Ann: Zoleo JV Arbitration Update, page-49

Btw I enjoyed reading through this coverage of BCC on the ***.com as per below:

https://***.com/reports/BCC/all

"I think I have overestimated the quality of BCC as a business, while there are many positives, I think I have underestimated the amount of capital that needs to be deployed to maintain their sales cycles.

This quarter they slipped back into negative cashflow ($622k) and reduced the their $5m cash down to $3.2m, after capitalising product development costs. A lot of this will unwind next quarter as they sell the inventory they are now building, which is mostly to fill the Irridium Go Exec order. So the working capital will be recouped as these are contracted orders, but the ability for BCC to spit off cash is a lot less than I had initially expected. I still think it is a good buisness that is undervalued but I don't think the business will become significantly more profitable in the future.

The positives - Zoleo subscription royalty revenues have increased to $1m annualised, up from $711K at the end of June 23. They say this is high margin and flows largely straight to pre-tax profits so continuing to grow this will be important.

The negatives- They estimate the JV arbitration will cost $1m ($100K spent this quarter) and should be complete before June next year. They still think it is a binary outcome -either Roadpost gets it or they get it.. The JV did $40.6M revenue in 2023, which is the same as Beam did, so the arbitration decision will have a material effect. The big risk here is if it goes on longer or costs more, as Beam don't have large pockets to absorb these costs. They also want to deploy $3m for product development this year. Despite this, they are still guiding for cash to increase over FY24, above the $5m that ended 2023 with. For that to happen the next few quarters will need to be good.

Still happy to hold, but this year needs to deliver for my thesis to be maintained. However, I don't see a major catalyst for a SP re-rate until the JV arbitration is completed."

I believe the author of this blog/analysis is spot on, this coming quarter that is upcoming will most likely not match the lofty guidance that BCC has set and re-iterated over and over about the increases in the cash balance. I strongly believe that the SHs will see material outflows from the BCC's coffers this quarter.