Mega Brands Inc MBLKF

RE: RE: q4 2010

[FFHWatcher]

Keep in mind that the 244M warrants exercisable at
.50 each until March 15, 2015 will bring in $122M into the company, which in turn must be used to pay down their debt.   Their debt is approx. the same amt.  Therefore, after the dilution occurs, assuming it occurs, the company will have about 570M shares outstanding and pretty  much no long term debt. 

If the dilution event occurred today, that would equate to a $400M market cap, assuming all warrants are exercised and all proceeds pay down/off debt.  The leftover company would have assets and working capital of about that amount plus the potential normalized earnings of ???/yr.  What type of net margins did their business normally have?  I would guess 10-20% but that is hard to say as they have been plagued with problems and issues for more than 5 years.  I think the potential is closer to the higher end of that margin estimate, especially with their current and potential future level of debt. 
This doesn't seem to be a situation to put a lot of money into as the risks seem quite high but, at this point, so do the rewards.