Borislav Tonev

Ambient Water Corp (OTCBB:AWGI) Drowns in Toxic Debt

by Borislav Tonev March 3, 2016

Ever since hitting a 52-week high of just under $0.09 back in July 2015, Ambient Water Corp (OTCBB:AWGI, AWGI message board) has been slowly but surely sinking towards the bottom of the chart. During the last few weeks it drilled through a number of 52-week lows and it finally stopped at $0.0015 on February 24. Then, investors suddenly decided that the stock deserves better.

On Tuesday, the ticker experienced a strong 58% jump and the gains were extended during yesterday's session when another 59% push brought it to a close of $0.0043 per share.

It might not look like it at first, but the latest 10-Q does suggest that AWGI has one or two things going for it. Here's what the figures look like:

  • cash: $6 thousand
  • current assets: $60 thousand
  • current liabilities: $3.7 million
  • quarterly revenues: $80 thousand
  • quarterly net loss: $232 thousand

Indeed, the figures don't look like much. The balance sheet is absolutely horrific and the revenues are modest. It should be noted, however, that the sales experienced a rather significant jump during Q3 of last year and the management team described the outlook as “promising”. Last week, they also said that some negotiations with potential clients in Latin and South America are underway which goes to show that the figures in the future financial statements might just turn out to be a bit more decent.

But if that really is the case, then why did AWGI lose 98.3% of its market cap in a matter of just over seven months?

It's all because of the toxic debt. The company's O/S count grew from less than 130 million at the beginning of last year all the way to more than 150 million on September 30, but even after that there was about $967 thousand worth of notes outstanding at the end of Q3. That amount is convertible into shares of common stock at discounts ranging from 40% to 50%.

We don't know whether that has anything to do with it, but we do know that the decline in share price has been particularly steep since the publishing of the 10-Q and we also know that AWGI was recently forced by one of the note holders to increase the number of authorized shares to 2 billion which means that the gates for further dilution are now open.

There's also a stock purchase agreement in place under which an entity called River North Equity LLC will buy up to $5 million worth of shares at 75% of the market price. This might just reign in on the effects of all the toxic debt to some extent. Whether it will be enough to keep AWGI afloat, however, is another matter.

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