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"Our cash and other sources of liquidity will not be sufficient to fund our operations beyond May 31, 2019 . We may not be successful in raising additional capital necessary to meet expected increases in working capital needs. If we raise additional funding through sales of equity or equity-based securities, your shares will be diluted. If we need additional funding for operations and we are unable to raise it, we may be forced to liquidate assets and/or curtail or cease operations or seek bankruptcy protection or be subject to an involuntary bankruptcy petition."
"Significant changes from the Company’s current forecasts, including but not limited to: (i) failure to comply with the financial covenants in its debt facilities; (ii) shortfalls from projected sales levels; (iii) unexpected increases in product costs; (iv) increases in operating costs; (v) changes in the historical timing of collecting accounts receivable; and (vi) inability to maintain compliance with the requirements of the NASDAQ Capital Market and/or inability to maintain listing with the NASDAQ Capital Market could have a material adverse impact on the Company’s ability to access the level of funding necessary to continue its operations at current levels. If any of these events occurs or the Company is unable to generate sufficient cash from operations or financing sources, the Company may be forced to liquidate assets where possible and/or curtail, suspend or cease planned programs or operations generally or seek bankruptcy protection or be subject to an involuntary bankruptcy petition, any of, which would have a material adverse effect on the Company’s business, results of operations, financial position and liquidity."
"We have a history of net losses. We may not achieve or maintain profitability.
"We have limited non-recurring revenues derived from operations. Sphere 3D’s near-term focus has been in actively developing reference accounts and building sales, marketing and support capabilities. UCX and HVE, which we acquired in January 2017, also has a history of net losses. We expect to continue to incur net losses and we may not achieve or maintain profitability. We may see continued losses during 2019 and as a result of these and other factors, we may not be able to achieve, sustain or increase profitability in the near future."
-- Annual Report
If you look at their product line up, their total employment (41 as of the end of the year), and the gross revenue of their non-divested product lines, you have to wonder "what are the investors smoking?"
VMF has been bailing for a couple of months. He obviously saw this coming.
It looks to me like PT Barnum has run out of rabbits in that hat of his. My crystal ball says he's out of there by the end of summer.
So here we are, months after ANY dumped most of their revenue-producing assets (albeit with substantially all of their liabilities, and riddance of a massive "burn"). Unless you're an insider, you haven't heard a peep about the revenue, products, and prospects of the current incarnation worthy of an SEC filing. About all that's been disclosed is that a major stockholder has dumped about a third of his holdings.
It's difficult to believe that the day-to-day price has any credible foundation. I suppose that the buyers are placing a bet on P.T. Barnum pulling yet another rabbit out of his hat, such as finding another failing company to merge with, and fueling the acquisition with a lot of forward-looking BS.
Personally, I think that ploy has worn thin. Perhaps he's going to try the opposite, and sell this company to one that is failing, but still has significant revenue? After all, there is a sucker born every minute.
VMcF is probably as well informed as anyone about the prospects of ANY, and he's dumping about as fast as he can without completely killing the share price. I guess I'd do the same if I were in his shoes, because I think it would take a miracle for this stock to retain its listing.
It all comes down to this question: Where's the beef?
Yup. MacFarlane is cutting his losses, the rats are leaving the ship - or wait a minute - there are two rats left, aren't there?
Gearz,
To clarify my thinking, the delisting notice from last May (disclosed in Form 8K of May 29) required that the stock price rise above a buck within 180 days, but as a further condition of that, in order to re-attain compliance, they also are (separately) required to meet "all other initial listing standards". Those standards specifically include the stockholder's equity, under Rule 5505(b)(1).
Therefore, it's my interpretation that they face delisting on November 26 (only ten days from today) per the May letter, not today's letter. In other words, the May letter gave them 180 days to meet the stock price, but only as long as they also met the shareholder's equity standard at the end of the 180 days.
I don't think the letter described in today's item affects that. It wouldn't make sense that failing to meet a second, different requirement exempts you from a deadline of an earlier noncompliance. Per the May letter, they don't even qualify for a 180 day extension.
Regards.
