forecast pe at 6, page-31

Ladies and gents:

I've had a further look into the R&D capitalization etc and for me it is not so much of a concern. Yes it means their NPBT is considered high. But this is not inflated as it is in line with Accounting Standards and Audit standards.

The idea being one off expenditure for establishing contracts does not impact on your bottom line performance for the year incurred, but instead factors into your NPBT over time. This is common place particularly where large amounts of work is incurred that is intended to benefit the life of a contract. Note 9 of the Annual report refers.

Of course cash is King, so the cash flow needs to be considered as well as without cash the business will not survive. In this case cash flow is improving.

I also think the auditors notes (pasted below: 1R) tell a significant story for this business.

Going Concern
At 30 June 2013, the Company reported an EBITDA profit of $1,164,425 (2012: $600,471 loss). A net
asset surplus of $1,203,045 (2012: net asset deficiency of $310,234) was also recorded, demonstrating
a $1,513,279 improvement from the prior year. In the same period a net current asset deficiency of
$907,906 was recorded (2012: $1,570,384). Again, this represented an improvement of $662,478.


Finally: R&D funding an dGovt funding seems insignificant: Auditors note 1T: circa $12k received in Govt funding for the yr.

4TK