Ann: Appendix 4C, page-15

As HC'ers might know I have been a strong advocate of AXP over the last 2 years. I spent quite some time over the weekend trying to come to a view about the AXP 4C released last Thursday. Clearly the market didn't like it and it has made me reconsider my positions on this company. My conclusions:

There a 3 likely reasons for the market reaction to AXP's Dec 4C:
1. The cash flow burn
2. The current cash balance and implications for further capital raisings
3. Sales uptake rate

Cash Flow Burn: The following figures are from the 4C and the September Form 10Q Financial Statements:


  
The point to make is that the Dec cash outflow was $2.5M less than the Sept outflow. Second point is the increase in cash outflow for the calendar year is $14M outflow. I can quantify $9.6 Million from the items listed in the text of the Form 10Q (note that this figure is for 9 of the 12 months). My take out from this analysis is that this cash flow burn is close to Management's expectations and broadly reflects disciplined action.

Cash Balance: Buried in the 4C is the statement that the cash and equivalent balance is $22.6 Million - no capital raising in the short term.


Sales Uptake Rate: I stated above this AeroForm is not a iPhone-type gadget; there is no scope for error or mistake in any element, from product quality and reliability and surgery processes. It will be disciplined and structured. The Sept 4C said:

I suspect that, overall, AXP Management would like to have had 1,000 units sold in the Dec Qtr instead of 693.

My conclusion; hang in there!