It's just the beginning for Spenda!, page-10347

Just 9 days until the last day of the quarterly reporting period. In absence of new information, all we can do is use prior 4C to estimate where they have landed at the end of March. Using the same cost base (operational and financing), the same average yield, assuming no new loans and no redemption of loans on balance sheet, the cash balance would be $1.4mio, which is less than a quarter of runway. With $3.4mio loans on balance sheet.

We can then make simple assumptions on loan growth from here, noting that a) new loans under the financing facility need 10% of cash to support them in the warehouse, and b) some loans on balance sheet could be redeemed to improve the cash position.

For +$2mio loan, the cash position goes to $1.38mio. For +$5mio, $1.3mio; for +$10mio, $1.1mio; for +$20mio, $0.89mio. The magic number is +$30mio... then cash left would be just $0.6mio... but the operating result would be flat.

You can draw negative or positive conclusions from this exercise... For me, the overwhelming negative is that this is far too close to the wire and this is a big thumb down to the managing team. On the plus side, there is a path to bring this business to a profitability just with lending revenues. And if they finally generate non-lending revenues, this is a bonus that may then boost SP. It makes me even more unhappy with how the financials have been managed so far.

Note that it is likely that their financier, is imposing financial covenants that should not let them operate with such a low cash balance. Liquidation of part of the book on balance sheet is likely, even though it reduces revenues, and a CR even more. It would even be wise if you ask me...

Anyway, there is no speculation in any of the above. It's pure basic maths. Make the assumptions you wish. I'll dare make a guess... I think revenues will disappoint and stay under $1mio. In terms of loan book, the loans under the facility will grow slowly, say $2mio. And they will have redeemed some of the loans on balance sheet towards the end of the quarter to improve the cash position to 2 quarters of runway.

See you all at the end of next week...