I just listened to the CC, and he said that they would need to raise more capitol. RS said in order to get to profitability they would have to raise more capitol. That's really bad right? In other words they used up all the loan money and will have to dilute more shaes whichc no one will do at this price so basically they going BK? Would someone please tell me (beside piptard) if I miss heard. Everything except for that one statement sounded great on the cc.
The need for incremental funding to push-through to profitability has been telegraphed for a Q or two – this should not come as any surprise to anyone – it was going to be m/a or incremental funding… Something had to give – the burn was just too high.
There will be some sort of transaction setup over the next month or so and consummated when OCZ regains compliance. It will probably be linked with the existing credit instrument to keep everything copasetic. Obviously, there will be some dilution (depending on how the transaction is structured), but the positive impact of a stable cash platform coupled with a firm commitment to establishing positive cash flow may offset the short-term share price impact.
I think it will come in the form of a convertible debt obligation. The new capital will be setup as a loan against the company's IP and convertible at some future date. So, I don't think new capital will be dilution immediately. The revenue numbers for the current quarter, good or bad, will influence the terms of the capital raise. RS said on the call that they shipped a 'record number' of units this quarter. Let's hope that's true.