Yup, M+, you're right. Whether it's a $1MM or $10MM company is a crap shoot.
Today's pop strikes me as rather odd. The 8K reports two items that I view as negative - 1) the re-coronation of PT Barnum, and 2) (yet) another delisting notice.
As I suggested earlier, NASDAQ caught up with the $707K shareholder's equity shown on the quarterly report. The problem is worse, though. They also need to meet this requirement in order to escape their prior delisting deadline, which occurs this month. There's not a provision for having a delay to submit a plan in the requirements needed to meet the earlier deadline. I don't know whether they can walk a line through this. Creative bookkeeping might work, but it is difficult to imagine that a company that has had to borrow so much in the past week or two really has $2.5MM in shareholder equity.
It might help avoid confusion if IHub would update their stock quote vis a vis shares outstanding and market cap. Since the 1:8 reverse split the market cap and historical pricing have been way out of whack. IHub shows the market cap at $32.15M, while MarketWatch shows it at $5.04M. (Hint: It somewhat depends upon what you count and how you count it, but neither is even close, especially with the preferred shares/debt, whatever, but the MarketWatch number is a lot more representative.) MarketWatch shows the 52 week range from 1.06 - 24.72, while iHub shows it as 0.13 - 4.25.
That half a million dollar loan is a little frightening. It kinda' makes one wonder how liquid the surviving company is? It's like a tar baby that Freidheim can't seem to shake.
Yeah, I looked it up, you're right. The goodwill relates to the excess that was paid over the actual value of the acquisition(s), presumably of OVRL. That given, it had the same effect, at least for the year that I originally tried to sort it out, especially since OVRL was substantially all of the business. It represents how much more OVRL is valued than it's worth. The books aren't going to close on the OVER side of the business in public, so we won't know how the goodwill will be valued come the beginning of '19. If ANY weren't shedding the debt and the bulk of the business, the shareholders equity would be deep in the red. Once the share purchase goes through, it will probably be unimportantly close to zero.
I'm don't see it as having been very fair, and perhaps even unethical, to publish the quarterly report without having broken down the income (net and gross) by categories relevant to investors, specifically including breaking out the HVE side. It makes it a crap shoot, with only insiders knowing the truth.
Separately, someone commented that the volume was way down. Perhaps they didn't figure in the 8:1 reverse split? You'd expect the volume to be down by a factor of eight.
You probably know more about this than I do, but from how I've seen the goodwill asset derived in the past, it has essentially been the difference between the market value of the outstanding stock (more or les market cap) and the sum of all other assets. In other words, it is adjusted to make the assets balance, and not assessed in its own right. The fact that this stock is so overpriced, considering how greatly impaired it is, is the driving force behind the high goodwill valuation. An effect, not a cause, if you will. The problem with the goodwill valuation is that it lags the market by many moons, so to speak. It quickly becomes utter nonsense when you have such a precipitous decline. It is last winter's market cap, mixed in with todays remnants of the business.
Consider goodwill to be a participant in a zero-sum game. If they were to take an inventory write-down, for example, (which they probably should have done), the effect would necessarily be an increase the goodwill valuation by the same amount.
It doesn't matter any more, as the bulk of the assets and the bulk of the liabilities will move out of the light of day and into Freidheim's private venue before the next assessment occurs.
The remaining stock will be renamed/resymboled and effectively be stock in what is now HVE ConneXions. Sphere 3D was pretty careful (i.e., deceptive) in breaking out their revenue stream in detail. I don't have a clue as to how profitable HVE is. The low price that ANY paid for them would suggest that it isn't a whole lot to write home about. On the other hand, I also recall some of their principals being less than happy with the value of what they got in their end of the deal.
It's not that bad an ending, given the prior storyline. Current ANY investors will be investors in a legitimate operation (perhaps successful, perhaps not), and Freidheim will be stuck with his just desserts - an appropriate payback for his support of the scam measures in the past (the shotgun wedding of OVRL with Glassware comes to mind), where he held all the cards. I know that that is little consolation for those who have lost 99.9 cents on the dollar, but hey, for those who were in a frame of mind to have believed in the get rich quick pitch, they probably would have lost it all another pitch even if they didn't fall for this one. That's about the best spin I can put on it.
