you're welcome, doc. and thank you for motivating me to do some work on this investment too :)
i've dug a little deeper into the company's filings, going mainly into the details of the february financing transaction and done some rough calculations to try to determine where we might stand with the shares stemming from that dilution.
the company issued a total of about 58.7m shares pre-split in conjunction with this toxic february transaction:
- the original 2.2m shares issued in feb;
- adjustment shares of 2.5m issued on july 3rd as penalty triggered by low stock price;
- 54.0m shares issued on august 22nd as a renegotiated settlement to avoid further penalty adjustments and any other outstanding contractual obligations including warrants (with 4.4m of that total still possibly reserved by the company). this news killed the stock price and understandably so.
the total shares issued represents 58.7m or 11.74m shares post-split, which were acquired for $4.19m raised in the offering, yielding an average share price of appox. 35 cents/share post-split. this should be the floor level for sellers from this offering, unless the sales below this level are offset with prior gains from sales at higher prices, or the private placement investors decide to sell at a loss altogether. it kind of jives with the level of the deep august correction.
furthermore, i can't pinpoint exactly when the separate portions of the transaction became registered for actual sale into the market or especially when they were actually sold, but it may be worthwhile to know that the stock has traded 11.9m shares on a post-split basis since august 27th, at which time all of the shares were already issued (aug.22), even allowing a few days for certificate delivery from the transfer agent and deposit at respective brokerages for sale. obviously, it's unreasonable to assume that 100% of the shares sold in the market since then were by the investors from this offering, but it gives you an idea of the magnitude of the overhang. clearly, the shares issued in february and july (0.94m post-split equivalent combined) were available for sale earlier and could have likely been sold even prior to end of august. also, almost another million (4.4m/5=0.88m) shares are still likely reserved in the company's hands. this leaves about 10m shares of overhang since late august, some or maybe even much of which we have already churned through.
so, selling below $0.35 does not seem very attractive for these february investors, albeit imo sell pressure appearing below this level in october has to be at least partially attributed to this group. actually, hopefully its mostly them, as that would mean they finish sooner. the financing group we don't have to worry about for now at all is the september edery group, as they purchased their shares at just under $0.40 and have not realized any gains to date, so they should not sell any shares below even when they convert from the preferreds. i believe they truly are in it for the long haul and big gains. maybe not all of the toxic february group intend to sell too soon either.
at any rate, we're squeezing the trading range, the mms seem to be willing to hold the price at this level by providing liquidity in moments of temporarily stronger pressure on either sell or buy side and i'm overall optimistic that this stock will finally get out of this range to the upside. i hope the 10q is a non-event, although i do have some expectations of symbollic international revenues in the u.k and australia. then as the overhang continues to be absorbed and we're getting closer to the fda clearance news, the stock should breakout for good. one of these days, the technical signals are going to be strongly confirmed by price action :)
