Wave Systems Corp. (fka WAVXQ)

[RootOfTrust]

(Edit): 4xcsl many thanks for that very comprehensive response and analysis.

So, recognizing revenue from the sale of enterprise licenses over four quarters as Wave currently does, means that if q4 upgrades double from your estimated $750k in q3 and are billed @ $1.5m in q4, Wave will only take 25% of that ($375k) as q4 revenue.

If, as you estimate, q3 upgrades were billed @ $750k, that means only $187,500 (25%) were taken as q3 revenue. Of course upgrades dating back 12 months and forward were also taken in their respective amortized percentages in q3 as well, but I want to guess that number was not a lot more than the portion of q3 upgrades billings that was taken as revenue ($187,500). I would thus estimate if q3 upgrades billings were $750k, that $375k or less is the total recognized q3 revenue from upgrades, including that being recognized from previous quarters.

I shuddered a bit when Wave announced in q3 2008 that upgrades revenue would be amortized over a 12 month period from when they are billed, because I realized it would tend to understate cash flow (money in the door).