At June 30, UNIS had only $10.8mm of cash – this, plus blowing the remaining ATM by dumping stock at $2.13, means UNIS has only $23mm left.
UNIS burned a staggering $28.7mm cash just in the most recent quarter (ended June 30) alone!
If their PR statement is true that this was $16mm of capex and R&D above normal quarterly levels they burn $13mm/cash PER QUARTER: 5 months of cash left.
With $55.5mm of debt, a Sept 8th covenant trigger and undisclosed debt covenants, things could get ugly even sooner than year end.
Questions around the apparent law enforcement investigaiton involving UNIS still unanswered.
On July 30, Unilife (NASDAQ:UNIS) filed a Hype-filled Press Release that included a heretofore unachieved level of grandiose promotion by embedding a flashy promotional video rather than including actual financial numbers. The PR highlights the success they have had at "Accelerating Investment" i.e. cash burn (Unilife Accelerates Investment to Meet Increasing Demand from New and Existing Customers).
During the fourth quarter of fiscal year 2014, the Company invested approximately $16 million in capital expenditures and R&D above normal quarterly investments
That investment is now generating revenue at an attractive growth rate. We are pleased to refine our full year revenue guidance for fiscal year 2014 to the high end of the $12 million to $15 million range that we had guided previously.
The hype-filled press release, lacking the numbers available to those who actually read the SEC filings, seems questionable to me considering that almost immediately after, UNIS unloaded the entire remainder of their stock ATM achieved by dumping shares on the market (via their broker) at a whopping $2.13/share net proceeds just a few days later.
SEC Filings Reveal Staggering Cash Burn
In fact, taking a look at the SEC filings which included the above press release as well as required financials revealed that Unilife burned $20mm on an operating basis and an additional $8.8mm investing in equipment. It is unclear how Unilife came to the "$16mm above normal R&D and capex levels" for the quarter as the entire R&D line was $6.7mm so 100% of the capex and R&D = $15.5mm. Is UNIS implying that normal run rate will include zero R&D and capex? Even given this optimistic assumption, the Company burned through $13mm of cash in a quarter on a "run rate" basis using this favorable assumption. Compared to the $10.8mm cash and the $12.4mm from the ATM this is a mere 5 months left of cash which means UNIS could potentially run out of cash and file bankruptcy by November or December this year.
New SEC filing raises questions about the Debt: What happens September 8?
According to a subsequent SEC filing on Aug 28th there may be additional debt available to add to the books to survive liquidity past year end but with a big question raised. This is on top of the fact that UNIS has still not disclosed its debt covenants to investors - given UNIS history of overpromise/under-deliver I think this could be because the covenants are potentially dangerous to UNIS shareholders.
The Credit Agreement also contains certain customary covenants, as well as, covenants relating to achieving minimum cash revenue targets at the end of each calendar year, maintaining minimum liquidity targets, the execution of certain customer and employment agreements in form and substance satisfactory to lender no later than September 8, 2014.
Question: What happens on September 8th? Is UNIS in compliance even with their massive cash burn or will we see an expensive credit amendment?
Do Shareholders realize how expensive this debt really is? = 17.5% effective interest rate
From the same SEC filing Aug 28:
In connection with the Credit Agreement, the Borrower entered into a royalty agreement (the "Royalty Agreement") with ROS which will entitle ROS to receive royalty payments. The buy-out amount ranges from $6.5 million, on or prior to the first anniversary of the agreement and up to $21.0 million, after the fourth anniversary of the agreement
The Loan will be accreted to the face value over the loan term based on an effective interest rate of 17.5%.
As a result, on the Closing Date, the Royalty Agreement was determined to have a fair value of $7.0 million and the Loan was allocated the remaining proceeds of $33.0 million
Questions Still Remain About Apparent SEC or Law Enforcement Investigation?
Unilife has still not disclosed its debt covenants nor the status of an apparent law enforcement or (and?) SEC investigation I outlined was seemingly underway in April using a FOIA request. Shareholders deserve answers, not promotional videos. I reiterate my price target of $0.