What’s the deal with SP3?, page-3

G'day Don

I think it's a good time to have "come across SP3".

At 1.7 cents per share currently, there's not a whole lot to lose if you're a newcomer, and you like what the business is trying to do, and you're willing to have a punt that the business is turning around.

The bleak view - with a focus on the past has been eloquently set out by the previous poster, who I note has recently sold out his/her long standing holding.

The positive view is probably best set out by the CEO himself in various recent company presentations in which he has outlined the Board's strategy for achieving sustainable profitability.

For my own part, I've been a holder for several years and I admit that while I'm underwater on my investment, and I still like what the company is trying to do, my patience and faith in the company has been tested.

The forthcoming 2nd quarter cashflow and activities reports which are due next week, if not before, will be important for me in deciding my future level of commitment as a company investor.

The 1st quarter cashflows which were in excess of -$700,000 were a bit of a shock and a disappointment to me. For the 2nd quarter, I'll be looking for that negative 1st quarter cashflow to be more than fully offset, and I believe there's a good chance of that happening for the following reasons:

1) Circa $400,000 has been received from the Government during the second quarter in the form of an annual R&D tax rebate;

2) $615,000 has been received from Southern Cross Security - being a 5 year payment for maintenance and subscription revenue;

3) Some lumps of revenue should have started to accrue from the second Optus scope of works, and from maintenance payments which have been initiated by Surf Lifesaving NSW as part of the most recent million dollar contract for supply of more Emergency Response Beacons and provision of maintenance services for all pre-existing 32 ERBs and the 35 that are yet to be supplied.

My original expectation for what might be a reasonable (but not spectacular) 2nd quarter cashflow result was +$1 million reflecting a neutral cashflow outcome from normal quarterly activities, boosted by circa $1 million from the abnormal items listed in 1 and 2 above. However, with the recent $250,000 debt repayment, I'm happy to revise that expectation down to a cashflow result for the 2nd quarter of circa +$750,000.

Anyway, we shall see.

zeno9