The reverse split was all for naught if I'm reading the quarterly report correctly. Their shareholder's equity on the balance sheet for September 30, 2018 has slipped to $707,000(USD), whereas for December 31, 2017 it was $10,463,000(USD). Having a stockholder's equity of over $2.5MM was sufficient to allow them to meet the Equity Standard for continued listing (NASDAQ Marketplace Rule 5550(B)(1)), as long as they kept the stock bid price over a buck. They're no where near meeting the other two continued listing standards, specifically, a market value of listed securities of over $35MM, or a net income of over $500,000. They're negative net income streak goes way back, and the market value of listed securities is under $5MM.
From the delisting letter of May 29, it looks to me like whatever portion of the business that remains after November 26 will be booted off on the pink sheets.
Yeah, you're right, and it's no fun for all-in speculators, but it's still fun for spectators.
I wonder what PT's got up his sleeve? Without the revenue from Overland/Tandberg, there's no way that he can comply with the continuing listing standards, even enough to get a six month extension. Also, he'd need to get a bump in the stock price from the reverse split, and usually it goes the other way.
So, I'm guessing the actual purchase agreement won't be officially recognized until after the NASDAQ delisting deadline, so the revenue is there, at least on the books for the day or two that it matters. But before that, he'll push out some product releases, and some great forward-looking statements about how his company is (or will be, more accurately) free from debt and has valuable assets in order to pump up the stock price, and correspondingly, the market cap. In other words, he'll try to span the deadline with two alternate realities.
Don't be surprised if it works, at least for the next six months. There is, after all, a sucker born every minute.
Gearz,
I don't think I see it exactly the same; I'm not sure the differences are important.
As I interpreted the original offer, what was Sphere 3D/ANY now becomes HVE, stripped of the debt that it bore, but also minus the perhaps non-existent, but in any case, delusional upside potential. What becomes of the renamed entity is anyone's guess. Perhaps it will continue under PT Barnum, and will continue pursuing those, one of whom is born every minute. On the other hand, it could simply continue pushing the old HVE product, which might be viable, but their own history suggests that it probably will struggle and barely keep its head above water. (Otherwise, it wouldn't have sold to Sphere 3D for so little).
Overland Data/Overland Storage/Tandberg will, for now, no longer be a public company. EK will have to answer to Freidheim, not public investors. I suppose that means he won't be hanging up on anyone who questions him in a shareholder's meeting, which is too bad for those of us who were so amused. I also think his job is no longer secure. The three men in the sinking boat no longer have each other by the bells. Again, SVTP won't be public, but I'm guessing that Freidheim has little choice but to pony up for the current operational losses, and in response he'll put EK/SVTP on a monumental diet and fat trimming program, whether or not he chooses to retain EK.
EK had planned on buying his way out of debt with Freidheim, and Freidheim hoped to escape the debt uninjured. That failed, and failed from both perspectives. EK's got his new company, but as the worm turns, he is instead entirely, and deeply, in debt to Freidheim. In that respect, the can is kicked down the road, it's just now a private drive, not a public road.
That's about as confusing as it gets. My spin would be that Freidheim has given up on EK coming up with a buyer and has little hope of ANY regaining the share price and market cap required for continued listing, so to avoid taking a funderthucker of a haircut (and corresponding write-down), he's rolling the debt forward to EK's "new" company. The king is dead, long live the king. Good luck, Steve. You're going to need it.
Redux. Someone's playing, many are being played. Cyrus's/Freidheim's ownership and the price FPC Holdings paid for the discounted debt that Colbeck bought from Opus were well discussed a while back on this board. Interestingly, no one paid much notice to PT Barnum's preliminary and desperate reverse split proposal, and the subject of funding the operational losses remains taboo.
Rinse, and repeat. Congrats to whoever's getting away with pulling this off yet one more time.
Another reverse split? Wow. You gotta be kidding. I wonder what PT Barnum's strategy for meeting NASDAQ market cap minimum consists of. Another trumped-up merger/acquisition, perhaps?
