By Nigel Somerville, the Deputy Sheriff of AIM | Tuesday 3 January 2017
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
With the L1 funding package now fully drawn, AIM-listed CloudTag has now had an awfully large amount of money, yet we are still to see a product available for it to sell. But thumbing through the RNSs of the last few months shows an incredible cashburn. Where has it all gone?
Working backwards, we now know that the company had had £2.08 million (net) from Tranche 1 and £1.7 million (net) from Tranche 2 of the L1 package. For that it has had to issue £4.5 million of convertible notes. Until today’s last payment, that suggests that the company has burned through £2.93 million since 7 November – two months, or thereabouts. And we have already been told that the company will need further cash following drawdown of that last line of death spiral cash.
Quite what it has been spending all this lolly on is a bit of a mystery to me, since it is not even ordering up units of its newly rebranded imaginary Onitor device.
Before the L1 deal was announced, the company had in 2016 raised just shy of £5 million from share issuances and warrant exercises, and a further £1 million of fees (excluding Amit Ben Haim’s bonus, also issued in shares) were settled by issuing shares in lieu. Call that £6 million.
But the company received £2.08 (net) from Tranche 1 of the L1 facility and before year-end a further £0.85 million (net) from the first part of Tranche 2. The balance of Tranche 2 falls in to 2017, so is ignored.
I make that about £9 million worth in 2016.
Yet the company has already made clear that it will require further funding, so the cashburn looks set to continue for some time yet.
So what has the company got to show for all this cash?
Has it any revenue? Er….no.
How about a product available for sale? Er…no.
Maybe a firm sales contract? Er….no.
Since the company has now decided to preserve its cash resources by holding off commercial production of its Onitor device until it has sales orders, one can’t imagine that manufacturing cost has eaten into the cash much.
So where has it all gone?
Of course, this means that the company is somewhat dependent on being able to issue fresh equity in order to keep the lights on, and the gravy train afloat.
Shareholders might want to show their undying gratitude to Cairn Financial, the Nomad, for not pulling the plug.
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