I can assure you I have read all the available WSR information several times. And my normal DD process would involve a couple of discussions with management, major shareholders, advisors etc which I haven't yet done but will do so once the prototype have been tested and demonstrated.
WSR had $4.148m at end of June. By their own 5B, they will have used an additional $1.725m in the Sept qtr which will leave them with $2.423m. This is why I have said they are clearly and severely underfunded to take on a 2-3 year grudge match.
But out of this is, of course, the $1m they paid to SF for the 12.5% equity which SF must use to develop, demonstrate and enhance the prototype. In my experience, $1m is not a lot when trying to pay 4-5 people, developing a reasonably technically complicated prototype and working through the inevitable issues, both foreseen and unforeseen, that prototypes throw up.
It also appears the deal changed between first announcement on June 4 and the option announcement on July 17. In the June one, there was no mention of Geospatial Investment with their 19% holding and a $500,000 loan to SF which of course will have to be repaid when WSR acquires the remaining 87.5%. I would be very interested in knowing what GI put up for its 19% of SF; but either way, it seems a fraction of what WSR had to pay. But I digress....WSR's $2.423 then becomes effectively $1.923n (provided WSR share price is north of 2.3c) and take off another 2-300k for WSR admin and this then becomes about $1.7m by the end of Dec. And the fight hasn't even started!
I estimate that WSR will need a minimum of $4-5m/yr for the first 2 years. Wages will be $1.2-1.5m/yr, admin about $0.5m which only leaves about $2-3m for product enhancement, data capture and storage (which will gradually be displaced by marketing costs as the initial data base starts to attain some critical mass).
As I said before; its absolutely imperative that start-ups, if they want to succeed, must tick some crucial boxes:
1) A good/great product? Without having demonstrated it, we cannot at this stage, tick this box. However, I can concede that these guys certainly have the background necessary to develop a great and possibly even 'better' image product than NEA. But that is the bare minimum requirement for a start-up. What I and you haven't seen is HOW much better this may/could be and whether that difference is going to be sufficient/material enough to possibly disrupt an incumbent with multiple products.
2) Own their IP? No. Patent lodged; possibility for challenge.
3) Capital to demonstrate product? Yes
4) Expertise in new product marketing? Not evident; mostly technical.
5) Existing evidence of market acceptance? None
6) Detailed plan to commercialisation? Not available
7) Capital to support product to profit? No
8) Capital to Profit required greater than 100% of existing Mkt cap? Likely (on a 3 yr to profit basis)
9) Founders ability to support coy? Unlikely
10) Broker/analyst support? None to date
11) Simple corporate structure? No. Poison equity pills in case of T/O. Revenue based equity bonus
12) Management incentive to profit? None
NEA was able to tick all of these boxes nearly 2 years before the pay wall went up. Just saying WSR has a lot of boxes to tick before the fight even begins.
These guys will have a relatively big cup ($4-6m?) out by 1Q/2Q next year and they have a lot of work to do/boxes to tick before the market will give them this level of funding. By then, we'll all have a lot more real knowledge about SF. Its my assessment that the reduction of risk will be greater than any premium I may have to pay for the above boxes.
To each their own. Good luck.
WSR Price at posting:
3.7¢ Sentiment: None Disclosure: Not Held
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