Boreal Water Collect (OTCMKTS:BRWC) Reluctant to Bounce

Boreal Water Collect (OTCMKTS:BRWC) had a pretty rough day on Tuesday. The ticker opened the session with a small gap up at $0.0016, but it started slipping almost immediately. A couple of hours before the closing bell, the management team issued a press release and said that their Baby Water is now available in more than 300 stores across China. They also announced that they will be taking part in an event dedicated to drinking water in a couple of weeks’ time.

Many people expected that the news will break the fall, but unfortunately, it wasn’t to be. BRWC remained unmoved and continued falling until it closed Tuesday’s session at $0.001 per share (33% below Monday’s value). Yesterday, it attempted a bounce, but despite the $308 thousand in dollar volume, it only managed to add 10% which means that it’s still a long way away from the levels visited at the beginning of the week.

Despite the somewhat hesitant performance, most people don’t appear to be too concerned. Discussion boards are still pretty active and the investors who post there are saying that the future is bright. That might just turn out to be the case, but it must be said that the present isn’t quite so rosy.

Take the latest 10-Q, for example. It covers the first quarter of 2015 and the figures in it look like this:

  • cash: $125 thousand
  • current assets: $542 thousand
  • current liabilities: $2.3 million
  • quarterly revenues: $531 thousand
  • quarterly net loss: $301 thousand

Those of you who are looking for a silver lining will probably say that the sales figure is significantly bigger than the one logged a year ago. This is true, but on a quarter-over-quarter basis, BRWC registered a 15% drop. In addition to this, there isn’t a whole lot of cash and the working capital deficit is quite disturbing.

That, by the way, is where the biggest problem lies. A large portion of the liabilities consists of convertible debt and the dilution coming out of it has put quite a lot of strain on the stock. During Q1, for example, some unrelated parties (who won’t need to file Form 4’s when they liquidate their positions) acquired more than 133 million shares at $0.0006 a pop as a conversion of debt. In April and May, a further 319 million shares were issued to some equally unrelated parties at $0.0003. Once again, they were issued as a conversion of toxic debt.

Couple this with the hundreds of millions of shares issued to the management team in exchange for services and accrued salaries, and you end up with a stock that’s been heavily diluted. More specifically, you end up with a stock that’s been diluted by a stomach-churning 488% in a matter of just six months.

BRWC apparently realize how bad this is. At the end of last month, they issued a press release and said that they are in the process of removing all of the convertible debt from the books. They also said that they will no longer rely on toxic financing.

Sounds good, but you really have to look at the damage that has already been done and think about whether it’s repairable.

About forty-five minutes after today’s opening bell, BRWC is sitting at $0.001.

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