Some comments and observations based on discussions I have had with Alcidion in relation to the recent performance and capital raise.

Following that discussion and subsequent follow ups, Alcidion, to its credit, did improve and provided a greater transparency in its AGM webinar. But then... the extension of the SPP deadline had me dumbfounded...

Capital raise

Optics wise, the capital raise looked rushed and not well thought through. I was comforted by the level of due diligence Alcidion went into to explore other funding options. At the end of the day, it all comes down to which option was the cheapest.

Company is also not budgeting in the $1M from SPP. That entitlement was included to provide equal opportunity to retail shareholders. Company does not expect to use much, if any, of the other $5M, more like an insurance policy if situation does not improve.

Company also initiated preliminary discussion with major shareholders prior to the capital raise being announced and there was support from major shareholders. It was also an opportunity to bring new institutional investors on board. It is important to note that the company has no control over what the small institutional investors might choose to do with their shares if they have a very short term focus.

Cost base

When this question (which obviously was on everyone’s mind) was asked at the webinar, I felt it was a missed opportunity to articulate what other options they have considered, including what levers they could pull.

Perception wise, it came across that the company is still stubbornly electing not cut staff numbers in the hope that things would turn around soon. I know this is not the case, but what Kate could have done is to take the question head on and inspire confidence that the company is proactively seeking out ways to conserve cash. Potential options include:

·        Encouraging under-utilised staff (if any) to use their leave entitlements (including unpaid leave)

·        Exploring other employment options (e.g. contractor arrangements to provide the company with more flexibility)

·        Undertaking a review to extract further efficiency gains and savings

As the old saying goes.... "Never let a serious crisis go to waste".

These potential options are not mutually exclusive, nor does it mean that Alcidion has to deviate from its current course.

My understanding is that the company is not envisaging to use the $5M (or $6M) raised for operational purposes. But if things do not improve, company has contingency plan on other levels to pull, including reducing underlying cost base.

At this stage, company is still expecting a stronger second half and remains confident of EBITDA and operating cashflow positive result for FY24. I suggested withdrawing this guidance given all the uncertainties, but company remains confident.

Corporate strategy

I questioned if the current high risk strategy of running a cash burning company is still sustainable, one that is largely based on hoping to win some (but considerably delayed contacts) is still suitable for current circumstances. Shouldn’t company simply bunker down, work towards sustainability asap and wait out any further delays with the procurement process without raising capital?

Company remains committed to current strategy and believes it is temporary. If uncertainties persist, company will then react accordingly and pull other levers.

Public perception and investors’ confidence

Company agreed that it wasn’t a good look to delay the quarterly webinar, release the 4C after market and announcing a capital raise on the last quarterly reporting day. Many things were happening at once and many discussions were held over different matters over a longer period. Nevertheless, company will look to improve its performance in this area.

For obvious reasons, the market reaction has highlighted both the board (led by Rebecca Wilson) and Kate’s diminishing credibility. It is imperative that steps are taken to restore market confidence.

As investors, we now need a clear line of sight of how the board and Kate intends to steer Alcidion out of this situation and emerge stronger. It is comforting to know from my discussion that the company does indeed have contingency plans if things don’t turnaround in subsequent quarters. However, this point was not made but should have been articulated at the webinar.

Greater care also needs to be taken regarding the language used in further webinars. Lines such as "It became obvious during the last few weeks" does not inspire confidence that both the board and management are keeping their fingers on the pulse of the business or even (I hope not) suggests a disconnect between CFO with the CEO/Board.

Dual role of chairperson

I expressed my concerns with Rebecca Wilson’s involvement as chairperson with both Alcidion and LBT Innovations on the basis that would this divert her time, attention etc between one another. Have received assurances that this would not occur. I will continue to hold the company and her accountable on that front.