Zignsec’s stock is now in the penny stock category. There wasn’t much to cheer about in the Q2 results. The cash reserves hold about one quarter’s worth of losses.
Source: Identity Verification Solutions - ZignSec
Since Q3 has already come and gone, and the company is not yet bankrupt, something is still happening. What? Funding has been obtained through some sort of sale of rights or a similar action, which has bolstered the cash position by 19.6 MSEK. However, this amount of money will be burned through in about 6 months of losses, so the situation remains critical. Additionally, I can’t say what kind of rights sale this was, but it looks like a situation where something was sold under duress that is likely much more valuable than the money received for it.
In addition to the above, the company is making cost cuts that will also have an annual impact of about 14 MSEK; so if these are realized in the coming quarters, they could cut the losses in half. What impact these will have on future revenue streams is a question mark.
The company has gained new customers from Eastern and Southern Europe and is looking for new customers in Africa. This isn’t necessarily a bad thing, as there are many digital growth opportunities in Africa, as Tecnotree has shown. There are risks too, and receivables tend to come in late, so operating there requires a strong stomach and patience.
A few days ago they announced new customers, but apparently they aren’t major contracts since the contract values weren’t mentioned, or perhaps they are still under negotiation. The customer accounts have come through the previously acquired WebShield. Interestingly, Zignsec’s revenue stream seems to be entirely dependent on WebShield, at least based on the press releases.
In previous blog posts, we have mentioned a growing market in Eastern Europe, where the ZignSec Group, via Web Shield, has been active for a long time, and where the company is making remarkable strides. In October alone, we signed new clients in Ukraine, Moldova, Kazakhstan, and Serbia. This expansion is a testament to the potential of this region and the opportunities it presents for the ZignSec Group.
What next? ZS got a shot in the arm for its balance sheet, but now the company is on a knife’s edge: can it plug the cash leak and balance its revenue streams? Amazingly, they haven’t done a share issue yet, but in the current situation, it’s possible it wouldn’t be fully subscribed.
The situation is critical, but not impossible. Collaboration with Mastercard, new client relationships, and the cash flow generated by WebShield’s operations could sustain the company enough to reverse the direction of cash flows and get growth started. Tecnotree is a good example of how competent management can bring a company back from the brink to be an interesting company again. Will ZS follow that example or will it disappear from the digital world map during 2024?