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I don't like 8.5 million shares
Too much dilution... they split at around 3 million shares and already up to 8.5 million according to the presentation (assuming all of the conversions and employee incentives come true).
They have to uplist...
I think they have spent way too much money, and have now diluted way too much. Not uplisting will kill this stock, and I don't think Frost would invest without knowing the future looks bright.
$15 is possible, $8.50 is realistic
I laid out a case where IF they could get 2013 revenue of $125 million, keep COGS at 80%, and maintain SG&A at $4 million per quarter - assuming no other expenses - this would give them a $9 million annual profit. I don't see any other expenses below the operating income; however, I don't know if they can keep SG&A that low with the FitMiss line.
A more realistic guess would be $5 EBITDA instead of $9 EBITDA. I really think they will be profitable, since they removed debt.
This is panic selling...
There is no other explanation for this... many people held onto this stock in the $4 range - just a few weeks ago. The more it drops, the more these people are wanting to get out for fear it is retracing back to $4 again.
I don't think the dilution machine is an option, because Frost would not allow that. Someone is buying alot of shares cheaply...
I say they can make $5 million EBITDA in 2013, which should give them an enterprise value of around $50 million... or around $8.50 per share. That is what I am hoping for.
Quarter 4 is going to be a bust, because of the enormous expenses associated with their effort to uplist and the legal costs associated with the Frost agreement.
I think you are reading that wrong...
2012 gross margins of 17%... raising by 50% would give us gross margins of $25%.
Still good - but no way they get gross margins down to 50%.
Quick Valuation Estimate
Let's assume Total Revenue for 2013 is $125 million
Let's assume COGS stays at an industry high of 80%
That leaves a gross margin of ($25 million)
Now that debt is removed, the only real expense line (based on their prior financials) is the SG&A line. Let's assume this stays around $4 million per quarter, or $16 million per year.
This would leave Net Income of $9 million or so... and based on their prior filings I don't see any other expenses.
Using a simple P/E ratio of 10 gives an enterprise value of $90 million - for a company with a $9 million Net Income.
Divide this by 6 million shares gives a share value of $15.
I don't see them losing money in 2013 - thanks to removing all the expenses associated with debt.
Let's be realistic...
And if you look at my past posts, you can see that I am long this stock and would love to see it hit $30 or more per share... but they just diluted 100% (from 3 million shares to an adjusted 6 million shares).
Now, let's assume they make a $10 million profit this year - which is unlikely in my mind... mostly due to their extremely high COGS (which I have gone through in detail in prior posts).
Giving them a multiple of 10 comes to an enterprise value of $100 million... if we divide this out by 6 million shares it comes to $16.67 per share.
I think throwing around numbers any higher than that is dreaming at this point.
What is the O/S now? Adjusted?
This frustrates me somewhat, because they just sold 3 million shares (after conversion) for $4 - when the stock price is over $7 per share. How do I get these nearly half off preferred shares?
Someone help me with these numbers so I can do some calculations...
1) Pre split O/S
2) Post split O/S
3) initial offering (after conversion to common)
4) today's offering (after conversion to common)
I think it adds up to more than 6 million shares, but not sure.
You are leaving one important point out...
They are raising $20 million... they want the share price as high as possible so that they will end up selling LESS shares to achieve that $20 million mark. This will have the effect of lessening their dilution.
If they could get this stock to $10 (post R/S), then they would only need to issue 2 million shares...
I don't doubt that they will do whatever they can to raise the price as high as possible BEFORE the R/S, so that they will require less shares for the $20 million. I just don't think they can get the price much higher than $0.02.
I agree, 10x is off the table...
I think this could hit $0.01 this week, and maybe $0.02 to $0.03 within the next 12 months.
I think the dreams of a 10x or a 20x investment are off the table.
My opinion is that it will end up around $0.02 ($13 post R/S)... Assuming everything goes forward with the uplisting.
I agree they'll dilute...
In my scenario I assumed O/S diluted to 10 million shares... What are you thinking it will be?
There is a big difference in A/S and O/S...
The A/S does not bother me as much as the O/S - especially if they uplist and get more scrutiny... they will not be able to dilute as much once they are on an exchange...
This is all good news - as long as it actually happens... if they are using this as a PUMP for a DUMP, then they are dirtbags.
