Stripping out extraordinary items, I'd estimate our "average" quarterly cash burn to be (conservatively) at closer to $1.5M to $2M. This number excludes one-off inflows like the $500k received by KDR (Dec Q) or this Q's $540k one-off inflow from the ATO.
The low end ($1.5M/qtr) expectation excludes, say, $300k per quarter (more likely $275k-ish, but let's round it) to cover interest payments due to Jefferies for the CN. Either way, without an ongoing revenue stream, cash will need to be raised to cover all these costs through the ongoing periodic issuance of new shares.
Naturally, these numbers are my best estimate base on current public info.
With regard to shares issued to Directors in lieu, my view is that we won't be under any pressure to start paying them in cold hard cash until such time as the company starts to generate ongoing income. It will be their call (being the managers and all), but I'd hazard a guess that they would need to feel comfortable that the company was in a suitable financial position to justify paying themselves cash without getting risking being lynched. If the KDR option gets exercised and the lease commences, then that's the promise of (min.) $6M p.a. in revenue. That's probably not quite enough to break-even, but perhaps enough for them to justify paying themselves in cash.
Taking shares in lieu isn't really that complicated. It's really an extension of the barter system. Instead of being paid in cash or chickens (or whatever) for services rendered, they are paid in shares. By doing so, they are taking on market risk and handcuffing themselves to the fortunes of the company, which could/might pay off handsomely... on the 12th of never - if that ever comes. That said, commercial realities don't really give them much of a choice, because the company would have prolly run out of money by now and (more importantly) market confidence/trust, which is required to order to permit continued raising of funds through new share issues. Short answer: without accepting the bitter pill of in specie payment of Directors ' Fees, the company may well have already run out of cash and folded.
Hope I've answered your questions reasonably coherently.
POS Price at posting:
4.1¢ Sentiment: None Disclosure: Held
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