I would agree with DS that the debt is not huge especially when you put in context of who they owe money to. I annotated some excerpts from their last SEC filing which should allay some of the BK fears. The real debt of this Company owed to parties who can be meddlesome is closer to $1.2m not $8.7m.
The real fear to stockholders is that the way to deleverage is to convert debt to equity which would throw a lot more shares in the market. The good news is they can't do that until they get current.
Customer deposits $ 175,000 (1)
Convertible notes payable $ 896,666 (3)
Notes payable-related parties $2,773,623 (2)
Current Portion Long term $ 1,016
Derivative liabilities $1,842,555 (3)
Acc Exp and sundry current liab - related parties $1,847,267 (2)
Accrued expenses and sundry current liabilities $1,132,457 (5)
TOTAL CURRENT LIABILITIES $8,668,584
Long term debt $ 73,984 (4)
TOTAL LIABILITIES $8,742,568
1) $175k- This deposit goes back to the old diesel emulsion project days. It has been outstanding forever. If it was an issue it would have surfaced much sooner. They can't write it off since they legally owe the debt, but the counterparty has walked away from it.
2) $4.6m- This is money the Company owes to shareholders like (i) HanscomK for their loan; or (ii) executives for unpaid salaries. These debts can be eliminated by capitalizing it into shares. They are not going to BK over salaries since they would have claims against themselves.
3)$2.6m- This is the money owed to the convertible note people. They are stuck like us. They can't convert and flip under the new rules. They likely wouldn't BK the company as their is nothing to be had.. They will just want to be paid out first.
4) $75k- Is per the financials are real 3rd part obligation to a Bank. it carries interest at 39% per annum. It is allegedly to a bank (which is suspicious since it carries a rate well above the usury rate). This creditor is the real threat to a BK but you need two creditors to force an involuntary BK.
5) They have never said what is in this category of obligations. Likely includes rent and other accruals. Kind of high but if it is general business obligations these types of creditors don't commence their owe BK they pile on someone else's party. Why? Because they are unsecured. They can't just stop providing services
