My main concern is Q2 cash. The $2.5M payment to Capstone will be done this quarter on Apr 2nd, May 2nd, June 2nd. In the 10q, they mentioned they made the Apr payment.
Then on top of that they need to pay down $5M by May 31st as they said they'll be back in good terms for the debt covenants which require them to be @ $3M for 14 non consecutive days within the quarter. Right now that debt stands @ $8M.
"As of March 31, 2015 and December 31, 2014, the Company had drawn down all $8.0 million under the line of credit. The Company would not have been in compliance with certain financial covenants, including requiring the balance to be at or below $3 million for a minimum of 14 non-consecutive days per quarter, under this facility as of March 31, 2015 and December 31, 2014, and received a written waiver from the bank until May 31, 2015."
This all means that they need $7.5M in cash just for those to come true.
On top of that they have ~$3M in endorsement & sponsorship payments due during the quarter.
Adds to $10.5M in cash outlay.
My fear is that come Apr 1st is we get a press release saying they couldn't meet their obligations and that the bank has seized some assets or ends up liquidating their stock collateral.
If we don't get that press release, then the stock should shoot up.
I expect Q2 to be a huge quarter $47M+ and hope they can cut variable expenses to meet these obligations. I just don't see how they can meet $10.5M in cash obligations with that little revenue.
Also,
From the Capstone section:
"The Company is in the process of completing the valuation of the various contract elements which are expected to be included in the results for the six months ended June 30, 2015."
Will this add to the assets/valuation of MSLP? I would assume so. These are options on Capstone so they should.
