Q: I would appreciate your take on the recent financing and what are sales residuals? Is the company on stronger footing now?
5i Research Answer:
The $6M financing helps, certainly, and one investor is backstopping $5M of the deal. At 35c the price though was a discount to recent trading, and down 70% from the price of the last financing in 2021. But debt of $78M has worried investors so this will alleviate some solvency concerns. The stock is down 53% this year, and there is dilution from the deal. Part of the deal is to buy back some sales residuals, and this will increase margins. Typically, sales residuals refers to money made over and above any initial sale, with little additional work, that typically gets paid out to sales reps on a predetermined schedule. Kind of like an ongoing bonus to sales reps on an initial sale. But of course this hurts margins.