I wish I knew the answer for certain. I've been operating under the assumption that the FV adjustment will be adjusted every quarter until the end of the year, and that the calculation is based on the number of shares outstanding at the beginning of the year. Some posts have suggested that's not the case. I really have not been able to track down the answer. It may be in the book I posted the link to; to be honest I have not had the time to sit down and give it a thorough read (something I really need to do).
One thing widely agreed on to date though, is that if the average share price at the time warrants are exercised in Q2 is lower than Q1, we will see a downward adjustment in the Fair Value Adjustment, which will translate into a credit back into the GAAP EPS.
Meanwhile, I have looked a little deeper into discussion on EPS, including an article that gave a fairly good discussion. Here's the link once again.
After reading that, I made a post on another board, I've copied and pasted it here (with a bit of the quoted text edited out):
OK, let's see if I've got this right . . . .
Quoted material taken from the discussion The 5 Types Of Earnings Per Share on Investopedia
Reported EPS (or GAAP EPS) We define reported EPS as the number derived from generally accepted accounting principles (GAAP), which are reported in SEC filings. The company derives these earnings according to the accounting guidelines used. A company's reported earnings can be distorted by GAAP. For example, a one-time gain from the sale of machinery or a subsidiary could be considered as operating income under GAAP and cause EPS to spike. Also, a company could classify a large lump of normal operating expenses as an "unusual charge," which can boost EPS because the "unusual charge" is excluded from calculations.
This is the method PEIX used to report their EPS. Notice the comment on unusual changes or expenses. In this case, non-cash expenses to account for unexercised warrants skewed the EPS. They reported them using GAAP in accordance with SEC requirements, and the result was a $0.69 loss. Ok, now a little more discussion from Investopedia:
Cash EPS Cash EPS is operating cash flow (not EBITDA) divided by diluted shares outstanding. Generally, cash EPS is more important than other EPS numbers, because it is a "purer" number. Cash EPS is better because operating cash flow cannot be manipulated as easily as net income and represents real cash earned, calculated by including changes in key asset categories, such as receivables and inventories. For example, a company with reported EPS of 50 cents and cash EPS of $1 is preferable to a firm with reported EPS of $1 and cash EPS of 50 cents. Although there are many factors to consider in evaluating these two hypothetical stocks, the company with cash is generally in better financial shape.
Notice that comment on what's preferrable to see. This is exactly the situation with PEIX. So, operating cash flow (OCF) is defined as EBIT (or operating income) + depreciation - taxes. (source of definition here). From the earnings release:
Cash EPS is given as OCF/Diluted shares outstanding. The shares outstanding at the end of the quarter is provided in the release as well (18.014M), so
$34.693M/18.014M gives a Cash EPS of $1.926 or $1.93 rounded.
Comments? Please, speak right up if you see an error. I'm constantly learning at this stuff and welcome constructive input
Ok. Now here's something to think about. At present it's not unreasonable to project the OCF for Q2 to be very near the numbers for Q1. It could even beat Q1. Let's assume for the sake of discussion that the half-yearly totals comes in just under $70M. Let's also assume for the sake of argument that all the remaining warrants were exercised, and add them to the outstanding share count along with the shares from the offering. I believe hat gives a rounded share count of 25.25M. Let's not even factor in the cash raised from the offering.
$70M/25.25M gives a Q1 + Q2 fully diluted Cash EPS of $2.77 and that's not even adding in the cash raised from the offering, with 2 quarters to go. For a stock currently priced at $10.90 as of the time of this post?
Come on baby, touch the bottom of that gap for papa and I'll spend every penny I got on ya :D
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