Spectur Secures $271k Short-Term Loan Against R&D Tax Return
SP3 (SP3) Share Update August 2024 Thursday 8th
Spectur Utilizes Short-Term Loan Facility for R&D Tax Return Advance
Spectur Limited (ASX: SP3), a company specializing in solar security, sensing, and visual AI solutions, has announced the utilization of a short-term loan facility worth $271k, secured against its FY24 R&D tax return.
Instant Summary:
- Spectur draws $271k from Radium Capital's R&D advance facility.
- Loan secured against Spectur's FY24 R&D tax refund.
- Terms include a 16% annual interest rate and a $768.90 application fee.
- Loan to be repaid by Q2 FY24, with no penalty for early repayment.
- Spectur had a shortfall of $465k from an entitlement offer in May 2024.
Details of the Loan Facility
Spectur Limited has opted to utilize a short-term loan facility from Radium Capital, drawing $271,020 against its FY24 R&D tax return. The loan, provided by Innovation Structured Finance Co., LLC via Radium Capital, comes with an application fee of $768.90 and an annual interest rate of 16%.
The loan is expected to be repaid by Q2 FY24, coinciding with the traditional receipt of the tax refund. However, Spectur has the flexibility to repay the loan earlier without incurring any penalties.
Rationale Behind the Decision
Following a shortfall of approximately $465k from an entitlement offer in May 2024, Spectur considered various options to address the deficit. These included placing the shortfall, which occurred in July 2024, and securing a short-term loan against the R&D tax return.
To maintain financial flexibility, Spectur prepared for the loan by obtaining 'comfort letters' from its tax advisors, incurring cash costs of $3k in June 2024. By the end of July 2024, Spectur had $877k in cash and cash equivalents.
Financial Considerations
Q1 FY25 is expected to include several annual cash costs such as audit fees, tax and consultant fees, and insurances. Additionally, the company faces increased market risks due to persistent inflation, rising interest rates, geopolitical tensions, and global market volatility.
Given these factors, along with the relatively low interest costs and the non-dilutive nature of the loan for shareholders, Spectur decided to draw down the short-term loan to ensure maximum cash availability for pending sales opportunities or potential delays in order placements.
Executive Commentary
Managing Director Gerard Dyson stated, 'Spectur is ahead of where we thought we would be in our cashflow modelling for July 2024, so this has not been an easy or obvious decision. Given recent market events and the relatively low incremental cost of proceeding, we nevertheless have decided to take the conservative, low-cost approach and draw down the facility for the next few months.'
Dyson added, 'We remain confident in the market guidance on revenue and EBITDA provided in June 2024 and look forward to providing additional updates in the future.'
The decision to secure a short-term loan against the R&D tax return is a strategic move to ensure liquidity amidst market uncertainties. The relatively low interest cost and non-dilutive nature of the loan are favorable for shareholders. However, the 16% annual interest rate is notable and should be monitored.
Investor Reaction:
Analysts are likely to view this move as a prudent step to maintain liquidity and financial flexibility. The decision to secure the loan reflects a cautious approach in response to market volatility and potential delays in project awards.
Conclusion:
Investors should keep an eye on Spectur's financial updates and market guidance. The company's strategic decision to secure a short-term loan demonstrates its commitment to maintaining financial stability and supporting future growth opportunities.