The Statement of Cash Flows seems to be the most critical report for the future of the company. Whether or not ongoing operations are covering interest repayments plus further debt repayments after operating expenses.
I am having a hard time understanding it though...flipping back and forth trying to understand which expenses are included in the 'Cash Payments in the Course of Operations' total. I'll ask my accountant.
The CFO does say that we have a sufficient interest cover ratio as of today so maybe we can simply trust the management, but I'd rather understand the cash flow myself.
Net cash from operating activities for 2010 was -$5.6m (including $12m interest). Like I said before, interest might be $4m lower next year which would put us at -$1.6m. If employee expense is included in the 'Cash Payments in the Course of Operations' total then that should put us into cash flow positive by +$1.9m then lower legal costs would put us at ~+$2.6. Again, this is assuming those expenses are part of the 'Cash Payments in the Course of Operations' total. This is also assuming 'Cash RECEIPTS in the Course of Operations' stays the same as 2010.
The figures look promising. A cash flow surplus of $2.6m or more looks very possible after paying interest. More than enough to decrease the debt level.
I'll get my accountant to verify my understanding, then I'll wait until February for updated reports.
TCQ Price at posting:
8.3¢ Sentiment: Buy Disclosure: Held