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EXPOSE: Ooh Err Mrs … carry on droning

By Tom Winnifrith, The Sheriff of AIM | Saturday 30 March 2019


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.


Management Resource Solutions (MRS) has form when it comes to doing crackers deals to destroy shareholder value. Do you remember this one? (Carry on Dogging?) . Well now we have another corker. How Nomad Arden Partners signed off on the lastest crock defies belief. Management is buying fledgling drone operation Alerion for £1.32 million in shares at 5p. It is ‘avin’ a Turkish.

We are told that Alerion owns the intellectual property and other assets relating to unmanned aerial systems developed under the program name "Aerial Cinematics." Aerial Cinematics is an Unmanned Aerial Systems ("UAS") based photography, mapping and surveillance systems design project.  Right so we do not get to see how much cash Aerial has spunked but we do know that under Alerion ownership..

“Alerion was incorporated on 3 August 2018 and, apart from acquiring the assets relating to Aerial Cinematics, has not traded, whilst it has been in the technology development phase. MRS has secured the company and its IP before its commercial deployment. Alerion made a loss before tax of £88,800 during the period from 3 August 2018 to 12 March 2019 and had tangible assets of £47,650, according to unaudited management information.”

Really? As you can see from the companies house details below Alerion has capital of £100 as at August 3rd rising to £101 in March 2019. How did it fund all those losses and the acquisition? Answers on a postcard....

We are told that Alerion had tangible assets of £47,650 but what were net assets? Given the losses of £11,000 a month somewhat less one suspects. And those losses suggest that without this buyout Alerion would have gone tits up pretty soon so why on earth is Management paying £1.32 million ( albeit in shares) for it?  That is insanity.

So who is the genius behind Alerion? Step forward Elliott Talbott ( odd way to spell your surname BTW). As you can see from his LinkedIn profile below Elliott is a biusy chap with his main job as President of a Canadian outfit Leinad.



I also bring you below the Leinad management structure from its websitebelow . Have a look at who is the IT consultant? Does that name ring a bell?


Back to companies house (below) and you can see a string of share transfers between Ellliott Talbott and Christopher Grove (or in one case Groves). What on earth is going on here? Perhaps Management might like to explain?

As a final note I have never met someone with the surname Talbott.  I see that Comrade Elliott was born in May 1983. Companies House, as you can see below, also has an Elliott John Talbot as a director of two companies and he was born in May 1983 as well. How odd. What a coincidence.

Management supporters keep on asking why shares in this company appear so cheap. Well it depends how you define cheap. If you look only at earnings per share then you might say Management is cheap but only a moron would do that.

The recent interims showed a company with NEGATIVE net current assets of $17.4 million and additional liabilities (largely loans) due in more than 12 months of another $5 million. While the company reported a profit before and after tax of $3.5 million and $2.644 million ( those earnings), the amount of cash generated from operations was materially less than capex ( which appears non discretionary, i.e. has to be maintained to keep plant moving) and (small) loan repyaments. So this is a business burning cash and drowning in debts. It can only keep going by a) using incredibly expensive last resort invoice discounting debt facilities, always a red flag, and b) by stiffing suppliers by paying bills in a less than prompt fashion.

So a crap business, drowning in debt, burning cash, does all share transaction on a crazy valuation with blokes operating in an utterly opaque fashion. What is not to like?

SELL.



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