Auditors Are Concerned About VOTI Detection (CVE:VOTI)

When VOTI Detection Inc. (CVE:VOTI) reported its results to October 2020 its auditors, Deloitte & Touche LLP could not be sure that it would be able to continue as a going concern in the next year. Thus we can say that, based on the results to that date, the company should raise capital or otherwise raise cash, without much delay.

Given its situation, it may not be in a good position to raise capital on favorable terms. So current risks on the balance sheet could have a big impact on how shareholders fare from here. Debt is always a risk factor in these cases, as creditors could be in a position to wind up the company, in the worst case scenario.

See our latest analysis for VOTI Detection

How Much Debt Does VOTI Detection Carry?

As you can see below, at the end of October 2020, VOTI Detection had CA$6.63m of debt, up from CA$3.23m a year ago. Click the image for more detail. However, it also had CA$2.17m in cash, and so its net debt is CA$4.45m.

A Look At VOTI Detection's Liabilities

Zooming in on the latest balance sheet data, we can see that VOTI Detection had liabilities of CA$6.33m due within 12 months and liabilities of CA$9.01m due beyond that. On the other hand, it had cash of CA$2.17m and CA$2.55m worth of receivables due within a year. So it has liabilities totalling CA$10.6m more than its cash and near-term receivables, combined.

This deficit is considerable relative to its market capitalization of CA$13.2m, so it does suggest shareholders should keep an eye on VOTI Detection's use of debt. This suggests shareholders would be heavily diluted if the company needed to shore up its balance sheet in a hurry. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if VOTI Detection can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

In the last year VOTI Detection had a loss before interest and tax, and actually shrunk its revenue by 33%, to CA$19m. To be frank that doesn't bode well.

Caveat Emptor

Not only did VOTI Detection's revenue slip over the last twelve months, but it also produced negative earnings before interest and tax (EBIT). Indeed, it lost a very considerable CA$6.4m at the EBIT level. When we look at that and recall the liabilities on its balance sheet, relative to cash, it seems unwise to us for the company to have any debt. Quite frankly we think the balance sheet is far from match-fit, although it could be improved with time. However, it doesn't help that it burned through CA$3.8m of cash over the last year. So suffice it to say we consider the stock very risky. We're too cautious to want to invest in a company after an auditor has expressed doubts about its ability to continue as a going concern. That's because companies should always make sure the auditor has confidence that the company will continue as a going concern, in our view. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. To that end, you should learn about the 7 warning signs we've spotted with VOTI Detection (including 3 which are significant) .

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

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