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Inspirit - time for another placing to stave off insolvency don't you think?

By Tom Winnifrith | Tuesday 14 November 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.

We have had no news from the Inspirit (INSP) boiler room run by John Gunn and once graced by the great Dave Lenigas since its last placing completed in early September. By my maths the company is once again insolvent so how about another placing Mr Gunn? As a reminder of the maths...

As at 31 December cash stood at £73,000, trade receivables were £63,000 but trade payables were £311,000 and short term borrowings were £120,000 making net current assets of MINUS £295,000. Admin expenses in that six month period were £214,000.

So let us assume that admin costs have not changed. You need to pay to retain talent after all. That would see a cash spunk of £380,000 since the last balance sheet which, ceteris paribus would see negative net current assets of £675,000. But....

There have been two placings so far in 2017. In May £215,000 gross was raised at 0.125p. In late August another £300,000 gross was raised at 0.12p. So collectively that would be £515,000 gross - call it £465,000 net. But that still leaves net current assets of MINUS £210,000 and you can bet that cash is sod all.

The company has death spiral funding available but with the market cap down to £1.1 million that is not going to raise much to close that current assets deficit and keep the lights on for another six months. There was a three month gap between the first and second placing of 2017. Another three months have now lapsed and the maths are clear. The boiler room needs is placing ahoy.

The last placing was justified thus:

The funds raised are expected to allow the Company to finalise the accreditation process, accelerate the 'design for manufacture' process and provide working capital for the Company's continuing development.

Bollocks. It was to partially plug a gaping hole in the balance sheet and to fund ongoing losses. Working capital my arse, this is a serial loss maker. That is why the company went bust first time around before Gunn relisted it. The balance sheet remains holed. The losses continue. Brokers Peterhouse and SVS do not care about dilution all they want is their 5% commission. What price do you think the next bailout will be at?

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