IMO not a nice set of numbers. We currently have about $1.15 million left in working capital reserves and a record cash burn of $1 million last quarter as staff were taken on and Trade Shows were attended.
The trend is a uncomfortably high cash burn rate that shows scarce capital being depleted at a time when its replacement via a CR is largely likely to fail. I say this given market sentiment towards TV2U that is reflected in the SP and indications that there are holders waiting to exit if the share price bumps 2c or more again.
There has been a number of announcements lately but none that imply any revenue in the next quarter which is critical as once an ASX company runs with working capital under $1 million it comes under closer ASX scrutiny for proving it is liquid and is not likely to trade while insolvent.
It is not the core issue anymore that we have only been listed 9 months so lets give them more time and not be hasty in our assessments. We simply are now running out of cash and therefore time and the announcement that alternative or innovative working capital raising methods will be explored, is reactive and short sighted IMO if this has only now been considered, as this should have been an ongoing process from the initial prospectus cap raise given that struggled to fully fund the company.
Everyone hopes that tomorrow we will be saved by new announcements that Divan or Toomai will come off, or some new deal will be struck. Critical to any new deal is that typically even when an upfront fee is paid, that will typically commercially represent only a portion of the working capital needed to progress the deal and pay for the hardware, software and labour indicated in any accompanying term sheet.
We are now in a situation where in the next quarter labour and admin costs alone will burn through much of the remaining working capital, even if a cutback occurs in these areas. Where will the working capital come from to progress any announced deal if there is a shortfall in any upfront payment versus the capital spend to commercialise the project?
Self regulation of costs is typically hard for companies to inflict on themself with rigour as its hard to be commercially tough with key staff. Will shareholders vote to reject the Remuneration report at the AGM and table a motion for a large salary cut for staff given wages and admin levels are way out when you benchmark them for tech startups as based on reported indices by commentators such as Gartner and IDC?
I perceive that the influencers on this forum are largely significant shareholders likely to vote with the status quo, if I read their comments correctly about where they believe the company is at. IMO If we stand by and be passive or in denial then we will be victims to the looming crisis and potential insolvency of this company in 2017 if dynamics do not change.
There is no point in blaming anyone here as the dynamic for all this occurred in the initial prospectus cap raise where only the minimum amount of $2.2 million approx was raised with difficulty. We live the legacy of this now as adequate working capital has turned out to be the critical issue for the potential of TV2U to be realised, and time is now simply running out IMO.
If I read the Notice of the AGM and the most recent quarterly report our current standing is of having no declared substantial income. Worse we have an opaque set of accounts that do not allow anyone to make informed investment decisions, given we are blind to K2 income which people suggest has risen but is not disclosed but is and continues to be the basis for some holders to pin their faith to thus far.
IMO there should be a line item in the quarterly showing the TV2U Singapore income as a total and a corresponding line item showing the total expenses so we can ascertain as shareholders what our subsidiary(TV2U International owns TV2U Singapore) is actualising.
Another concern is the suddenly announced 2013 Employee Performance agreement which is resolution 10 in the Notice For AGM. I have found no mention of this artefact in the original prospectus I received in 2015. Schedule 3 is missing from the Notice For AGM so I cannot quantify it as a future cost if voted through and enacted but it is poor timing IMO to be introducing a reward scheme at this time when belt tightening should be the mood and direction of the company.
IMO Financial quarter 3 is the premiership quarter for any company as the business year has been well underway and any significant activity should reflect in that quarters results. Quarter 4 is potentially good for retailers who plan for the Xmas rush but other companies often find it disruptive, costly and less productive as everyone goes on some form of public holidays and/or short leave or their 4 weeks leave per year, which is another company expense.
Deals are typically harder to get over the line as key staff go on leave as Western societies wind down for Xmas and New Year whilst Asian Countries often kick into Chinese New Year celebrations in February. It is also an acknowledged difficult time of year to raise capital as investors are typically well heeled and found on beaches rather than in boardrooms listening to brokers trying to sell them a proposition.
If good deals drop tomorrow for TV2U that show clear short term monetisation that will offset the current cash burn trend I will be relieved. If they are announced deals with an obvious period of further negotiations and pre-commercialisation activities then I will personally despair as TV2U is now spread thin trying to rope in deals and commercialise them, spending ever decreasing cash reserves to do so.
I am keeping my sentiment to HOLD till the new announcements drop tomorrow and the AGM takes place later in November so I can gauge where the company is headed, but IMO I can understand now potentially why a senior lawyer and a senior financial deal maker might take the decision to stand down from Directorships with TV2U at this point in time.
DYOR.
TV2 Price at posting:
1.7¢ Sentiment: Hold Disclosure: Held
