LIFX email Update, page-130

There are several details that illustrate concern the current quarter will not deliver. From memory (happy to be corrected), DM said over 60% of their sales are through Amazon. BUD reports revenue when goods are handed over to customers. He also said this was now happening from the warehouse in China. Cash isn't received until the customers actually sell the stock. This gets us to shipping constraints, which DM alluded to as being the latest issue. Some research shows this typical shipping time to be around 60 days, but this has now blown out to 130. Here is a fantastic article detailing the complexities at play: https://www.nytimes.com/2021/10/31/business/economy/global-shipping-delays-shortages.html

Realistically this means the time between BUD spending $1 on producing a good to receiving $1.43 I have estimated as 30 days production plus 130 days shipping plus 30 days to sell and pay terms = 190 days, or over three months.

Revenue doesn't pay the bills, cash does. I'd challenge the notion that "this company has all but taken insolvency off the table now". This threat is why the sp is at 1.4c with the line-up to exit the stock getting bigger by the day. Remember, they chose not to report the latest cash on hand in the recent ASX Aware. AU$2.1m isn't exactly a lot of cash. Think back to that shock 4C for the March qtr.

But the delays also mean, if it wasn't shipped months ago then the stock won't be available to be sold before Christmas, or extended delays will result in cancellations (this would go some way to reconciling the differences between reported revenue and actual cash received). You can work out how much stock was shipped by looking at production expenses and inventory figures in the 4Cs. Of course, it is a big assumption BUD are getting their accounting correct, but their inventory has remained stable while their production has dropped significantly.

On your point about throwing everything at Black Friday, I acknowledge that BUD can't afford to miss out on the sales opportunity, but that this is symptomatic of the problem. The product might be good, but it's not that good a consumer won't seek a cheaper alternative. SO BUD can claim "we have increased our average margin to 43%", but the question is, "can you sell enough at this margin to make a profit?" The answer appears to be a resounding NO.