Interesting developments The good news is that the company will improve its balance sheet with the divesture of Gggolf. The bad news is they acquired the company for $1,800,000 and sold it for $ 1,600,000. Instead of making an acquisition a year, they should consider improving its balance sheet especially during a difficult time period. Why can't they grow organically?
Anyway, as of Q3, the working capital is - $ 801,739 which is not good. They have an additional $2,844,172 in long term debt on top of that.
The latest acquisition will increase this deficit as the latest acquisition will cost them $ US 2,000,000 which is about $ C
2,680,000 of which $ US 1,500,000 or C $2,010,000 will get paid off by the end of the year. The Gggolf divesture will give them help to pay down the US acquisition but it will still increase their deficit. I've calculated they will receive $ $1,600,000 from the sale but they will owe an additional C $401,000 to pay off the US acquisition. There is some share dilution as well.
Total deficit by end of 2023 :
$801,739 + $2,844,172 + $401,000 - free cash flow (2023)
= $4,046,911 - free cash flow (2023)
=~ $3.5 m (explained below)
The company is generating at least $500k annually in free cash flow without the additional US acquisition. The company loses about $900k in Gggolf revenue but it adds
C $1,340,000 in the US acquisition. The net difference shouldn't change the situation that much.
It would take about 7 years for the deficit to be elimated at current rates. This is too high in my opinion.