I do have some experience...
There are many scenarios though... In this case, they state in the Pre 14C that it will occur anytime between now and December 31st.
The R/S, and everything else that has happened recently (warrant conversions, salary increases, etc), is all in negotiations with the underwriters for the uplisting.
Notice that the Pre 14C also states that they are not required to effect the Reverse Split - which means they will not continue unless they are confident that they can meet the other uplisting requirements.
Also notice that as of October 25th there were only 2,292,665,700 shares of Common Stock outstanding - they still have over 200,000,000 shares left in current reserve... so no need to further dilute (raise A/S) before the R/S.
This will be a very quick move once it happens, but it will not happen this week (I don't believe)... it will likely take at least a few weeks to get everything worked out.
The stock will NOT be halted in the interim, and it will trade as normal - likely with higher volumes and higher prices... like I said, an uplisting to the NASDAQ is the holy grail of penny stock investing.
As with IPO's, the underwriter's price will most likely be set at the time of offering, and will be at some slight discount to currently traded price...
I really don't think we will have any advance notice - I think we will wake up to a huge amount of news and 1:650 less shares... but I don't think they will be uplisted yet...
I expect (but this is my opinion) this to occur as two distinct events separated by a period of time...
Event 1: 1:650 reverse split with $20 million worth of shares sold (dilution)
Event 2: Uplisting to NASDAQ
Huge Positive IMO
After 650:1 Reverse Split
3,846,154 Authorized Shares
3,527,178 Outstanding Shares
They predicted the stock price to be: .0053*650 = #3.45 per share
The current stock price would be: .0059*650 = $3.835 per share
Notice that they did not spell out how many shares would be sold - this is
because they do not know... all they know is that they plan to raise $20 million
with the offering.
This means 5 million shares if the stock is trading at $4 per share at time of offering.
This means 4 million shares if the stock is trading at $5 per share at time of offering.
I think this is HUUGE! Here are my thoughts...
The reverse split is irrelevant - your current value in the stock does not change.
Uplisting means it is likely that some funds will invest in the stock, and they will not
allow for constant dilution - I think this move will limit future dilution.
They will remove all debt from the balance sheet, and replace it with working capital - huge.
Let's assume that they issue just over 4 million shares - putting total outstanding shares at 8 million.
There is no doubt revenue will increase and COGS will decrease now that they can pay their bills and
negotiate rates with vendors...
Let's assume 2013 has Total Revenue of $150 million with COGS of 80% (still high). This is a gross profit
of $30 million. Now, let's assume SG&A raises all the way up to $10 million... This leaves an operating
profit of $20 million. Removing their tax rate of around 35% should give a net profit of $13 million.
I assume it will be a while before they have to pay any taxes due to their carried over losses, but I am
assuming a worst case scenario of a Net Profit of $13 million.
Now, let's assume the NASDAQ gets them up to a P/E ratio of only 10... this puts the enterprise value of
around $130 million.
Divide the $130 million enterprise value by the 8 million shares outstanding gives a per share price of
around $16. I assume the underwriters will purchase the additional shares, so there will more than likely
be around 10 million shares outstanding... which would put the share price around $13 for the above scenario.
The current post-split price is $3.835 as stated earlier, so the $13 price means the price is 3.4 times higher
than today...
So... even under this scenario of an extremely high dilution, the current share price should be 3.4 times higher
than it is currently trading - or almost exactly $0.02.
I expect the price to jump pretty quickly, as this is the holy grail of penny stock investing - the uplist.
The news is WONDERFUL for those who purchased below $0.02 or so, but terrible for those who purchased over $0.05.
As always, my opnion is worth about the same as a share of MSLP, but I would be interested to know your opinions
on where you feel my numbers or assumptions are flawed.
From last years annual report... April 16, 2012
Starting on page 33...
