The valuation impact of the additional funding required and drawdown of the bridging loan is set out in section 2 of our Supplementary IER. However, we also consider it appropriate to inform Shareholders of an additional consequence of not approving the Scheme. The Scheme Implementation Deed requires that each party is responsible for their own costs incurred in relation to the Scheme and the inability to receive the requisite approval levels from Shareholders is not a condition that would require Pfizer to pay a break fee. As such, if the Scheme is not approved, ResApp will be responsible for paying the costs that it has incurred during the Scheme process. In addition, it will be required to repay the bridging loan plus any accrued interest to Pfizer. Given that the Company required this bridging loan for working capital purposes, and based on the management accounts provided as at 31 July 2022 as well as advice from Acuity, the Company will require funding in the short term. As addressed in the notional equity raise analysis in our IER, any such fund raisings would likely be at a discount to the Company’s share price prior to the announcement of the Scheme.
As set out in our IER dated 14 July 2022 ResApp’s auditor had outlined the existence of a material uncertainty relating to going concern in the 31 December 2021 half year, with the going concern basis of accounting being dependent on cash inflows from commercialisation of products, capital raising or other fundraising arrangements. We considered the financial position of ResApp in preparing our IER and reflected this requirement via the inclusion of a notional capital raising which would be required to fund operations to realise the values contained in the Acuity report. We enquired with ResApp’s advisors in relation to their ability to conduct a capital raising (in the absence of the scheme) and were satisfied that this would be able to occur at a discount to the share price pre Scheme announcement.
RAP Price at posting:
19.0¢ Sentiment: Hold Disclosure: Held
