donvictorio
Immediately after the near of Wednesday’s common session, Intellect Technologies (NASDAQ:Brain, NASDAQ:MINDP) or “Mind”, declared the receipt of an combination $7.7 million in new orders for sonar and supply controller devices.
That claimed, the corporation experienced now projected these orders to come by means of and appropriately incorporated them in its said $22.9 million “overall guide of enterprise” disclosed in each its Q1/FY2023 press release and quarterly report on Form 10-Q final thirty day period.
These new orders had been predicted, but it is an significant action to have them in hand. The tools to be sent involves multi-beam sonar devices, along with involved dealing with tools, and seismic source controller methods. We assume all these orders to be finished and delivered in our present fiscal calendar year. We believe these orders show the energy in army and exploration marketplaces and we be expecting even more orders in the near upcoming.
As a final result, these orders will never outcome in upside to the company’s previously communicated anticipations.
In addition, Intellect surprised investors with the choice not to declare a quarterly dividend on its 9.00% Series A Cumulative Preferred Stock (“Sequence A Favored Inventory”) for the 2nd quarter of its fiscal yr ending January 31, 2023.
Because of to liquidity demands to total these, and other, orders and the uncertainty as to the timing of particular money flow, we really feel it prudent to defer the payment of the next quarter dividend on our Series A Most well-liked Stock. The Enterprise proceeds to have favourable doing the job cash and no funded credit card debt.
As the Series A Favored Inventory is cumulative, the non-payment technically signifies a deferral:
The Company may possibly defer dividend payments on the Series A Most well-liked Stock, but the dividend is a cumulative dividend that accrues for payment in the future. For the duration of a deferral time period, the Enterprise is prohibited from paying dividends or distributions on its common inventory, or redeeming any of these shares. Additional, if the Corporation does not shell out dividends on its Series A Preferred Inventory for 6 or extra quarters, the holders of Series A Most popular Inventory will have the appropriate to appoint two directors to the Company’s board.
Though liquidity was currently down to a paltry $.8 million at the conclusion of April, administration tried to reassure traders on the new Q1 meeting phone:
MIND’s funds composition and liquidity remain fantastic. As of April 30, 2022, we experienced performing capital of approximately $16.7 million and dollars of approximately $817,000. We collected roughly $4 million of accounts receivable in Might, so our funds situation has enhanced appreciably and we have good visibility on extra receivables that are imminent.
Obviously, the board of administrators did not share management sights as it decided to maintain off on the $.95 million quarterly dividend payment.
Make sure you notice that just seven months back, the business done a $10.5 million stick to-on offering of its Series A Most well-liked Stock at a value of $24.25 per share.
But with far more than $20 million of funds utilised in running actions since the starting of FY2022, signals of distress have develop into obvious in the stock price in latest months. At Wednesday’s closing value of $13.40, the desired shares were down close to 45% from the offering price tag in November.
In FY2022, the company raised an extra $5.2 million from selling preferred shares into the open sector under its at-the-current market (“ATM”) giving plan with Ladenburg Thalmann.
But with the dividend generate approaching 17%, the price of capital has become prohibitive for the corporation. Whilst Brain also has the capacity to provide frequent shares beneath the ATM, the weak stock price and little buying and selling volume correctly precludes the company from heading via this avenue.
Base Line
Brain Technological know-how luggage some perfectly-expected orders but shocks buyers with the choice to “defer” the quarterly dividend on its 9.00% Sequence A Cumulative Most well-liked Inventory in get to protect liquidity for clear functioning funds needs.
Offered the firm’s ongoing liquidity difficulties, I do not assume Thoughts to capture up on the favored inventory dividend anytime shortly.
With quite limited supplemental sources of liquidity accessible to the corporation at this issue, chosen stockholders must significantly take into consideration promoting present positions and going on.