The CEO and Chair should return the $187,000 cash bonus they received in FY21 immediately. In no way should they be rewarded for the performance of Damstra in the last 18 months, ever since acquiring Vault. The Vault acquisition was part of a clear strategy to acquire earnings in the face of a faltering legacy business, a common strategy we see from boards of companies. This was a turning point for Damstra financially.
Management stated that EBITDA turned positive in 2Q of FY2022, but this is quite misleading. As usual the cashflow tells the real story, and the recently released 3QFY22 Cashflow Statement shows that free cashflow for the first 9 months of FY22 is -$12m. Management often refer to 'Operating Cashflow' because this excludes the cash outflow from capitalised software spending and interest costs and does not give the full financial picture.
Actual quarterly cash outflow is running at about $5.3m, and cash at bank is about $12m. Hence Damstra have about 2 quarters to raise capital, and certainly not the 6 quarters stated on the Cashflow Statement (as that calculation is based on 'Operating Cashflow'). I would assume a capital raising is imminent, and so does the market - hence the share price decline. Further debt is unlikely due to the perilous state of free cashflow and the existence of $10.5m of deferred consideration.
Spare a thought for the vendor of TIKS who has lost 90% of the $!2m received in shares (escrowed) for selling his business to Damstra and must be concerned about receiving the contingent consideration due later this year!
A really sad state of affairs attributable to poor management.
(I also note that while management were happy to buy stock as part of the placement at $0.34, now 6 months later - they haven't seen fit to buy any further stock despite the share price now being much better 'value' at $0.10. That in itself is concerning.)
DTC Price at posting:
10.0¢ Sentiment: None Disclosure: Not Held
