Boreal Water Collect (OTCMKTS:BRWC) Wants to Break the Toxic Debt Chains
Boreal Water Collect (OTCMKTS:BRWC) is a triple-zero stock and it has held this status for about a month. The long term shareholders are probably wondering if it can get back to its feet.
It would appear that it wants to do just that. The stock managed to double its value in a matter of just six and a half hours yesterday and it closed the session at $0.0008 per share. Perhaps more importantly, it logged a dollar volume of about $220 thousand which goes to show that we might see some more action over the next few days. Here’s where another question comes in, though: If BRWC exits the triple-zero range, will it be able to move further up?
We should receive a definitive answer in the future. In the meantime, we might as well open the latest 10-K and see how the company is doing. The first thing that could strike you is that unlike many other triple-zero OTC enterprises, BRWC is actually an operating entity. Even so, the report will probably leave you with some mixed feelings. Here are the figures:
- cash: $187 thousand
- current assets: $619 thousand
- current liabilities: $2.9 million
- yearly revenues: $2.4 million
- yearly net loss: $885 thousand
The revenues are undoubtedly impressive for a triple-zero company and they seem to be growing. On a year-over-year basis, for example, the sales jumped up by about 12%. Recently, BRWC informed us that the business in China is growing and said that they expect to see a much more significant growth during 2015.
Unfortunately, the rest of the 10-K isn’t really that promising. There isn’t a whole lot of cash and while the revenues are indeed growing, the company has been unable to reign in on the operating expenses. The biggest problem, however, is called toxic debt.
Quite a lot of convertible notes were issued last year and while the management team decided not to disclose the specific conversion terms in the 10-K, we know that between November 5 and November 27, $55,000 worth of debt was turned into 26,415,520 shares of common stock. This brings the average conversion rate down to just $0.002 per share. During the same period, retail investors were paying between $0.004 and $0.01 per share on the open market.
In January, the management team raised the number of authorized shares from 600 million to 1.5 billion and they later issued a further 59,630,033 shares as a conversion of $49,919 worth of convertible notes. The conversion rate in this case stands at $0.0008.
At the end of March, the number of issued and outstanding shares was sitting comfortably above the 900 million mark (compared to just 370 million at the beginning of the year) and because of this, the A/S count was raised again, this time to 5 billion. This could suggest that more dilution is coming BRWC‘s way. Or is it?
The management team announced yesterday that they are in the process of retiring the convertible notes. They also said that they haven’t picked up any toxic debt since October and promised that from now on, they won’t be relying on this sort of financing.
Investors seem to be pretty excited about the news. That’s what caused the massive volume spike and the 100% in gains, and some people around the internet now reckon that this is just the beginning.
The thing is, the dilution has already caused quite a lot of damage and nobody can say for sure whether it’s reversible. What’s more, BRWC will need some time until it gets rid of all of its convertible notes. This should happen before the end of the quarter which means that some more discounted shares might see the light of day over the next two months.
And once the toxic debt has been dealt with, the company will need to think about achieving a positive bottom line – something they’ve been struggling with for more than a few years.