This would suggest to me that they've given up on selling Overland/Tandberg, and PT's up to his old tricks, going back to what he knows. I'd expect big-time dilution to fund the ongoing operational losses. There's a sucker born every minute, but I don't think even his twofer warrant deals will sell at this point. Also, it wouldn't surprise me if the 1:10 reverse is enough to keep the price above a buck. Remember how they had to jack it at the last minute the last time they pulled this?
They say that even a broken clock is right twice a day. I haven't even seen that out of you. Go back to your post #45774 of July 13, where you insisted that there was "News pre-market on Monday" and "no more extensions". There wasn't any news on that Monday, or the next, or the next . . .. There were, however, "extensions".
So, do you now want to tell us what happened to the pre-market PR you touted yesterday?
As I recall from reading the "Purchase Agreement", the price is subject to adjustments related to cash and presumably other balance sheet positions, presumably to nullify any benefits from postponing or accelerating payments. I know that doesn't directly answer your question, but the seller (as you call it, "remainco") would have what's leftover of the $45M after retiring the debt. There's no guarantee that there will be anything left over, or that the surviving company will, in fact, survive (it's even stated this way in the purchase agreement).
I think it is fair to presume that if EK had been able to secure investors and other funding to compete the purchase, the purchase would have closed a long time ago. I think he's pumped the well dry, but that's just my opinion. At this point, the additional accumulation of operating losses have probably put the deal underwater from remainco's perspective, and EK/Overland/Tandberg are damaged goods. It's up to CCP/Freidheim to act on how they prefer to expose or conceal the trainwreck to their private investors.
A good friend who was sometimes a banker once told me that the more you owe a bank, the more you have the bank by the bells. In this case, the bank is Freidheim & Cos. off-shore bank, and EK is, uh, holding the sack.
Somebody's out there smiling. Perhaps even laughing.
The filing really just looks like a clean-up, removing CCP's right to convert debt to equity on a portion of the debt they currently hold. They would probably consider exercising this if the stock price were (with the split) above $250 a share, or about a thousand times what it is now.
I suppose it might offer a glimmer of hope to EK's fans, as there is probably a reason behind why they are cleaning up CCP's entanglements between Overland/Tandberg and Sphere 3D. Perhaps this is to facilitate the "Share Purchase Agreement". That may mean diddly-squat to shareholder, though, because it is still unlikely that whatever isn't spun off has any value. I believe the Share Purchase Agreement only relates to shares in the two subsidiaries, not ANY.
Shoot his own foot off - I love that. Nevertheless, I wish I had made off with as much money as Kelly. I could use a vacation home and a new Mercedes.
Per yesterday's filing, at least one investor, Freidheim/CCP/FBC, is at least pretending to be a believer. He extended Kelly's window by four more months. What we don't know now is who's going to bail the boat out in the interim.
Here's a thought. Freidheim et al. own about $45M in ANY debt, while the entire market cap is only $4.3M. In other words, their exposure is 10x the market cap. It's getting to the point where stockholders are little more than a nuisance. Delisting would clobber the share price, and make the cost to take it private trivial. They would no longer have to launder their dirty linen in public. Retail investors have outlived their usefulness, and delisting is a convenient way to flush them down the loo.
But who's going to fund the burn? We'll be seeing another 8k filing fairly soon . . . stay tuned.
Thanks. Now would be entertaining to know what Colbeck paid Opus.
So, anyway . . . We've got three men in boat that's taking on water, far out at sea - Machine Gun Kelly, PT Barnum and Captain Freidheim - and each has the others by the bells. Who's going to turn cannibal, and who's going to be supper?
This sort of answers your question from yesterday re: "who in their right mind". I (brag, brag) offered the possibility that CCP very well could (again), and they did, (again) through their phony off-shore, vest-pocket bank.
This begs the question of whether Madoff was in his right mind?
(That shouldn't be misconstrued to imply that CCP was in their right mind.)
So anyway, they were in it to the tune of $25M at the beginning of the week, now they are in it to the tune of somewhere near $45M, but instead of it being a $25M in default, it is now magically a $45M loan that isn't in default. Plus, they have Glassware and a metric shipload of worthless shares. Ahhh, the wonders of bookkeeping.
