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By Steve Moore | Thursday 8 March 2018
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.
Previously writing on digital tv technology company Mirada (MIRA) in December I noted net debt of $7.6 million and that some improvement is going to be needed to turn around the balance sheet. The company has now announced that it “has entered into a secured one-year loan facility for up to £3 million... The directors are confident that as a result of its pipeline of potential new customer contracts and the expected revenues from its recently won contracts now being implemented, the company's cashflow position will improve and it will be able to satisfy all debts as they fall due”. Hmmm…
It is explicitly stated that “the directors believe that the facility represents the best financing option currently available to allow the company to satisfy its short to medium-term working capital requirements and to convert its pipeline of new business opportunities into new customer contracts” and, if there is confidence in the expected revenues from the noted contracts, what sort of interest rate should the ‘best available’ £3 million loan facility command?
… “The facility bears an interest rate of 15 per cent. per annum on monies that are drawn down”. You what?!?... but what about confidence in the expected revenues to see all debts satisfied as they fall due?
This follows prior operational changes and delays – and it is updated that “net debt at 28 February 2018 was $9.34m with available facilities of $1.64m (mostly comprised of invoice discounting facilities)”. I.e. it was heading for cash crunch ahoy. Indeed, even the latest seemingly isn’t enough - “to ensure the company will be in a position to deploy any new contracts and satisfy the associated working capital requirements… in discussions with (the loan facility provider) Mr Tinajero regarding him providing further funding for this purpose, either as debt or equity, ahead of material cash flows from the current contracts being implemented”.
With the market cap currently heading towards just £1 million, mega dilution ahoy? It certainly remains bargepole ahoy.
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