Thoughts on Q4 (reposted) Having reread ATI’s most recent MD&A and Financial Statements, I wanted to share the following observations.
For starters, management should be commended for its success in cutting costs over the past year. As a percentage of Product Sales, the Cost of Goods has dropped from 62% to 59% over the past year (Q3 2011 vs Q3 2012). Over the same period, fixed costs have also dropped and -- even allowing for the new service costs brought on by ATI’s new $200,000 bridge loan (20% interest = $10,000/quarter) -- it seems reasonable to project Q4 fixed costs at about $350,000.
Secondly, although sales in the last quarter were somewhat disappointing (just over $600,000), they are probably not a good predictor of Q4 performance. Over the last two years, the fourth quarter has proven relatively strong for ATI sales while the third quarter has been consistently our weakest. So let’s imagine for the moment that Q4 2012 sales will equal those in Q4 2011 ($855,513), and then consider the following:
$855,513 x 0.41 - $350,000 = $760
Please note, there are no brackets around that “$760” and, yup, you guessed it, I’m calling Q4 2012 as the quarter in which we (albeit modestly) go from the red into the black.
GLTA, ULarge