Wave Systems Corp. (fka WAVXQ)

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tkc, I was fooling around with those numbers, too. I produced a running total of cash-on-hand covering July through October based on the PP’s. This was to confirm the level of cash they had to be bringing in from other sources. That table is at the bottom of the post.

As you point out, the most important assumption is the amount of cash needed. The only thing that I think is a bit off in your analysis is your cash usage figure for Q2, from which you derived your cash needed for Q3. Below, I think, is a better way to calculate cash usage. (It doesn’t include changes in receivables and payables, but I think gives a good picture of their actual cash needs.)

CASH NEEDED

Q2 Cash Used

 
 SGA   4,243,656  
 R&D   3,145,326  
 - - - - - - - - - - - 
       7,388,982  (Your 7.4 million?) 
 COGS    239,576  
 - - - - - - - - - - -  
       7,628,558  
 D&A     (88,222) 
 SBC    (588,450) 
 CAPEX    16,870  
 - - - - - - - - - - -  
       6,968,756 

Now if you reduce that by 650K (your 7.4 to 6.75), you would get about $6.3 million in Q3 cash needed. It so happens I was using $6.3 in my cash-on-hand table.

PAYABLES

As you mentioned, the other important thing is whether, like the million dollars in Q2, they were able to push out expenses, increasing payables. But how high can payables get? Maybe some executives pushed their salaries out??

NET BILLINGS ESTIMATE

Anyway, with no increase in payables and using $.6.3 million for cash needed, my result is slightly lower than yours, as would be expected. (And it’s about 600K lower than a couple of people who did this earlier in a back-of-the-envelope-type way). I get $3.880 million in net billings.

CASH FROM WHERE?

An important part of the question is “Where did the cash come from?” Was it from what I refer to as “core” sales like ETS, FDE, upgrades, and Bcom/STM/Intel? Or was there something else? This is my guess about the sources:

 
  
 ETS  $  .25          4,700,000   1.175   Total ETS: 6,600,000 units, $2.030 
 ETS  $  .45          1,900,000    .855       
 FDE  $ 7.50             30,000    .225 
 Upgrades  $60.00         8,750    .525   Total Upgrades: 13,750 units, $.825 
 One Semi-large Upgrade   5,000    .300      
 Bcom, STM, Intel                  .200 
 WXP Olympics                      .300 
 eSign                             .300 
                                 - - - - - 
 Total Net Billings               3.880 
                                 = = = = =

--- $ .600 is from WXP Olympics and eSign. This may be the key here: that the extra money may be from a one-time thing such as the Olympics or the eSign contract SKS spoke about in the last CC or some other one-time event.

--- $3.280 is from “core” sales (ETS, FDE, Upgrades, Bcom/STM/Intel). I’ve included a semi-large 5,000 seat TPM-management customer in Upgrades.



Month-by-Month Cash-on-Hand Running Total

(By running this through October, and assuming cash comes one month later than billings, “Cash from Q3 Billings” = Net Billings for Q3.)

 
                                                                   C-O-H 
        6/30   6/30                    Cash from         Cash     Running 
        COH    A/R       PP’s         Q3 Billings        Spend     Total 
 

 
 Jul 1  .146         1.503 ( 7/1)                                  1.649 
 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -  
 Jul 15       .470                                       (1.050)   1.069 
 Jul 30       .470                  .075 (Upgrades)      (1.050)    .564 
 Aug 15             .772 ( 8/11)    .825 (July Dell)     (1.050)   1.111 
 Aug 30                             .175 (Upgr + Bcom)   (1.050)    .236 
 Sep 15             .711 ( 9/12)    .720 (Aug Dell)      (1.050)    .617 
 Sep 30             .211 ( 9/30)    .675 (Upgrades +     (1.050)    .453 
                                          WXP Olympic + 
                                          eSign) 
  
 Oct 15                            1.335 (Sep Dell)*      (1.050)    .738 
 Oct 30             .678 (10/31)    .075 (Upgrades)      (1.050)    .441 
 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -  
                Q3 Net Billings:   3.880

* includes the 5,000-seat upgrade order.

IS THIS SCENARIO LIKELY?

1. It could be. I won’t believe that they did the Olympics for free until they say so on Monday.

2. It’s also possible that they reduced expenses further, especially in light of JKIRK’s information from IR (post #172431, “They said they did not know the current headcount but they did believe they have been shrinking staffing to reduce burn.”)

3. Something prompted the most recent investors to pay $.65 per share, which seems surprisingly high even when you include the two warrants.