Now CCP is EK's $45M investor. Per Shakespeare, all's well that ends well (LOL).
P.S. I'd really love to know how much Colbeck paid for the paper they bought from Opus, and how much (CCP affiliate) "FBC Holdings" bought it for. I don't think anyone's obliged to tell, but I'll bet Colbeck bought it at a good discount and sold it at face value.
If I recall, Dell's $23/share offer was pre-split. What you really meant was Dell's $575.00/share offer. (I can't help but laugh when I type this).
I don't have any knowledge as to why CCP has now loaned ANY an accumulated $24M, but I certainly wouldn't say they were in their right minds in having done so. At one point it looked like they had gotten their offshore, vest-pocket shell bank out of ANY and scrubbed it off on Opus. It's possible they wound up needing to avoid a Manafort, in other words, getting busted for borrowing from a legitimate bank based on prior, "performing" offshore self-loans secured with overstated assets. Futzing with banks is the sort of thing that draws a lot of regulatory scrutiny, much more than small-potatoes pump-and-dump securities. Also, CCP isn't public, so they don't have to answer to the SEC.
On this theory, they have since poured more and more money in to make ANY appear solvent and legit. This also served to let them avoid recognizing the haircut on their own books, which would make them look like suckers to their private investors.
Perhaps they were delusional enough to believe that they were going to strike it rich with all of those, $2, $3, $4 and up warrants they were accumulating? EK is quite the pitch man, and they've got PT Barnum as well. Anyway you look at it, they're getting what they deserve.
So, to offer an answer to your question, CCP hasn't acted in the past as if they are in their right minds, they've acted like sleazy manipulators. In this case, it looks like they'll get caught holding the bag, and I agree, in "a short time at that".
When I add up the debt on the 10-Q, the $45M "Share Purchase" deal would only cover the formal debt with about $100K to spare, so you would still have a money-loser in deep doo-doo at best. Also, come Sunday, the exclusivity of the deal expires and either party can cancel at any time, which is equivalent to no-deal.
HVE etc. have turned out to be money losers also, and all that's left that's in the plus column is RDX. (Once again they note that Glassware is "not material", chuckle, chuckle.)
I still say it's entirely up to CCP. They've got to cough up $18.5M, or kiss $24M goodbye. I say it's 50:50, but I still think it would be very entertaining if EK flipped and went direct to Colbeck with $18.5M, given that his raising $45M is a pipe dream.
And now we know one of the certain milestones, per "the Company must satisfy certain milestones which the failure to comply therewith would constitute an event of default under the Debenture.". Keeping current on interest payments was apparently mandatory. If Colbeck didn't have a buyer lined up, they probably just shot themselves in the foot by not deferring the interest payment. Nothing will kill off the value of Overland and Tandberg faster than a declaration of default, save, perhaps, missing payroll or laying off all "non-essential" employees.
What a circus this would be if EK were to be involved in buying the assets directly off Colbeck, leaving his fan base at CCP holding the bag. "Fool me once, shame on me. Fool me twice, shame on you." They should have heard his history from someone other than him before they signed on.
With the stock trading where it now is, I believe ANY is below the NASDAQ "Market Value Publicly Held Stock" continued listing requirement of US$5M. In other words, it would take more than a reverse split to avoid delisting, as they no longer meet one of the other necessary requirements to be reinstated even if they remediate the stock price. Perhaps their new puppetmasters at Colbeck will let them pull of yet another contrived merger with another declining, desperate, naïve, or failing company to prop up ANY for another spin cycle, rather than dumping in raw cash. The previous puppetmaster, CCP, would already have made them do it, if history is to be believed. On the other hand, it wouldn't surprise me if PT Barnum would put a positive spin on being exiled to the pink sheets . . .
m, I view the four month extension as being the result of the apparent collapse of the EK deal (as I'm sure you also do), and the low .30's price suggests that most buyers (and perhaps insider traders) see it the same. (It wouldn't surprise me that the 8-K dumpers also knew it was doomed, but that's another matter.) Colbeck's tricky wording of one of the earlier two-week extensions suggested that they might avoid officially declaring default, and the most recent extension suggests that they will assert control with "milestones" instead of seizing the security.
