SFI (ASX) Ann: Half Yearly Report and Accounts

Originally posted by Whatknots ↑

IMHO Note 11 provides some interesting insight into the contract with EV. With Spookfish retaining the title to all of the camera systems provided to EV.

The way I interpret Note 11 is that the contract puts SFI is in a financially precarious position if EV is decides to hand back some of the camera systems on the basis that SFI will not have the funds to cover any returns of the camera systems given they have been delivered at cost. Seems to me its more like a lease arrangement, with EV providing the upfront capital which once again is questionable from a revenue perspective.

Note 11 – Contingent Liabilities
Under the terms of the Development, License and Royalty Agreement with EagleView Technologies Inc. (‘EVT’, the Group supplies spatial imagery capture systems to EVT and EVT pays the Group amounts equal to the cost of those systems, in progress instalments. If for any reason the Group elects not to renew this agreement on the due date, EVT may elect to return capture systems in use. In this event, EVT are entitled to a refund equal to their book value, based on a straight-line, five-year depreciation schedule. At the reporting date, the gross value of systems manufactured or in progress, for which payments have been received, is $18,343,331 (31 December 2017: $9,705,222). After depreciation the notional contingent liability at reporting date would be $16,983,416 (31 December 2017: $9,451,343).

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I also noted this last night - I was wondering what the 'foot' on the neck of Spookfish was, that the directors would recommend the .08 bid as a good offer. I initially suspected there may have been an issue with the technology and coupled with the potential cash flow crisis (and issues with capital raising given current investor sentiment after the bid was announced), however this part of the agreement (which I note I have never seen reference to before!) seems to be it. The board seems to have stitched up the company entirely - first by agreeing to royalties being paid by reference to some subjective measuring stick that EV has control over determining, putting SFI into a terrible cash flow situation - and secondly, by allowing them again to determine if and when refunds will be paid if they decide to return the camera systems for ANY REASON. This is obviously the threat occurring at the moment - agree to our bid or we'll return your camera systems and probably just buy them from the liquidator. Marinko, Robinson and the rest of the board need to be replaced immediately. And without sounding like a complete conspiracy theorist, what personal benefits are they getting from this deal under their new employment arrangements. I hope the whole little scheme is disrupted and a decent price put the shares.