Muscle Pharm Corp (fka MSLPQ)

[Rhenarium]

I believe there are a few major flaws with the numbers you are throwing out.

First of all, the relationship between sales and EPS is non-linear. I ESTIMATE that MSLP is on pace to have about $6.5M in net earnings after non-cash stock amortization expenses of approximately $20M (at least $9.6M through Q2). I BELIEVE though don't KNOW that this equates to free cash flow of $26M. (Please correct me if I am wrong - I freely admit that you are much the more sophisticated / knowledgeable investor between us). Due to economies of scale, if revenue were to increase six-fold both FCF and EPS would increase far more that six-fold.

I don't believe this point is really open for debate. After all, dispite the massive dilution you cite, an extra $100M in revenue this year is going to move them from a huge loss to fully-diluted EPS of $0.50.

Second, just as "historical returns are no guarantee of future performance", historical rates of dilution are no guarantee of future rates of dilution. There has been a tremendous amount of dilution, but the RATE of dilution is obviously slowing down tremendously while the rate of revenue growth is staying constant.

The Frost and Arnold deals were TREMENDOUSLY dilutive because the O/S and market cap were so low at the time. The Frost deal saved the company. The Arnold deal seems to have been a tremendous one for the company. These deals, combined with the BNZE acquisition, are responsible for a significant percentage of the recent dilution and are unlikely to recur. Even if similar deals DO occur, they will be FAR LESS DILUTIVE given the increased O/S and market cap - a $10M deal paid for in stock when the share price is $12 and the O/S is 15M is obviously far less dilutive than a $10M deal with the share price at $8 and O/S at 8M.

Ditto for the impact of free shares that management lavishes upon itself so freely. Yes, it's excessive. But, again, the dilutive impact decreases over time as the O/S grows.

I am pretty confident that, on a percentage basis, revenue growth will FAR exceed fully-diluted O/S growth in 2014 (NOT average weighted O/S, which is sort of a BS, lagging number).

There will be no more 100% YoY increases in fully-diluted O/S.