Oddly enough, their imposition of milestones might be the only thing that could result in the eventual continued operation of Overland and Tandberg. Had EK come up with the cash, he would have been free to continue to run it into the ground. The ANY stock, however, is now doomed, even if the subsidiaries are able to continue on.
I have a few questions, though:
Does anyone see a strategy that avoid NASDAQ de-listing?
Does anyone want to speculate how they're going to pay rent and payroll?
It takes a few months for layoffs and cost-cutting to turn around a cash flow. Does Colbeck have enough faith to throw in more good money? Perhaps CCP's phony vulture bank? Is there another sucker out there for a private placement? Can VMF be suckered again? Can EK pull a rabbit out of his hat? It would be fun if there were a Vegas book on this . . .
Derek,
Just for clarification, I use VMware on the system that I'm posting this from because it uniquely handles the range of OS's that I need to run or test including some (typically nearly obsolete) oddball applications and hardware. It also does a decent job of running Ubuntu. The VMware version that I use doesn't reasonably provide for the "anywhere" served desktops that Citrix describes and that I've been familiar with in the past, where it was important that laptops and mobile devices that could be lost or stolen never actually retained confidential, privileged or classified information that needed to be protected. They are kind of two different animals. I guess I really don't know whether Glassware was targeting either of these. They sort of advertised it as "any" capable, like Citrix, but also boasted of a range of operating systems that such an approach could have never reasonably attained in a way that would have been meaningful to the customer base they were courting.
You may very well be right. They may have relied entirely on Azure for virtualization (and "any" functionality), and all they provided was a veneer.
Now that Colbeck has given ANY a four month extension, there probably won't be a lot to talk about for quite a while. It would be really interesting to know what the "milestones" are, but management doesn't seem too eager to disclose these in their filing. My speculation is that the EK deal collapsed, and they're giving management a chance to stop the flow of red ink. Maybe they couldn't find any buyers if they first tainted their assets with the word "default". I suppose we'll see quarterly reports in a few weeks.
Derek,
I know we disagree on some of the details, but please remember that we agree that once PT Barnum got involved, it became a scam. I really believe CCP is the biggest loser, and given that they were the ones who controlled the companies during the Sphere 3D/OVRL shotgun wedding that brought PT into power, in the end there is some justice in their losses.
I still believe that Glassware likely "worked", but that "working" is irrelevant. There is nothing extraordinary about making what is now called a "hypervisor" work. It does, however, require a very significant effort beyond that point to make one useful, and even after putting a few hundred million into the effort it will never be all things to all people, just a niche product.
In the industry there is typically another version of the 90/10 rule, where it takes 10 percent of the time to get the technology demonstrator working, and the remaining 90 percent of the time to get it to market. With a hypervisor, however, its more like a 99/1 rule. A working hypervisor is only a very small component of a product that at best is ultimately useable by even a small segment of the market. Perhaps the most successful virtualization products out there are ones developed by Citrix. I just googled them, and the first line that popped up claimed "Citrix enables business mobility through the secure delivery of apps and data to any device on any network.", a phrase almost identical to what Sphere 3D claimed, and in particular noting the word "any". But even at that, Citrix is a long way from being able to handle most real-world applications. (Note that it doesn't say "any application" anywhere in their catch phrase.) It is a very useful and valuable product if you can constrain your applications to Citrix's capabilities, but it is only useful under those constraints.
Back in the 1970s, IBM distributed a virtualization product named "VM". It wasn't intended as an operational product, but more of a testing tool. Nevertheless, by the 1980s many customers adopted it for use in what amounts to the same type of applications that Citrix caters to today. (I used it in both contexts, as a system test tool and later as a customer within a vendor's application environment). The problem is that PC's, and PC operating systems, aren't anywhere near as well architected for virtualization as the IBM System/370s were, and also the expansion of networking and the entanglement of networking technologies has rendered some of the additional benefits of virtualization impractical. The approach with PC's has therefore been to try to plug all of holes in the dyke, and there are a huge number of holes. This, more than anything else, results in the 99/1.
