The very last note on the last page is what you want to read...
Note 7. Subsequent Events
The Company entered into loan agreements with Paul Peros (CEO and Executive Chairman) and Brand Laboratories FZ, a company associated with Steven Schapera (Director), on 7 July 2022 and 9 August 2022 respectively whereby the parties advanced US$70,000 and EUR70,000 respectively to the Company. The terms of these loans include:
• A repayment term of 30 days or less, but in any event as soon as possible after the Company complete a rights issue or similar fundraising;
• Interest at 16.5% per annum, calculated monthly, and foreign exchange risk to remain with the Company;
• The interest rate increasing by 1% for each month repayment is delayed, capped at 21.5%;
• A facility setup fee of 2.5% payable by the Company to the lender; and
• The remaining terms are similar to those normally associated with such loans.
On 31 August 2022 the Company announced that it had entered into a convertible loan facility agreement with Celtic Capital Pty Ltd who agreed to advance $200,000 to the Company. Under the terms of the Loan Facility Agreement, the Company is afforded the ability to settle any funds drawn by either converting outstanding amounts into ordinary shares in the Company, or by payment in cash.
Settlement via conversion to shares is subject to the Company completing a capital raise of at least $2m within 3 months of the drawdown date and the Company obtaining shareholder approval to issue such conversion shares. The conversion price is set to be determined as 90% of the issue price of any shares issued under such a capital raise. If settlement occurs other than through conversion into ordinary shares, a fee of $20,000 will be payable. The Company will also become liable for interest at the rate of 15% if certain default events occur.I really don't see this as a way to run a company, even for the short term. Another $2m "within the next 3 months" is really not enough as (according to the June 4C announcement) they burned through more than this in the June quarter in operating cash. When you see how the company has raised funds over the last 14 months, it is like a death by a thousand cuts and has cost the company over $1m in borrowing costs, in FY22 alone. Having limited funds does not allow Peros to run the company for the long term.
Realistically, the company needs $10m in the bank account today to let the company do what it needs to do over the next 22 months (until the end of FY24). But how can this happen?
It needs to get to $1m in cash receipts a quarter, quickly. And then get to $2m in receipts a quarter in the next 12 months. How is this meant to happen? Again, the past quarterly cashflows have shown receipts of:
FY21 Q3$42kFY21 Q4$276kFY22 Q1$695kFY22 Q2$200kFY22 Q3$410kFY22 Q4 $274kWFL currently has a market capitalisation of $9m Given the negative equity at 30 June and the ongoing need for funds (and negative operating cashflow), I think this $9m is hard to justify and how they are able to raise further funds cannot be easy. Honestly, it doesn't look good. The company needs revenue badly and it is just not going to happen in the short term - revenue is not going to magically go from $2m in FY22 to $8m in FY23 or even FY24, no matter how optimistic you are. Sure, it should be increasing revenue, but it is the rate of the increase that is disappointing based on the past 12 months as a guide.
Some people will use the words "if" and "potential", but the reality is that how will things actually happen to ensure the company is around at the end of 2022? Not all good ideas succeed. Good luck.
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