Ann: Velpic Commences International Expansion, page-27

If they break even on cash next quarter I will be disappointed because that means they are not spending it! That was the entire point of the capital raising.

The cash flow (risk of second capital raising) is the biggest risk to investing in any expansion based startup like this.

The two factors that can influence this are:

(a) Frivolous management spending; and
(b) Weaker than expected revenue growth (or revenue that cannot translate into incoming cash).

I refer readers to this post: 17140064

A. Frivolous Management Spending

Adjusted cash burn from operating activities was $849k (on target with Baillieu Holst's research report cash burn target of $0.3-$0.4M per month [Note: first months are always going to be highest cash burn as figures will decline as revenues grow in an inversely exponential fashion]).

This figure is important because it demonstrates the team are able to control spending.

B. Weaker than expected revenue growth (or revenue that cannot translate into cash flows)

Cash received from operations was 71% of revenues. This is an acceptable figure.

The revenue primarily derived from Dash Digital as expected. Velpic growing strong with revenue $72,650 from two months. This is revenue annualised to $435,900.

I want to do a 'back of envelope' calculation to demonstrate growth is on track

I refer readers to the company announcement dated 23/11/2015 "Investor Update" Page 12 and I quote Revenue primarily derived from Dash Digital as expected. Velpic growing strong with revenue "Annualised PPV and SAAS fees of $200,000 as of October 2015" (UNAUDITED).

Let's assume this figure is the start of October to remain conservative. This is monthly growth in fees from October to the half year report of 29.65%. Also, this is as the process of placing BDMs in place was occurring.

Dash Digital revenue contribution estimated to be $2,803,986 at full year.

Let's also make a conservative assumption that PPV and SAAS fees only grow at 25% month to month! This is down from 29.65% and is conservative consider BDMs are now in place, expansion is occurring and the SME platform is in pre launch stage (Q3 expected).

This brings a second half PPV and SAAS fees estimate of $380,240. Add the $72,650
for the first half and we get $452,890.

This brings my own company total revenue estimate of $3,256,876 for FY16.

This is broadly inline with Luke MacNab from Ballieu Holst's estimate of FY16 revenue of $3.2M,

Note the conservative assumptions. First half results have less than historical PPV and SAAS fee growth (25% v 29.65%), no Dash Digital growth from half year, estimates calculated based on pre established BDM numbers and before NZ expansion.

All I can say is I am not confident on my own estimate on this one. I think I am going to have to revise up as the FY goes on!