This morning self-styled 'paydentity' business iSignthis Ltd (ASX: ISX) reported a positive operating cash flow of $1.07 million on sales of $8.3 million for the quarter ending September 30 2019.
On the surface this is a positive result with revenue up 36% on the prior quarter and a 'target' for calendar year 2019 EBIT around $10.7 million (excluding non-cash items).
The company has also stuck to its guidance that annualised EU+AU paydentity ecosystem gross processing transaction volume (GPTV) sits above $1.9 billion.
As at quarter end it had $12.4 million cash on hand including $3.2 million taken in from the issue of share options.
It has also estimated cash outflows of $13.84 million for the December quarter, with product and operating costs more than doubling on the prior quarter. The outflow figure is apparently gross in excluding operating cash inflows from sales.
It's not specified whether the huge jump in costs is related to its regulatory shake down.
It's also fair to assume the company has cleared the release of its quarterly 4C cash flow report and investor presentation with securities regulators ASIC and ASX that are both still investigating the business.
The shares have now been suspended since October 2 as the company responds to regulators over its client base, related party transactions, disclosure, and revenue recognition.
Given the amount of detail the regulators have on iSignthis it seems likely (but unconfirmed) a 'whistleblower' or former insider is fuelling the regulators' concerns.
Assuming, iSignthis does return to trade I would not suggest buying shares on any number of grounds including valuation.
