Confirming CS's numbers When I look at the last financials, for the period ending Sept 30, 2011, and I try to decifer the forward projections that CS made in regards to "cash burn/month". (because I like to make sure the upset stomach I get is not caused by excess smoke being blown up my hind end). I find the following, with respect to hard and soft costs:
We can leave out the Plant commissioning, start up and a few other "one time" costs moving forward, as there should not be any further expenses incurred, or they would be negligible. (sales and marketing...really?)
Costs of good sold 7,687,110
General and Admin 2,851,463
Share based comp. 2,648,974
finance costs 308,779
TOTAL LOSS 13,496,326
( Loss / 9months) 1,499,592 per/month
(2 day factor *.4 operating) 599,836 per/month based on reduction of operations
(idle time) I would not add a factor of 50% for idle time, as the costs above include all general and admin costs for the calculation thourout the entire 9month period.
As you can see, this calculation shows a realistic cash burn of 600K per month. CS stated that it would be 650K, i believe. I am now thinking that he was being conservative, which shows his eagerness to be realistic about the future. Some CEO's would have said something a little more general like "we reduced our cash burn to a 1/2 million/month". Then later rationalize that by saying, "our projections are based on best guesses at the time".
Furthermore, this calculation also includes "ALL" costs of goods sold. That will be dramatically reduced because the materials needed to run 2days/week are arleady on hand, stored, and paid for, (most likely). I believe the "actual cash burn" when all is said and done, for the coming months will be far less than 500K per month. More than likely, 200-300K/month. That is my own speculation, but as a business owner myself, that is what I think will be revealed as time goes on, leaving plenty of time to negotiate a JV and less pressure to consider low offers.
This makes me a bit more comfortable with the numbers being shared, however few they are. And I feel a bit more comfortable with any generalized statements coming form CS, as I think this shows his willingness to be realistic and not "blow smoke". Which leaves me to look elsewhere for the cause of my upset stomach.
My best guess for the cause of my stomach ache?....If this is truly the cash burn, why not produce 10tons or so per month, sell it for a profit of 200K-300K/per month? and keep this machine going for however long it takes to get the JV done, 6months, 1year, 3years, 5 years, whatever. You don't have to burn through savings if you have a way to replenish it monthly. This is what I don't understand, but I guess "time will tell". And who knows...maybe CS is doing exactly that, maybe he plans to sell a little here and there to keep an income, but doesn't want to share that info for fear that it doesn't happen, or that he would have to reveal all the people buying it? Just speculating, please don't beat me up over this last paragraph and dream sequence.
I hope you all find this helpful, if not a bit comforting, as well.