AudioPixels is in a crisis!Shock horror! Gloating naysayers are...

AudioPixels is in a crisis!

Shock horror! Gloating naysayers are out in force!

Here we are nervously awaiting the requisite amounts of cash to come in the front door to keep the fires stoked. These are mainly from EM's eager purchase of its shares. But EM has so far not managed to deliver finished chips to it. And AP has not made arrangements yet to raise cash from alternative sources. Presumably as a result of that situation, EM has presumably not presented AP with the bill for those finished chips yet. So AP will not need to dip into its reserves to pay for that significant bill. That will make its cash last just that bit longer. The bulk of its obligations seem to largely be to pay FB back for his loans to the company. Which will probably never see cash going out from its coffers, but rather additional shares being created. I like the fact that in this current crisis EM is responsible for both the delay and for the resolution of the problem that has led to the delay, and from that to the crisis for AKP with ASX, and eventually the solution of which will remove the problem with the ASX. Is that some sort of double barrelled Catch 22?

Furthermore, EM, according to AP, is very eager not only to complete this share purchase, but to invest even more into AKP share ownership. This is recognised as a strategic investment for EM, as well as for AP.

The problem is the Chinese government not approving their freedom to do so. If the approval comes, and it may not, we will probably never know the reasons for this holdup. If it does not, that does not mean that AKP will not be able to find alternatives to that injection.

The next big expenditure for AP will be committing to commission and pay around $10M for a major order of chips from all of the 3 FABs, who are all happy to make them. That obligation will not be entered into until all parties know for sure that the ability to make those chips is certain. It will also not be committed to nor payable if the product cannot be made. So there will be no such orders placed until such time that everyone involved knows that finished chips are birds in the hand, not in the bush. Thus no further major debt obligations are entered into until certainty of success is assured.

So. . .

We know that AKP's largest investor is Fred Bart, and he has put his own personal cash at risk by investing it in a company that has to succeed or he will not get any of that invested cash back. Not just once but several times. Several of Fred's mates and influential investor friends have also seen fit to put their own money into the venture on the same basis.

We know that the enterprise that has facilitated creating the actual final designs for the chips, has committed its own cash to buy into AKP. And that they want to invest more. Effectively they are willing to forego receiving much in the way of net cash for the opportunity to be involved with AP.

We know that the FABs are also committed to that production. They would not enter into an arrangement to make and provide finished chips to their customers EM and AP if they were not also confident they would be able to successfully do so and get paid for the finished goods.

From this I think it is safe to conclude that all of these players have put their money and resources at risk based on sound assessments (excuse the pun) of the risk involved.

The question thus has to be: what do all these parties know or at the very least strongly believe they have grounds for confidence in?

The answer is clearly that they have all been involved in the development of the tech in question to such an extent that they really are very confident of its value and its manufacturability. That is the basis of their betting on a winning hand in this situation.

Even though ASX has taken reasonable exception to the potential for problems occurring, it is also reasonable to assume that when the first finished chips finally arrive at AP's lab and are tested and approved, and that their demonstration to the industry will be, just as hoped, absolutely outstanding, and that it is likely to become revolutionary to the audio industry. At that point it will be clear that AKP's owners are quite likely to be onto a winner. From that product denouement prospective customers will be likely to express strong interest in using the chips, and AP will at that point place an order for the first runs of mass production product for sale to the consumer electronics market. The rest will be history to be made.