Wow, oh my. These 4E accounts tell a sorry tale. Ignoring the eye watering loss for a moment (which is hard to do), it looks to me like a huge chunk of the IPO proceeds will be immediately needed to repay existing creditors and that’s before they get going on delivering on their growth plans.
Even though operating cashflow for FY23 was a negative $12m for the year, it looks a lot worse because that number appears to have been dressed up with $3m in unearned revenue (that's cash received in advance - note 10) and a $3m in negative working capital (ie delaying paying creditors). And they still ended the year with only $0.7m in cash. I wonder what the cash position looks like today at 31 August?!
Look at the $14.8m in current liabilities of which $7.5m is in payables which typically needs to be paid in 30 days (note 9) and I’d bet a big portion is overdue as CDX is cash starved. Also $0.9m in working capital loan (note 12) due in 2 months.
The other telling sign is that shareholders equity has fallen from positive $6.6m to NEGATIVE $1m.
While CDX has $5.5m in current financial assets to potentially help meet obligations, that’s the inHealth notes which reads like a horror movie (note 7).
These accounts are also unaudited so I reckon the upcoming Auditor’s report and director’s declaration won’t be comforting. No wonder they released them after their EGM this week.
While the recently issued CDX notes should convert to equity if they raise over $5m at the IPO (note 11), I’d argue that management will be back at the trough in the not too distant future as there is a good case to argue that they have insufficient funding (after catching up on late payments) to pay for admin, staff, marketing, inventory, and further development as sales slowly ramp.
Over 12 months of funding runway is a fantasy in my view. I was actually looking to get back in, but it will be ground hog day IMO if this company gets the IPO away. Just more dilution. Governance concerns are just exacerbated by this report.
Show me where my take on these accounts is wrong and I’ll be the first to admit it.All my opinion, not advice and I strongly suggest that you do your own research.
Over and out.
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