S/A Shallow/Analysis...
posted on
Jan 23, 2024 09:25AM
(Edit this message through the "fast facts" section)
Every management team that forecasts higher OpEx, taps into approved Credit limits or restructures operations, take the advice of auditors, especially newly engaged CPA's, and gives the most dire potential outcome of a failed venture. Much like many, many other Q's and Annual reports here, we have read, although not "going concern" specifically, analogous language that points to the risk inherent in mangagement's inability to be successful versus competitors; failure to extend existing contracts; raise necessary capital due to unfavorable market conditions, etc. That is prudent disclosure and if it makes you uncomfortable you need to reasses your risk tolerance. On the other hand if you read the entire discussion in the report, posted below, you may find that this information is not new and management is condfident whether or not J-town stays in the mix.
...The first phase of construction is expected to take place within the existing 135,000 square foot manufacturing facility for the production of cells and batteries, with an estimated capital expenditure of approximately US$38 million. These material uncertainties raise significant doubt upon the Company's ability to continue as a going concern.
In assessing whether the going concern assumption was appropriate, management took into account all relevant information available about the future, which was at least, but not limited to, the twelve-month period following September 30, 2023. The Company and its Board of Directors have implemented various operating and financing strategies, including the following:
Subsequent to year-end, the Company renewed its revolving credit facility and extended it to March 29, 2024 with capability to refinance earlier. Despite this, it expects to refinance this facility with a different lender in fiscal year 2024, providing additional working capital to support the increase in revenue expected for fiscal year 2024.
The Company plans on pursuing large scale investments in its planned Jamestown gigafactory only in the event that it closes a government backed debt facility that includes advantageous terms with minimal impacts to operating cash flow and equity dilution. If the Company is unable to secure such financing, it will delay or cancel these expansion plans with limited financial impact as the main investment made thus far is the land and building which can be sold at a profit.
The Company has made improvements to its manufacturing process, equipment, and facilities over the last several months that have led to increased capacity and efficiency. Furthermore, the Company also anticipates gross margins to improve in fiscal year 2024 due to decreasing costs of key materials including but not limited to cell materials, separators, and other high value items. These anticipated improved margins, when combined with expected overall sales growth should result in improved overall financial performance.
Finally, the Company is confident in securing additional working capital from either debt or equity. Since the Company listed on Nasdaq in July 2023, it has further increased liquidity and overall financing capabilities.