conference call revisited:
<<Mark Jordan - Noble Financial
Okay. Question relative to your balance sheet, you obviously are making great progress with regards to orders and shipments are coming, what are your plans or expectations for strengthening the balance sheet in the current fiscal year?
Roger: Well, again, Mark, we do have our arrangements with the DMRJ group BAM and such, and we are looking at other alternatives. I mean, it’s too premature for us to get in to what those are, but we are looking to other alternatives to stabilize our financial position.>>
ME: Ok, no problem.
<<
We have a question from the line of Patrick Moore [ph] private investor. Please proceed.
Hi, guys. Can you talk about your plan around what you’re doing on the interest? Are you at a place now or will you be shortly where you will be paying interest with cash generated from your operations that [indiscernible] [interest basis, no more] [ph] shares?
Roger Deschenes - CFO
Right now, Patrick, I am not sure that’s likely to happen. We are investing. As Bill mentioned, we have quite a few projects ongoing in our research area and we want to continue funding that because we don’t want to be a one year wonder here; if we don’t invest in research we won’t have the products we need in two and three years out from now. So again, we are devoting our cash right now to continuing to fund the R&D that we need to make this is a long-term success.>>
ME: This is OK because he is saying 'right now', which given the cash flow I have little problem with a short term delay though of course would have preferred they not feel that way, and pay it off if they could). But do they really have the cash to do so, or would they have to lay R&D staff off?
<Okay. And do you have, whether you can share it or not, do you have in your head something where you’re targeting where at least that stops or is that further than your visible horizon?
Roger Deschenes - CFO
Buy that stocks, I am not following your question.
Unidentified Analyst
In other words, do you say, okay, hey, this quarter, yeah, we expect to continue to use shares to pay that interest and maybe the next quarter as well, but if things go great, we would expect the quarter after that, hopefully, we start to see cash rise and stop the usage of shares. In other words, do you have at least where your target to switch over?
Roger Deschenes - CFO
Well, the decision on whether shares are used or not used isn’t ours to be made, it’s the debt holder. They have the right to convert >>
ME: ok, he's clarifying a point here
<< and we – unless we come into a windfall of cash and pay off all the interest,>>
ME: INTERESTING COMMENT. This SOUNDS like they would definitely consider paying it off with a 'windfall'...well, what qualifies as a windfall? But why does he say ALL of the interest? Does paying off the .08 accrued interest have to be accompanied with paying off the other price level convertible interest?
<< again the decision is theirs to make as whether or not they convert.
Unidentified Analyst
I may be misunderstood, that’s interest and principal they can convert on.
Roger Deschenes - CFO
They can convert on the principal and interest.
Bill McGann - CEO
And our product technology roadmaps that we update on an annual basis go in a range between three and five years.>>
ME: UH OH, that sounds bad. 20 cent share price drop.
<< I don’t mean to sound like - we ask ourselves the question all the time as a team balancing the coverage of our debt with the coverage of our growth.>>
ME: This is the part investors have ignored. He recognized that mentioning 3-5 years could give the wrong impression.
<< And right now, we see the coverage of our growth as being primarily important. We’re just starting right.>>
ME: My take is that the main thing is refinance was expected in the fall, from comments made in a previous conf call (I think), and this shot that down. Is he saying NEVER? Is he saying 3-5 years? No. The other comments strongly imply to me that they WILL pay things off but not right now and not at the expense of growth that they need to prepare for right now. They may well be taking a more conservative approach than benefits shareholders the most in the short term but even that is hard to guage, but he clearly didn't say they wont be refinancing for the next 3 years.
The market has overreacted.
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