Credit Facility: My new thoughts.....
I found in the Nov 2016 S-1 where it said Verizon is a 60 day payment period on account receivables. I said before that in the Q1 2018 10Q it says the same thing about AT&T. However, in the last earnings report pr on May 15th it says "and a $1.5 million increase in accounts receivable associated with increased shipments to Tier-1 carriers with net 90-day payment terms."
As such, I'm going to go with 90 days for payment terms for AT&T accounts receivables.
However, when you read the 8-K from June 6th, it sure sounds like you pay for using 90 days in the Citibank payment fee calculation no matter if the time from when you sent the invoice to AT&T is 90 days ago or just 10 days ago. As such, I could see them paying Citibank fees to convert Q2 deliveries into immediate cash---assume the $5.2M was delivered to AT&T in two orders (ex. end of April and end of May). They used 90 days for the calculation to convert to cash even though the regular payment deliver would be the end of July and end of August. This alone cost them approx $44K in fees. ($5.2M divided by .9916 retention after fees = $5.244M is what the original number was). Remember, this is $44K in pure net income from the quarter! (i.e. 0.4 cents/share). I can see it worth it if growth is ramping up and you want to make sure you have constant delivery of engines from Japan, magnets from China, and electronics from Germany. This is coming in freight containers by sea and can easily get stuck in port in California for various reasons. They need to order lots and often to stay on top of it.
On the other hand, I seriously doubt they converted a March delivery into cash and paid a fee for 90 days from Citibank on June 10th when AT&T is going to pay them the full amount between 1 to 20 days after that (assuming they made a delivery end of March and normal payment would come 90 days later in late June).
As such, it is my opinion that the $5.244M (original amount) is revenue from AT&T in Q2.
If we take a step back, in last 10Q it said AT&T was 74% of the $14.1M backlog. The CEO said in his interview a couple of weeks ago that their first goal with the ramp up in production is to lower backlog on U.S. Tier 1 companies and shorten lead time. Say they get $6M in more orders this quarter as they deliver product (about what they got in Q1). That's $14.1M + $6.0M. If their goal is to have the backlog down to 6-8 weeks. then they need to do close to $10M just from U.S. Tier 1 in Q2.
If we assume all their sales so far in Q2 are U.S. Tier 1 and 74% of it is AT&T, then $5.244M divided by 0.74 = $7.09M in revenue in April and May.
Is $7.09M reasonable? Well, the COO said in the last cc call that March and April were running at 60-70% of eventual max capacity (with max capacity being $5M/month eventually). If we assume April is at 3.3M (which would be 66% which fits what COO says) and May is $3.7M as things continue to improve, then the $7.09M is very doable.
In last CEO interview, he said the plant will have capacity to do $48M this year. They did $7.7M in Q1 (we'll round it to $8.0M). Figure Q4 is full capacity or $15M. That means Q2 + Q3 have to be $25M. You don't do $25M unless Q2 is coming in over $10M. Again, his comment makes sense if they are doing $7.09M in April and May.
I'm not going to say all of this is certain, but it would make sense based on the huge build up of inventory, added machinery, and addition of personnel.
