Neptune(US:NEPT)2024-02-16 22:20Financial Position and Liquidity - Neptune reported a cash position of approximately $0.3 million as of February 15, 2024, indicating substantial doubt about its ability to continue as a going concern [184]. - The company has initiated a plan to spin out a majority of its equity interest in Sprout to shareholders, enhancing overall company value [171]. - The company is actively pursuing cash-generating transactions and expense reductions to ensure operational continuity amid financial challenges [184]. - As of December 31, 2023, the company's liquidity position was $1.2 million, a decrease of $2.2 million or 64% from $3.4 million on December 31, 2022 [274]. - The company is required to actively manage its liquidity, as trade and other payables exceed total current assets [273]. - The company has a maximum available inventory financing of $7.5 million to meet consumer demand and product line expansion [270]. - Total equity deficiency attributable to equity holders of the Company was $31.248 million as of December 31, 2023, compared to $11.940 million on March 31, 2023 [291]. - The Company has contractual obligations totaling $59.526 million as of December 31, 2023, with trade payables of $31.372 million and loans of $25.984 million [292]. Revenue and Financial Performance - For the three-month period ended December 31, 2023, total revenues were $7.600 million, a decrease from $12.209 million in the same period of 2022, representing a decline of approximately 37.3% [213]. - The net loss for the three-month period ended December 31, 2023, was $19.170 million, compared to a net income of $0.497 million in the same period of 2022 [213]. - Total consolidated revenues for the three-month period ended December 31, 2023 amounted to $7.6 million, representing a decrease of $4.6 million or 38% compared to $12.2 million for the same period in 2022 [227]. - Revenue from the United States for the three-month period ended December 31, 2023, was $6.700 million, down from $10.597 million in the same period of 2022, a decrease of approximately 36.0% [224]. - Total consolidated revenues for the nine-month period ended December 31, 2023 amounted to $27.0 million, representing a decrease of $13.5 million or 33% compared to $40.5 million for the same period in 2022 [242]. Strategic Initiatives and Acquisitions - Neptune's strategic review process has entered Phase II, focusing on maximizing shareholder value through potential asset monetization and strategic partnerships [170]. - Neptune has entered into a non-binding Letter of Intent to acquire Datasys Group, Inc., a data-marketing company, although the viability of the transaction is under review [172]. - The company announced a non-binding Letter of Intent to acquire Datasys Group, Inc. for a total potential consideration of $112 million [199]. - The proposed acquisition includes $20 million in cash at closing, $32 million in restricted equity, and a $31 million paid-in-kind seller note [201]. - The company appointed Stifel Nicolaus Canada Inc. as exclusive financial advisor for Sprout Foods Inc. to review divestiture alternatives [198]. Shareholder and Equity Matters - The company completed a registered direct offering on September 26, 2023, raising gross proceeds of approximately $4.5 million by selling 1,800,000 common shares at a price of $2.50 per share [187]. - The Company completed a share consolidation on September 8, 2023, reducing the number of outstanding common shares from approximately 24.1 million to approximately 0.6 million [209]. - The company plans to spin out a majority of its equity interest in Sprout to shareholders, retaining approximately 10-15% [197]. - The company increased its ownership in Sprout from 50.1% to 89.5% by converting a substantial portion of its debt into equity, significantly reducing Sprout's debt [264]. Internal Controls and Compliance - The Company concluded that its internal controls over financial reporting were not effective as of December 31, 2023, due to material weaknesses identified [336]. - Material misstatements were identified and corrected in the consolidated financial statements for the year ended March 31, 2023, indicating deficiencies in internal control [339]. - The company is developing a comprehensive remediation plan to address identified material weaknesses in internal controls, including hiring individuals with appropriate skills [344]. - The turnover in accounting personnel has delayed the implementation of the remediation plan, but the Company remains committed to addressing these weaknesses [345]. - The company lacks sufficient personnel with appropriate knowledge and experience to support effective internal controls [341]. Expenses and Losses - Selling, general and administrative (SG&A) expenses increased by $10 million or 115% to $18.7 million for the three-month period ended December 31, 2023, primarily due to a $13.5 million increase in legal fees and settlements [234]. - Net loss for the three-month period ended December 31, 2023 was $19.2 million, an increase of $18.7 million or 3754% compared to a net loss of $0.5 million for the same period in 2022 [240]. - Adjusted EBITDA loss for the three-month period ended December 31, 2023 increased by $18.9 million or 4125% to $18.5 million compared to a loss of $0.5 million for the same period in 2022 [239]. - The net loss for the nine-month period ended December 31, 2023, was $34.3 million, a decrease of $10 million or 23% from $44.3 million for the same period in 2022 [256]. Impairment and Valuation - An impairment charge of $18.0 million was allocated to the Sprout tradename and $19.5 million to goodwill in 2023, reflecting a significant decline in fair value [318]. - The fair value of the Sprout reporting unit was determined to be lower than its carrying value, leading to the impairment charges recorded in fiscal 2023 [318]. - Expected credit losses for the three and nine-month periods ended December 31, 2023 were $0.2 million, down from $0.5 million in 2022, indicating a reduction of 60% [306]. - As of December 31, 2023, 81% of trade receivables are past due, slightly down from 82% as of March 31, 2023, with 83% of past due receivables provided for [306].