Financiers usually finance otcbb stocks like CRQE with convertible debentures. So let us say that they (cirque) borrows $40k cash from Shady Lending Incorporated. Well, that all good and what not, but eventually after a period of time as negotiated between both parties, Shady Lending wants their cash back (and hopefully a large profit).
So what you usually see is dilution in the form of amounts of shares over a specified time range, amount per day maximum, or all out converting frenzy like we have now.
Now, how do they make money? Why, they get a discounted share price usually between 30-60% of the average price of common stock usually over 10 days time. So for good measure, let us say that price is .006/share. Okay, now they get shares that are issued to them at a percentage lower than this price, say .0035/share. They immediately dump this stock for the arbitrage gain of: .0025/share for millions of shares until 40k is met, but that usually doesn't happen because the price usually falls after. So they need to convert more shares to get more money, and before you know it you are at: .0009/share.
Well why not .0001 instantly you say? Funny thing is: this brings serious liquidity to the stock, and as many shares were held tightly for higher prices, now this is no longer an issue: enter the flippers, bottom-players, and pumpers. They and those associated with them and others who do not post but watch the stock, buy in droves in the hope to flip this higher for a gain, to break even, or to cost average down.
Hope this helps.
edit: if the share AS hits within this time frame and there is more to convert, look forward to an R/S and an increase in the AS.
