Others have already cleared alot of this up, but as they have stated, pretty much anyone can short a penny stock. Its not all that hard to open up an account overseas where they allow you to short pennys. The problem and or catch here is you have to meet very very very high requirements to do so. Many require something like 25,000 or more in cash in your account for you to be able to short a penny stock. Because of this, shorting of these are mostly left up to MM and hedge funds.
This is partially incorrect. The daily short volume is a completely useless number, as many of the MMs normal trades show up as "short volume" due to how they are recorded. Which means theres no way to know how much of the volume is actualy real short sells and how much of it is real trades listed as short sells.
This is why everyone goes by the short interest number for stocks. I can tell you that hardly any MMs will try and short a stock when it's at these levels. Any type of positive news would cause it to shoot up quickly and they would get burned. The short interest is and always has been very low in this company, and the FTDs are basicly at zero, which means there is no naked shorting going on of this stock.
I think the biggest problem right now isn't from people shorting it, but from people taking profits. You must rember that at these prices, it doesn't take a stock going up alot of ticks for someone to have a very very nice profit, which causes alot of day traders to simply flip it and cash it out. Once more news of substance hits, and once financials drop (assuming they show increased sells) this stock will go up nicely and start to hold at much higher levels. Once it gets to .002s and higher, the number of people taking profits should drop off quite a bit and it should maintain those levels or slowly grow.