recent additional funding by Eberwein/Lone Star @ 2.25. IP revenue plus strongbox product for huge amounts data archiving with rapid retrieval i am thinking of it as long term investment with multibagger potential. comments?
i'm buying the dips. costs are being cut. unfortuately so are revenues. rough breakeven point of about $4.5M per Q vs recent revenues of 2.3M. enough cash for about a year (more if they can grow revenues)
I see the high gross margin, reduction in SG&A and R&D. However, if you are able, can you provide a little detail around the derivative liability associated with the convertible preferred shares so I don't have to go digging? I've read this paragraph out of the 10Q a couple times and it is a little confusing to me - is it simply saying that as the common share price goes up the liability is more? This is where all of the loss for the quarter was attributable. If the common shares go down in value, then the change in value on the income statement will go the other way and they'll book profits on it in the quarter?
In accordance with ASC 815-40-25 and ASC 815-10-15 Derivatives and Hedging and ASC 480-10-25 Liabilities-Distinguishing Liabilities from Equity as approved by shareholders, the convertible preferred shares are accounted for net outside of stockholders’ equity at $5,720,000 with the warrants accounted for as liabilities at their fair value of $3,957,000 as of January 31, 2014. The value of the derivative warrant liability is re-measured at each reporting period with changes in fair value recorded as “Change in value of derivative liability”. To derive an estimate of the fair value of these warrants, the Company utilized a dynamic Black Scholes Merton formula that computes the impact of share dilution upon the exercise of the warrant shares. This process relies upon inputs such as shares outstanding, estimated stock prices, strike price, and volatility assumptions to dynamically adjust the payoff of the warrants in the presence of the dilution effect. In the event the convertible preferred shares are redeemed, any redemption price in excess of the carrying amount of the convertible preferred stock would be treated as a dividend. The changes in liabilities measured using significant unobservable inputs for three months ended January 31, 2014 was as follows (in thousands) (see Note 8 explaining the revaluation of Series-F Preferred Stock and Warrants):
thanks for the paragraph. yes it looks like the deriv liability is recalculated each q with subsequent impact on EPS (although it does not impact cash flow - this is key). with the BSM pricing model this liability will increase with higher share price, higher volatility, lower interest rates and higher time to expiry. Oct 31 PPS = 1.03 Jan 31 PPS = 2.95, April 30 PPS = 2.12. My guess is deriv liability will contribute between $1.4 M and $1.5 M to Q2 earnings and that we should see small profit in Q2. However as it has no impact on cash flow and will be reversed as share price rises, I am more interested in IP royalties, product sales, lawsuit settlements and cost controls.