Next 4C Revenues, page-38

Generous increase in revenues. We should expect some pickup in lending revenues from additional use of the DW. $10mio @ 20% would bring an additional $500K this quarter. Offset by about $250K of additional financing costs, and a resulting cash drawdown of $1mio. But non-lending revenues should only increase modestly. The CC deal was the only announcement, and the related non-lending revenues were estimated at $900K per annum when fully deployed. It would be a good results to see $100K of that in this quarter. Given they have not announced anything else, we can only assume that any additional non-lending revenues would be less than from the CC deal. $125K of additional non-lending revenues seems fair.

This set of numbers could be presented as an increase of $375K in net revenues. Or, an eye popping $2.225mio increase if cost of financing is reported separately and the R&D rebate is included.

Pick the one that drives your investment decisions.... And carefully review the runway from there. The rebate is welcome and there will probably be additional funds coming back from loans previously on balance sheet being transferred to the DW ($2mio was my estimate at last 4C but don't quote me...). Against that, the drawdown of the DW will result in a 10% capital call to support it. We could possibly see a net cash receipt from redemptions and drawdown of about $1mio if they have used an additional $10mio of DW. Add to that the net revenues and R&D rebate, $1.975mio, and the same operating costs as last quarter, $2.94 excluding interest, and we magically get to almost a flat net cash, so $6.3mio.

We're not that far...

From there, the situation is "tricky". Additional drawdown on the warehouse would hit the bottom line as they need to support it with 10%, and unless they reduce operating costs, the associated incremental lending revenues will not extend the runway much past the second quarter of the year. It is then a balancing act and it demonstrates that what we really need is a really big pick up in non-lending revenues to change the revenue vs capital drawdown profile.