I looked over the financials and the MD&A this weekend.
If I'm reading the MD&A correctly, it looks like the company spent a little under $1.1 million of the $2 million budgeted for XwinSys for 2016. Assuming they spend the full $2 million in 2016 that they budgeted, $900,000+ in additional expenses in Q4 will probably not be very helpful to the bottom line for the Q4 numbers next year. The company won't have the benefit of another $750,000 in GFI royalties to help off set the losses, and on top of this, XwinSys spending seems about to go quite a bit higher.
Almond growers and Xenemetrix. Before any of you go pinning your hopes on it, log on to Sedar.com and look up the financials. There are a lot more details in those than in the news release. For example, point 23, Commitment and Contingencies, part b and part c. It talks about the XwinSys R&D grants repayable to the Israelies and the Xenemetrix royalties due to Jordan Valley Semiconductors. Yes, Xenemetrix and XwinSys can make money, but it's probably $2.3 million less than you might expect. Is it any wonder that this tidbit is burried way at the very bottom of the actual financials on Sedar.com?
Revenue from continuing operations for the quarter continued to slide.
Yes, they received $750,000 of GFI royalties, but still managed to lose $1.18 million in the quarter. The royalty is paid every other quarter, so if they don't book some big profitable sales (Xenemetrix/XwinSys) in the current quarter, I wonder how large the losses might be next time they report.
Even if SICPA wins a GFI deal with the EU, theoretically the big money maker for Eurocontrol, can we really expect a bump in the size of the GFI royalty mid 2018? I doubt it.
From my perspective, the near term success or failure of EUO greatly depends on getting a pile of XwinSys sales on the books for 2017 and hopefully 1 or 2 for 2016 as well. If they can't turn the quarterly losses into profits, that cash from the GFI deal will continue to be eaten up by the relatively large burn rate.
The almond 'bone' they threw out does not give me any sort of confidence about where the share price is heading for the rest of 2016. I'm not even sure about 2017 at this point. Show me a single XwinSys sale on the books and if it is a real money maker, then it could have me do a 180 on my outlook for the company. I hope they get at least one sale in by year end so that I can see if it is profitable when the Q4 numbers come out in late April.
For those thinking of contacting the company for further clarification about anything, perhaps you should be contacting Doron Reinis instead of Bruce Rowlands. It appears that he took home $101,275 for the quarter. Page 22 of the actual financials on Sedar.com. It looks like he is the guy making the big bucks, so I suppose he is the guy who should be able to provide you with answers. The kind we'd all have liked to have seen in the MD&A. For example, did SICPA make a single GFI deal in the quarter? What sort of profit margin can we expect from an XwinSys sale? By the way, has Doron spent any of the $357,806 (first 9 months remuneration) on insider buys recently? This year? If not, why not?
As usual, do your own due diligence as I might or might not know what I'm talking about. This is just my perspective on the latest earnings release. I'm sure others will have a more positive and hopefull view of things before the open on Monday.