In the end, "works" in a test doesn't/didn't mean anything to anyone outside of the R&D lab. The fraud was in implying that it did, and even more so, pretending that it was time to "sell, sell, sell".
I think PT was way too big a fool to understand any of this, and anyway, understanding why the product he promoted could never be what he promoted wasn't part of his job. He was there solely to make a sow's ear look like a silk purse.
I've sat in the boardroom of a competitor and listened to a much younger, self-appointed messiah make a virtualization promise to a CEO that I knew from my experience was technically impossible. It took the clown about six months to find out for himself and quietly back down his promises, and another couple of years before the consequences of the failure was conspicuous enough to result in the cancellation of the product. I estimate that the CEO wound up wasting about $25M as a result. (The really foolish part was that the CEO turned around and repeated the mistake a couple more times over the next several years.) In the case of ANY, CCP is acting in the role of that CEO. At least they are getting what they deserve.
That's probably not a lot of consolation. If I had any say in the matter, I would give PT a lifetime ban. Having people like him involved in public companies damages the legitimate capitalization requirements of everyone. I think two strikes are enough.
8-K shows that the banks now give them through Monday to cough up. It also shows that NASDAQ gave them a warning for exercising the "blank check" provision to pay off FBC Holdings. I dug a little deeper into FBC Holdings, and the only presence that I could find of the Luxembourg-chartered bank is for CCP's self-dealing in Sphere 3D.
I agree. Cyrus has consistently shuffled things around to keep their unrealized losses off their books. (If my memory is right, this is how Bernie Madoff initially got off on the wrong track). It's only reasonable to presume that they will continue with this predisposition, and try to trade their debt for equity. That they and their affiliate bank allowed Colbeck to tag on the "fee" is an indication that they likely won't assert their rights to their junior debt (not to mention that they would most likely lose every last penny immediately, and not be able to hide that).
I think any Cyrus debt/equity trade will be short lived, though. Someone needs to fund the burn or the sheriff will padlock the doors. EK should rightfully struggle (and fail) to raise financing or bring investors on board, given how he burned through the VMF family trust funding, and another couple of big chunks of VMF's other cash. Even if VMF still believes in him, the books and due diligence should make anyone (else) shy away.
As I said before, I'd need $30-50M to bring Overland/Tandberg back to profitability, and that's after the debt is retired. Layoffs, closures, contractual defaults, payables and buyouts aren't cheap, and there is a significant lag between bringing the products up to date and making them competitive and when the net turns positive. The best-case scenario with EK's current fantasy would only be a delay of the inevitable.
My rule of thumb us that a company is worth somewhere around a year's revenue, or 10x net, whichever is greater, minus the debt, but you have to consider some abstract liabilities when assessing the debt. Overland/Tandberg could be worth $50-80M, but only if it were fully turned around. EK's got the train going the wrong direction (and he always has), and it's going way too fast. The debt is too big to overcome.
Uh, which, uh, Monday, uh, are you referring to? Ain't seen no news in a month . . . except, of course, insiders disposing of stock and extensions to avoid officially declaring default.
I beg to differ. I would never characterize EK as shrewd.
He's a pitchman, and like many salesmen, he's foolish enough to believe his own pitches. To be shrewd he would have to know better. I genuinely don't believe he did.
I've been in their industry for over forty years. I could give you a list of disk and virtual system product promoters just like EK. The world is full of parasites who promote, largely because they lack the skills to do the work themselves and the experience to know where their concepts will break down. There've been many times where I've been in heated discussions telling a CEO why a product (oddly enough, in one case one similar to Glassware) couldn't succeed from a technical perspective, only to have the CEO buy into a starry-eyed pitch anyway. A well-presented fantasy is easy to believe. Even if the technology is sound (and often it isn't), the details of integrating performance, reliability, security, cost, extensibility, maintainability, etc., don't impress anyone but are essential to viability in the marketplace. The pitchman's ignorance and naiveté almost always prevail. I know we disagree and I respect your opinion, but Glassware is a perfect example of this, as were Ultamus and Snap but to a lesser extent. I think EK was a fool for his own beliefs. On the other hand, PT Barnum didn't know or care one way or another, it was just another opportunity play more suckers. (There's one born every minute, you know).
