RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:Ex bullfrog numbers?This is actually a good exercise to go through.
Out of the rights offering, approx $8.2 million went to pay promissory notes that were subordinated to the bank. I'm assuming these related to vendor take backs or earnouts for prior acquisitions. Suspect BMO wouldn't have consented to paying these without the rights offering, and I'm not sure if they would have consented if they knew Spark was going to blow covenants at Dec 31st (the rights offering closed Jan 31st and they disclosed the covenant breach a few weeks later).
Comparing the Dec 31st 2021 numbers to the Sept 30th 2022 numbers shows the following:
Investments in Equipment of $2.5 million, and $3.4 million in the ERP system.
Increase in Cash related to assets of Bullfrog of $4.8 million
Increase in working capital of $25.7 million (primarily Accounts Receivable and Contract Asset - which I am assuming is unbilled WIP).
Drawings on the operating line actually increased by $2 million vs December 31st, despite the rights offering.
In other words, the rights offering was used to retire subordinated debt, some small paydown of term debt but primarily to build working capital (which looked significantly large as a % of revenue to begin with).
I know there has been an increase in revenue, but increasing working capital can also indicate declaring profit on jobs too agressively.
Lets hope there isn't another year end surprise when the auditors come in to look at year end numbers.