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Jim Mellon's Diabetic Boot Company spoof unravelling as late accounts filed

By Cynical Bear | Sunday 11 June 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.

I’ve written a few times on the travails of The Diabetic Boot Company over time, usually after yet another Jim Mellon-related company lends or invests money in this biotech pipedream. Well, its results have finally come out, two months late, and they make interesting reading.

Just to set the scene, this company’s performance impacts a number of different companies as FasForward Innovations (FFWD) has a stake of over 4% in it and both Port Erin BioPharma (PEBI) and Life Science Development (just cancelled from AIM) lent it £200,000 on a ‘short-term’ basis. In addition, Regent Pacific in Hong Kong invested about £1 million a year ago before getting cold feet and stopping further funding.

Anyone spot a connection between those companies?

The accounts for the year to 30 June 2016 were due to be filed by 31 March 2017 but have only just been sent to Companies House and can be seen HERE. For a private company I have to say that it is a pretty good set of accounts with plenty of detail and information to provide shareholders with an adequate update.

Unfortunately, it’s not great news.

The cash outflow from operations in the year was £2.4 million as revenue was negligible; however, the real issue is in the outlook. As things stand it is only able to sell to a very small part of the US market; however, there is uncertainty over whether it can get the reimbursement codes it needs to sell more widely without coming up with more clinical data from trials. I doubt that would come cheap.

In terms of cash and funding, with a burn of around £200,000 a month, it is no great surprise that the £818,000 on its balance sheet as at 30 June 2016 was running low by the time of the proposed RTO with Life Science Development in October 2016 and it then turned to Port Erin for a further £200,000 pending a larger raise.

To Jim Mellon’s credit, or the fact that he ran out of connected companies willing to stump up funds, with no large funding round forthcoming, it appears that he has been largely funding it himself on a monthly basis since January but where does it leave the company now?

It has overdue debts of £400,000 to Life Science and Port Erin; it probably owes Jim Mellon the best part of £1 million and there is no great visibility on revenue growth. It has been trying to raise significant funds for a long time now with no great luck so I do wonder when Jim’s patience will run out.

In the meantime, I suggest it might be sensible for the companies mentioned in this piece that have lent money or invested in DBC might consider an impairment 

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