Brad Pryatt - On August 15, 2011, the Company entered into an employment agreement (the “Pyatt Employment Agreement”) with Brad J. Pyatt,individually, pursuant to which Mr. Pyatt will serve as the Company’s Chief Executive Officer (the “CEO”). The term of the Pyatt Employment Agreement is for a period of sixty (60) months, commencing retroactively on January 1, 2011, and expiring on December 31, 2015 (the “Pyatt Term”). Pursuant to the terms of the Employment Agreement, the CEO is to receive a base salary of $250,000 for the 2011 calendar year; $350,000 for the 2012 calendar year; $400,000 for the 2013 calendar year; $450,000 for the 2014 calendar year; and $500,000 for the 2015 calendar year. Further, the CEO shall receive, upon execution of the Pyatt Employment Agreement, 31 shares of the Company’s Series B Preferred Stock. In addition, upon the three year anniversary of the Pyatt Employment Agreement, the CEO shall receive 10,000 shares of theCompany’s Series A Preferred Stock.
Cory Gregory - On August 15, 2011, the Company entered into an employment agreement (the “Gregory Employment Agreement”) with Cory Gregory, individually, pursuant to which Mr. Gregory will serve as the Company’s Senior President (the “Senior President”). The term of the Gregory Employment Agreement is for a period of sixty (60) months, commencing retroactively on January 1, 2011, and expiring on December 31, 2015 (the “Gregory Term”). Pursuant to the terms of the Gregory Employment Agreement, the Senior President is to receive a base salary of $150,000 for the 2011 calendar year; $200,000 for the 2012 calendar year; $250,000 for the 2013 calendar year; $300,000 for the 2014 calendar year; and $350,000 for the 2015 calendar year. Further, the Senior President shall receive, upon execution of the Gregory Employment Agreement, 20 shares of the Company’s Series B Preferred Stock. In addition, upon the three year anniversary of the Gregory Employment Agreement, the Senior President shall receive 10,000 shares of the Company’s Series A Preferred Stock.
etc.
It is all there... read for yourself...
The board...
I found it the other day - Bradd will get large raises for next few years - as will the others. Their future salaries were laid out earlier this year. The increases don't seem to be tied to anything either.
No basis for class action...
Check last years Annusl report - salary increases for next few years were reported then... Salary increases is old news. Do your due diligence before buying a penny stock.
Buyback was a sham...
Everyone needs to understand that the buyback was a pump scheme - they bought back somewhere under 30 million shares (I believe around 26 million) and issued around 1 billion shares.
Theoretically, a healthy company that puts a healthy buyback program in place would put the shares back into the treasury - typically used for bonus, options, etc.
In theory, shares of a company are secured debt. You buy s share of a company because you gain some ownership in that company, and you can sell those shares at a later date for "some" price.
If the company needs cash, then they have the option of selling more shares to raise cash - but, this dilutes and effectively screws current shareholders. They can only do this up to the amount of Authorized Shares previously approved (they can always increase the number of Authorized Shares, but this is not a good thing as it means you have fully diluted shareholders). If the company begins to turn things around (and especially if the share price has dropped), they can begin to buy back those shares.
It is what we do in reverse... let's say they issued a billion shares at $0.01 per share... if they started making money (and the share price did not reflect their improved condition), then they could buy back those shares at $0.005...
This would give them the ability to bonus shares and even potentially reissue those shares - without having to raise the A/S - which is NOT a good thing...
The day they raise the A/S will not be a good day for the stock price.
Salary increases were already agreed upon...
Look at last years annual report - it listed their salary increases for the next few years.
Part of the financing agreement...
I would say all of these were terms of finalizing the TCA agreement...
1) Clean derivative liabilities off of balance sheet
2) Finalize budget for 2013 (including salaries - hence that 8k)
3) Stop the share buyback - they didn't want them to burn through the money they were getting
This is just my simpleton opinion, but these are things I would demand clarity on before giving them another $2 million.
Wasn't the TCA Agreement Terminated?
I see on the 8k from July 20th that they entered into this agreement with TCA Global Credit Master Fund... but I also see on the 8k from July 31st that they terminated that agreement.
I don't think the agreement from July 20th was used - there will need to be a PR tomorrow to explain.
I think this is HUUUUGE! There is no way an investment company would give MSLP $2,000,000 unless they felt comfortable they would get it back.
This is not only tied to the July 20th idea of them purchasing a percentage of shares - it specifically states "$2,000,000 USD via a Senior Secured Debenture and Committed Equity Facility."
I think this was a new deal, and potentially one initiated by TCA...
TCA Agreement
Where are the details for the TCA agreement? I have not seen this, but the $2 million cash infusion could be huge - I think something positive is up.
