The early repayment of a loan from BDC removes the potential for a large liability for Memex (TSXV:OEE) , says Clarus analyst Noel Atkinson.
On June 29, Memex announced that it had paid back a $160,000 loan from BDC Capital, the financing of which was raised by senior management and directors exercising warrants.
Atkinson says while the loan was small it could have become a real headache because it had a 9 per cent stated interest rate, but also required “royalty interest” payments of 1% of annual sales plus “bonus interest” due at maturity equal to 2.3% of the “fair value” of Memex. The analyst says the involvement of the company’s key personnel in solving this problem is a good sign for shareholders.
“We believe the investment by the board and management speaks positively as to their belief in Memex’s near-term prospects,” says the analyst, who notes that CEO David McPhail did not particpate because he didn’t own any of the $0.16 warrants.
Atkinson says he sees upcoming catalysts for Memex in its partnership with Cisco, where it will reportedly power the Mazak SmartBox at the Cisco Live! trade show in Las Vegas in mid-July, and in September, when it may launch its next-generation Merlin 3.0 software at the IMTS show.
In a research update to clients today, Atkinson maintained his “Speculative Buy” rating and one-year price target of $0.90 on Memex.