I no longer hold AVA, but today's announcement caught my eye.
AVA_ASX_AVA Secures Strategic Investment from Hale Capital_1767150000.pdf
The initial reaction in seeing the headline was "typical, some wizz bang new deal that will make my capitulation really sting.." so I opened with some trepidation..
Anyway, the tl;dr is it's an ok funding deal for AVA that will give them a bunch of cash and hopefully a partner that can help open a few doors. If it helps unlock a bunch of new sales it could be great for AVA and existing shareholders. But if they don't deliver they'll be in a worse position than they already are.. basically, having to pay back a bunch of debt after carrying it at at least 10% pa, plus a $1.4m repayment on some warrants
Hale are getting a really good deal. With a high interest loan on $7m and free warrants with a guaranteed floor of $1.4m. it's not risk free, if AVA goes bust they lose everything. But assuming AVA stay solvent, there's little downside for them.
Anyway, after having dissected the details of the announcement, I got a little ticked off about the way these things are communicated. They sure don't make it easy to understand the things that really matters for shareholders. They never do! So, after some back and forth with my AI PA, we rewrote the ASX announcement in a plain English way so you don't have to go through the pain of working it out.
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ASX ANNOUNCEMENT
31 December 2025
AVA Secures US Strategic Partner & A$7m Growth Funding
The Bottom Line
AVA Risk Group has signed a deal with US-based investment firm Hale Capital to fund our expansion into the American market. Hale is providing up to A$7 million in funding.
This is not a simple placement of shares. It is a structured debt deal that gives Hale the option to become a major shareholder (owning ~26% of the company) if our share price rises significantly over the next 4-5 years.
Who is Hale Capital?
They are a US specialist investor focused on security and technology. They are not just passive money; they are taking a seat on our Board and will actively help us open doors to US federal and infrastructure clients—our biggest growth targets.
How the Deal Works
The funding is split into two parts: Convertible Notes (the loan) and Warrants (the sweetener).
1. The Loan (Convertible Notes)
* Amount: A2.98m immediately (Tranche 1), plus another A4.02m subject to your approval (Tranche 2).
* Interest: AVA pays Hale interest of at least 10% per year.
* The Conversion: Hale can choose to swap this debt for AVA shares at any time over the next 4 years.
* The Price: The swap happens at 12.34 cents per share. This is an 81% premium to our current price, meaning Hale only converts if they help us almost double the company's value.
2. The Sweetener (Warrants)
* What they are: We are giving Hale ~45.4 million "Warrants" for free. These are essentially options to buy more shares.
* The Price: Hale can exercise these to buy shares at the same price: 12.34 cents.
* The "Put Option" (Important Risk): If Hale doesn't use these warrants after 5 years (likely because the share price is low), AVA must buy them back for cash at ~3.15 cents each. This creates a strictly defined liability for AVA of approx. A$1.43m if the share price fails to perform.
The Scenarios: What This Means for Shareholders
There are two main outcomes for existing shareholders:
Scenario A: The Growth Success (Share Price > 12.34c)
* What happens: Hale converts their loan and exercises their warrants.
* Financial Impact: AVA becomes debt-free (the A7m loan vanishes) and receives an *additional* ~A5.6m in cash from the warrant exercise.
* Dilution: Hale would end up owning roughly 26% of the company. Existing shareholders own a smaller slice, but of a much larger, cash-rich, debt-free pie.
Scenario B: Stagnation (Share Price < 12.34c)
* What happens: Hale does not convert. They keep the deal as a loan.
* Financial Impact: AVA must repay the A7m principal in 4 years, pay the 10% annual interest, *and* pay the A1.43m penalty to buy back the unused warrants.
* Dilution: Zero dilution occurs, but the financing becomes expensive debt.
Why We Did This Deal
* US Expansion: We need capital and connections to crack the US market. Hale provides both.
* Less Dilution Now: Raising A$7m by selling shares at today's low price (~7c) would have been highly dilutive immediately. This structure pushes dilution into the future and only triggers if the share price rises substantially.
* Alignment: Hale only makes a significant profit if they help get the share price above 12 cents. They are incentivized to make the stock perform.
Next Steps
* Tranche 1: We receive A$2.98m immediately.
* Tranche 2: We will call a shareholder meeting (likely March 2026) to ask for your vote to approve the remaining A$4.02m funding and the issue of warrants.
Board of Directors
Ava Risk Group Limited