Listening., page-92

If AJX are doing a CR it greatly increases the likelihood that they will not be cash flow positive again this quarter and/or the next, which already seemed likely given their reduced expectations on the last 4c. Its simple accounting that if they need to boost their financing cash flows via CR that it must be because operational plus investing cash flows are expected to be negative.

The reason I pointed that out is to weigh into the CR vs debt debate. Debt is and is only preferable when it can be serviced safely. If a company is not profitable CR should be preferred. So the return to CR fundraising in this sense also indicates the company is not expecting to be profitable anytime soon either. When they are debt financing it indicates they expect to have earnings to service the debt.

This is a good thing though. When they moved towards debt financing to fund their growth on pretty low revenues it showed they had lowered their expectations - it meant they were going to finance their growth with that little bit of debt plus whatever small profit they could glean off 20 to 30 mil revenues. Now they are returning to using equity financing it shows they are not yet profitable but actually still in the revenue growth phase, where new business development expenses outstrip earnings from established business. This means they may yet come to realise the lofty expectations of yesteryear, but with the caveat that actual profits will come later. I'd say most would prefer this scenario.