Not enough volume for dilution...
Everyone is scared - even me!! I feel relatively confident in a few numbers - total revenue of $20 million and gross profit around $4 million and SG&A around $4.25 million leaving an operating loss of around $250,000.
I think those are pretty solid figures based on the last 2 quarterly reports, and I have not seen anything to imply anything vastly different.
The numbers below the operating profit/loss line scare me... I have no idea what they will report on the derivative liabilities and how that will ultimately affect the balance sheet... and I have no idea where their total debt will be and what those interest expenses will be (I assume interest expenses around $1.25 million for the quarter).
I will really be looking at the following - in this order...
1) COGS
2) Revenue
3) Balance Sheet
4) Share Structure and Plans Going Forward
SCENARIO 1 - If #1 is going down (around or below 80%) while #2 is going up (which should be the case), and they have cleaned up #3 (which they stated they had done)... and they don't need to increase A/S in the near term - then this is a great price and it will go back over $0.01 pretty quickly.
SCENARIO 2 - If 1 is still above 80% and $2 did not grow much, and they replaced the derivative liabilities with more high interest debt... and they need to increase the A/S and raise the O/S just to make it through the year - then I will run, run, run.
The current price movement is nothing - there are just no buyers or sellers... which makes it move 15-20% in a day on low volume (less than 20 million shares).
I stick by my current prediction - if SCENARIO 1 happens, then they will be back well above 0.01... if SCENARIO 2 happens, then it will trade down to around $0.0025.
PLACE YOUR BETS (and it truly is a bet), THE NEWS COULD COME OUT ANY DAY NOW.
Patience is key at this point...
If you cannot afford for this stock to go bankrupt, then you should not be investing in it - it is a penny stock and has more risk than a stock on a major exchange (less regulation).
This board tends to celebrate when it goes up for no reason - saying that someone must know something.
This board tends to panic when it goes down for no reason - saying that someone must know something.
At this point we are like a ship being tossed about in the ocean - going up, then down, then up, then down, etc - until we get some real concrete news... which will likely be the 3rd Quarter Report.
The stock should range trade (0.0045 - 0.006) until then. There is really nothing to drive it up much higher than 0.006, and no reason to think it should tank below 0.0045.
Soon AFTER the 3rd Quarter results come out, this stock will either trade at $0.01 or $0.0025... depending on results. if you cannot handle a drop to $0.0025, then you might should consider getting out.
This is all just my simpleton opinion - which is worth about 1 share of MSLP - currently half a cent.
Not according to their financials...
Once again, I want everyone to understand that I know I am stepping out on a limb by trusting their financials. Where do they need money? Look at their income statement and cash flows...
If you really read between the lines, you will see that their manufacturers are actually handling their billing for them - and sending them the money that they are owed. I am sure this is partly why the COGS is so high, but it also demonstrates their past lack of ability to pay bills.
Let's take the numbers I often use and am familiar with... meaning COGS of 80%, SG&A around $4.25 million, and Interest Expense of around $1.25 million. There are no other needs other than this that I can see from their financials - as long as their derivative liabilities are cleaned up as they stated in the PR.
IF they can have Revenue around $20 million, and maintain 80% COGS - then that leaves them $4 million gross profit. Now, take out the $4.25 million for SG&A and that leaves them an operating loss of $400,000. Take away the Interest Expenses - and that leaves them a total net loss of $1.65 million or so.
Now while I will agree that they will still be losing money, that is a far cry from the numbers that are being thrown around on this board.
This will not be a problem beginning with the first quarter having revenue of $25 million...
IF they have truly cleaned up their balance sheet and are still growing the top line, then I think (and may be the only one who thinks it) they could be close to qualifying for real financing...
Are any of my numbers way off base?
Conspiracies...
The only thing I keep thinking of is the change in fair value of derivative liabilities... it seems that this was a huge negative number for Q1 when the stock price surged, then it was a huge positive number for Q2 when the stock price dipped. It has dropped further in Q3, which would imply that it would be another large positive number...
I am guessing that this is why they converted all these derivative liabilities to shares recently (it will be reported as of September 30th according to the PR) - they should have a positive number for this line this quarter... and even though it is not a cash transaction, it will have an impact on the balance sheet (negative retained earnings).
