Here's a good example. what if they were already shorting when the stock was at .20 a share? If that's the case the stock is already down 36.5% so if SFMI decides to do a "draw down" it would be at the average closing price of the last 15 trading days minus a 3% discount. They could then use those shares to cover their short.

At that point SFMI doesn't have a lot of choice but to take that type of financing because they only have to give out shares at a 3% discount. If they don't like dealing with them the alternate type of big financing is a PIPE and that would be at a discount of 20%-30% of the current share price. See how this gets to be toxic?