricts our ability to raise capital and eventually position the Company for listing on a stock exchange. Therefore the Company has determined that it must improve its capital structure, especially to enable it to raise additional equity capital. The first step in this process is to reduce our outstanding Warrants. That is why the Company has initiated this Offer. We also plan to ask our stockholders to approve a reverse split of our shares. Finally, we have and will be undertaking efforts to encourage our preferred stockholders to agree to a conversion of their securities incidental to a listing on a stock exchange. Our convertible noteholders are obligated to convert upon such a listing. There are additional benefits resulting from reducing the Warrants. Our public float will be increased which may enhance the trading liquidity of our shares. We also eliminate the derivative liability and non-cash effect on results of operations resulting from the anti-dilution price protection included in some of our outstanding Warrants. As for Warrant Holders, the exchange of Warrants for tradable shares provides a current economic benefit to them."
Let's face it, we all knew about this overhang, now at least we know they are trying to deal with it. I hate reverse splits, but it will likely happen because we could never get the price consistently over $1 with all this dilution overhang.