If I am right, and I can only hope I am right on this, then they would only do this when they expect things to turn around.
A reverse split is not necessary...
They currently have the authorization of the Board of Directors (and theoretically the shareholders) to issue up to 2.5 billion shares - which they pretty much have. A reverse split by itself does not impact this... a 1,000 to 1 reverse split would mean they have 2.5 million outstanding, but they would only have authorization to issue 2.5 million shares.
They will raise the share authorization from 2.5 billion to 3.5 billion or more - which will hurt the share price.
We don't want a reverse split!!
Why does everyone keep begging for a reverse split, or for management to put out PR's - management's job is to grow the business into a profitable entity... not to manage the share price.
What we need is for revenue to continue to climb, and for dilution to stop! This is what investors are looking for.
The way I look at things, the company will be worth $0.01 when they can show a path to $2.5 million in annual EBITDA (with 2,500,000,000 shares outstanding). This can only happen with a reduction in COGS or increase in revenue - but hopefully both.
I have said this on many posts, but take $100 million in revenue and take away the 80% COGS - this leaves gross profit of $20 million. Now, take out the $18 million or so in SG&A, and you get a positive EBITDA of $2 million. These are very reasonable numbers that can be achieved in 2013... and these numbers will turn around the stock price.
If they can get to $150 million in revenue, removing the 80% COGS leaves $30 million gross profit. Take away a higher value for SG&A due to increased sales of $24 million would leave $6 million in EBITDA. This could equate to a stock price of $0.024.
These numbers are not made up, but are based on their last few quarterly expense numbers. This is a pretty small company with a very simple income statement... there is not much hidden there.
A reverse split will only open the door to more dilution - we need to get this idea of further dilution off the table... this stock will start to rise if they can show shareholders that the company can run without issuing more shares.
They must maintain a share price above $4 (I believe) to up list to the NASDAQ... but I think it is too early to start talking about that. It needs to trade around $0.04 for a while... then they can do a 100 to 1 reverse split - moving the price to $4 on 25 million shares.
This would be more reasonable than a 1000 to 1 reverse split which would only be followed by more declines.
I was looking at the October 12th Prospectus for directors... I assumed Mark Groussman and Gordon Burr were the two under consulting agreements - maybe I assumed this in error.
Page 53 shows ownership of all directors, including Burr.
This is confusing - it is hard to track their share and warrant distributions... hopefully they are cleaning this up going forward.
They discount ALOT!!
Maybe it is necessary in the supplements industry, but at least their deal is the top on the list...
http://www.a1supplements.com/news.php
Interesting action today - or lack of...
I have noticed a trading pattern as of late, where a few million shares trade before 1PM - with the price trailing lower.
After 2PM - sometimes around 3PM - the buys start coming in and the price tends to move higher.
If this is the case today, then we could see a higher close again... because it appears the early morning sellers are finally drying up.
Learning Curve...
I looked through the S1A and found what you were referring to, and I agree... it looks like Groussman was given 7,500,000 shares of stock and warrants to purchase another 3,750,000. Gordon Burr was given warrants to purchase 120,000,000 shares.
I wonder why Groussman was given such a lower deal? This is strange, but I agree that it is a non-event.
I have really been thinking alot about the financials here, and feel that they will be very close to at least breaking even on Operating Profit. If they get rid of the Derivative Liabilities (which they said they have), then the only other thing we have to worry about below Operating Profit is the Interest Expense, which has held steady between $1 and $2 million.
If they hold this close to the $1 million mark, then that is all the money they need to continue operations... so this idea that they need truckloads of cash is just not true in my opinion.
Granted they would not be paying down any debt in this situation, but I feel more confident at their ability to continue - bankruptcy seems pretty much out of question - as long as quarterly revenue is around $20 million.
What do you think?
Do you think he returned shares?
They had to have some type of circuit breaker in effect in the event one of these consultants left early - surely there is no way he took 4.2% of the company and ran in 2 months without having to relinquish some of these shares...
Are the managers that foolish... no, the word for this would truly be stupid.
I must have missed this somehow...
When did the consultant leave? Do they keep the 4.2% share even if they leave so soon? Where / When was this announced?
Further International Expansion...
http://almacenesgurabo.com.do/noticias/presentamos-nueva-linea-musclepharm-en-almacenes-gurabo.html
You are talking SG&A...
