I have to say I am amazed how energised we all are about this announcement!
I'm sure many of you will havre run your own businesses and would know how lumpy the cash flow can be at times. Bringing forward a chunk of the R&D tax incentive payment (a kind of factoring) is an excellent way to address this problem for a business that
operates at a loss. Yes, the annualised interest rate is higher than a bank loan, but securing cheaper finance isn't so straightforward when you don't have the profits (excess earnings) to pay it back.
For the sake of completeness, this is what the interest accrual looks like, assuming the additional facility available in June isn't tapped:
$19k is hardly something to get your knickers in a twist about (in fact, with inflation currently running at around 6 percent, the NPV of the interest accrued is even less).
I posted previously that, to me, it looks like some up front costs associated with the trials need to be paid - maybe they are a bit higher than anticipated (seems the cost of everything is going through the roof). Could be the MND trial (while it's funded by Fight MND, the payments only come in
after the milestones are hit - so it's a reimbursement of sorts - the company has fund the work to reach each milestone itself before being reimbursed) OR Covid (
significant up-front costs to outsource to Ergomed).
My thoughts are that it's more likely related to Covid trial establishment.
From the 21 Feb announcement:
https://company-announcements.copyright link/asx/paa/c3de50e6-9290-11ec-b4cf-6eeaf7b2618c.pdf
So a small (non-material) fee paid for Ergomed to conduct the feasibility exercise, with a rough completion date of a couple of months.
My guess is that this is now complete and they're talking terms to run the trial, including the cost, and need to bring some cash forward. If this is correct, expect an announcement about the Covid trial soon.
Cheers
Densy
(20min delay)