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Pebble Beach Systems – “Final Settlement of VCS Consideration”, so much for “substantially debt-free”!

By Steve Moore | Monday 20 March 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.

A “Final Settlement of VCS Consideration” announcement from Pebble Beach Systems (PEB). I remind that on the conditional sale being announced on 20th October that RNS concluded “if the transaction completes then the group will be left substantially debt-free and to execute its software transition strategy with Pebble Beach Systems”

It is now updated that;
“… outstanding deferred consideration of $4.9 million due from xG has been settled in full by a cash payment of $2 million and the release of the $125,000 in escrow from the initial payment. Following this latest agreement there will be no further liability by the company to xG or in respect of VCS, save for the remaining 3 year lease obligations at Hemel Hempstead, amounting to approximately £1.2 million… The board considers that there is significant benefit to the company by the removal of uncertainty relating to the sale of VCS.”

Hmmm. The noted “uncertainty” is particularly with xG having earlier this month stated “until all outstanding liabilities are dealt with and fully agreed to by both parties, we do not intend to send any cash to the seller. Furthermore, we reserve all our rights to deal with the seller as needed in response to the numerous breaches of the contract that have occurred”. The situation saw me question just how much in Vislink Communication Systems liabilities are there? And whatever happened to being “left substantially debt-free”?

These concerns now look even more justified – with the latest announcement also including that “xG and the company will continue to work together to recover by 30 September 2017 the $2 million due to the company in respect of one debtor” and that “the company has been able to reduce its net debt from £17 million to approximately £12 million”.

So much for “substantially debt-free”!?! Instead it’s “remains in regular dialogue with its bank, who remain supportive”. With this reliance, hopefully previous warnings have been heeded here – and hopefully further insight will be provided in a 31st March-scheduled results announcement. Presently though, this remains a certain bargepole stock.

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