I am talking Gross Profit - if revenue goes high enough, COGS will have to come down - and the gross profit can get pretty high.
You can raise SG&A considerably and still have a profit - revenue makes all of the difference in the world, and MSLP seems to have increasing revenue.
You also must look at how SG&A actually declined from March to June of this year; spending is not spiraling out of control as many on this board say - at least not according to the last 2 quarterly financial statements.
I agree completely, but don't see facts
Why are you assuming people have stopped using their products? They have 10 of the top 100 best selling sports nutritional supplements on Amazon.com - which I believe must be a decent gauge of their popularity.
http://www.amazon.com/gp/bestsellers/hpc/10781141/ref=pd_zg_hrsr_hpc_1_3_last
I really don't know that we have any way to truly gauge whether sales are increasing or decreasing until we hear from the company.
There are some soft indicators - Dick's Sporting Goods, increase in Facebook likes, etc - that seem to indicate that the brand is picking up momentum. It is possible that sales have peaked, but they raised projections for 2012 to $75 million in revenue, so we have to assume that will be close until we hear something different from them.
I do know that they began the year with 2012 projections of $40 million, and they are already over $30 million in just 2 quarters - so it would seem sales are picking up steam instead of losing momentum.
I would love to hear why you think sales have topped, as that would definitely have an impact on their stock price going forward.
2013 Projections???
Someone please tell me where I am wrong with this calculation - I would be happy to hear someone else's opinion. I am basing all of this on the following facts / assumptions...
1) 2013 Annual Revenue - $100 million (very reasonable)
2) COGS level out at 80% (which is high)
3) Derivative liabilities are gone
4) Interest Payments stay around $1.25 million per quarter
5) SG&A stays around $4.25 million per quarter (which is high)
Here is a potential income statement for 2013 - this is based on their last 2 quarterly releases. I cannot see where this is wrong...
Revenue - $100 million
COGS - 80 million (80%)
Gross Profit - 20 million
SG&A - 17 million
Operating Profit - 3 million
Interest Expense - 5 million
Net Loss - 2 million
This is essentially a positive EBITDA of $3 million in 2013, with their insanely high GOGS. They would use part of this money to pay off their debt, so their interest expenses would begin to decline in 2013.
I hope they continue to focus on cost cutting in SG&A, but the real money is in COGS. With revenue of $100 million, every percent reduction in COGS is a million dollars to the bottom line.
If they can ever get COGS down to a more reasonable 60% this will be a cash machine.
Also - notice how increasing revenues takes away all of their problems... once revenues gets to $200 million their debt will go away.
At revenue of $200 million, their EBITDA would likely be between $15 and $20 million - I am allowing for a considerable SG&A increase at this point.
Couple of questions to answer...
1) As to the share buyback program - that was one of the more embarrassing efforts at pumping up their stock... kind of like a rich man who goes bankrupt so the bank sells all of his possessions... then that man goes to the bankruptcy sell to try and buy some goods back. A futile effort at best. I mean, they purchased 26,000,000 or so shares (I believe it was in that range) and they issued around 900,000,000. I hope they are getting real with shareholders at this point.
2 As to when they will file - I expect a very late filing. Why? Because they just did a very major restructure of their share structure and balance sheet. They did this as of October 12th (I believe), but stated that it would be shown on their Sept 30th financial statements. This is a huge underaking to straighten out and have audited... I was pleasantly surprised that they committed to have these changes shown with Q3 financials - just don't expect it quickly.
MY FEAR - my only real fear is what their other expense line will be, specifically related to their derivative liabilities as they remove them. They will still have the $1 to $2 million in derivative liabiliites expenses - we know that, but how much will the change in fair value of derivative liabilities end up being. This is a big unknown - and has been huge the last few quarters (both positive and negative). Either way, this is the last quarter we have to deal with it...
I hate opinion based responses...
Obsolete financials - you are calling Q1 and Q2 obsolete?
There are so few vaiables to get to operating profit/loss... Total Revenues, Cost of Revenues (COGS - around 80%), and SG&A which seems to be relatively stable.
That is all there is... there is no smoke and mirrors to get to the operating profit/loss line.
Maybe below that it gets tricky, but not so much once derivative liabilities are erased.