It's hard to be a good salesman if you don't believe in your product. The products EK has allowed himself to be seduced by have only been mediocre at best. He has vastly oversold them. Some would call that skillful. Others would consider it dishonest. Anyway you look at it, it has harmed a lot of people (and benefitted many that genuinely didn't deserve their rewards).
(BTW, I was just out putting a new power steering pump in my old Jeep. Sometimes you need a break from writing ARM A-series hypervisor traps).
I agree on all points, and Cyrus's reluctance to take a haircut is outweighing their wisdom.
I am a bit surprised that whoever's backing EK in the new (ad)venture hasn't gone around the deal, directly to Colbeck. That suggests to me that Cyrus is partnering with EK.
I estimate that it would take $30-40M to keep the lights on and turn both Overland and Tandberg around, in addition to the $18-20M to get out of jail with Colbeck. It would also take some talented management with considerable commitment to the industry. The necessary cutbacks would bruise EK's ego/legacy right out of existence so I can't see it working under his, uh, leadership.
Nevertheless, Cyrus may think they can pull it off. In any case, it won't be under ANY and PT Barnum's purvue. The twitching of the corpse will most likely be hidden within a private company.
So the 8Ks show CFO KK and General Counsel Jenny Yeh each thought 39 cents was more valuable than a share of ANY this week . . . makes me wonder what the pumpers know that they don't? I suspect it's the other way around.
Today marks the fourth expiration of the Opus/Colbeck two-week loan extensions. How friendly will the next extension be? Stay tuned.
Okay, so anyway, back on subject:
From the filing, "(i) the maturity date of the loans owing to Colbeck under the Credit Agreement was extended from June 29, 2018 to July 13, 2018, (ii) the interest rate applicable to the obligations under the Credit Agreement are to begin accruing at the default rate under the Credit Agreement as of June 29, 2018 regardless of whether a default exists under the Credit Agreement, and (iii) an amendment fee in the amount of 2% of the aggregate amount of the obligations outstanding under the Credit Agreement as of the maturity date will be charged in the event that the loan parties have not either entered into an amended and restated Credit Agreement or undertaken a restructuring on terms acceptable to Lender by the maturity date."
It looks like Colbeck is beginning to assert control. Note that they aren't demanding immediate cash, as the once-seemingly-bottomless dilution well has probably run dry. This does leave us to wonder, however, how they intend to make payroll. We could start a pool on how many two-week-at-a-time times the can can or will get kicked down the road.
Colbeck's paper is between Overland and Tandberg as co-borrowers, whereas CCP's Spanish affiliate bank's loan is to the parent, Sphere 3D. Any speculation as to who is in and who is out in an "acceptable restructuring"?
M, I'm worried that you're too serious about this. I was counting on you picking up on the "PT Barnum" double entendre. All this stock has left is its entertainment value, so why not go for it?
Ooops. My compounding calculation only considered the "fee" and didn't also add in the interest rate, which was just increased to the "default" rate, so it is a little closer to loan shark rates than I posted. Sorry.
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You gotta stand back and look at the SEC and Sedar filings, hopefully with a sense of humor (and with genuine apologies to those who are still hurting) . . .:
Setting aside the PT Barnum aspect of the Glassware, etc., what we have here is a tragicom starring an, uh, gentleman, who led his company to a decade of consecutive quarterly losses, fell flat on his Snap server, whose Ultimus RAID was a financial disaster, and who just in the past month or so cashed in $5,000 in stock (showing how valuable he viewed the future of it), now agreeing to pony up somewhere around an additional half a million of what would be someone else's money to buy himself another two weeks of time to snooker his buddies into bailing out his sorry, uh, derriere, or, perhaps, ego, reputation, whatever.
A real knight in shining armor. I can't see why anyone wouldn't want to put their life savings in this stock. It's a sure thing!