Follow-up to Bubbles: Where the Cash Bridge Breaks and What June 2026 Really Tests

The main article already showed that Bubbles did not run into trouble because demand collapsed. It ran into trouble because the funding wall got thicker through 2025. This follow-up isolates that mechanism: where cash actually got stuck, why covenant relief through June 2026 only buys time, and how the treasury-share sale fits into that picture.

Three points sharpen the story faster than any annual headline:

• The problem started inside working-capital terms. Working capital fell from ILS 5.896 million to ILS 2.518 million, receivables rose to ILS 22.771 million, and payables fell to ILS 7.332 million.
• On an all-in cash-flexibility basis, almost nothing was left. Cash flow from operations was only ILS 890 thousand, against ILS 5.815 million of net investing cash outflow and another ILS 1.083 million of total lease-related cash outflow.
• June 2026 is a real test, not a convenient date on the calendar. At one bank the company was fully compliant. At the second it met only two of three financial covenants and received a letter requiring full compliance only from June 2026.

What matters is that these numbers are all describing the same problem from different angles. Bubbles did not finish 2025 without funding. It finished 2025 with funding already carrying the bridge in the place where the business itself had not yet returned to supporting it.

Where The Cash Bridge Breaks

The right read of 2025 starts with one point that is easy to miss: the pressure did not come from an inventory blow-up. It came from a less intuitive mix of more credit to customers, less credit from suppliers, and a business model that still needs a high inventory base. That is why the working-capital squeeze matters more than the movement in revenue.

The first number to isolate is receivables. Customer days rose from 141 to 151, and the company explains that 2025 was affected by a larger classic-franchise customer base that enjoys better credit terms. That is not an accounting footnote. It is cash staying outside for longer.

The second point matters even more because it moves in the opposite direction. The company says that for a large number of brands it shifted from a distribution model to a licensing model. That may help gross margin. It also weighs on funding, because the change requires production advances and additional early payments. That is why payables fell even though average supplier days rose to 223. In practical terms, Bubbles did not get easier supplier financing here. Part of the commercial model now requires it to pay earlier to preserve the activity.

That is exactly what made 2025 a more working-capital-hungry year. Inventory itself barely moved, only ILS 548 thousand higher, so it would be wrong to blame the whole problem on too much stock. The pressure came from the combination: customers taking longer to collect, suppliers requiring more advance funding, and a retail operation that still shows a decent gross margin but enjoys less operating credit on the way.

The chart above uses the cash-flow statement itself. It does not try to capture every small balance-sheet movement, only the four items that explain the core story: receivables, inventory, payables, and accrued liabilities. The takeaway is important. Even the ILS 1.667 million rise in accrued liabilities did not offset the drag from receivables, inventory, and payables. That is why cash flow from operations collapsed from ILS 5.166 million in 2024 to only ILS 890 thousand in 2025.

That is also why the June 2026 test is not really a sales test. It is a terms test. Bubbles has to show that the combination of collections, supplier terms, and investment pace stops eating into the cash cushion.

The Real Cash Picture

The framing here needs to be explicit. This analysis uses all-in cash flexibility, meaning how much cash is left after actual cash uses, not a normalized version that strips out investments or leases as if they were optional noise.

The numbers are sharp:

• Cash flow from operations: ILS 890 thousand
• Net cash used in investing activity: ILS 5.815 million
• Total lease-related cash outflow: ILS 1.083 million

Even before adding cash interest or debt repayments, that already creates a cash shortfall of about ILS 6.0 million. In other words, the operating business did not fund 2025. It did not even come close.

The picture gets tighter once the financing layer is included. In 2025 the company paid ILS 2.759 million of cash interest, repaid ILS 9.078 million of bank loans and credit, and repaid ILS 70 thousand of related-party loans. Against that, it received ILS 17.834 million of bank loans and credit. That is not the profile of a company sitting on a comfortable cushion. It is the profile of a company refinancing, rolling, and trying to preserve operating continuity while the bridge already depends on outside funding.

The simplest proof sits in the bottom line. Year-end cash was only ILS 209 thousand, versus ILS 266 thousand a year earlier. So even after the new credit layer, Bubbles did not exit the year with a stronger cash cushion.

That does not mean the business does not work. It means the business is currently working on tighter funding terms than before. Every expansion step, every collection delay, and every inventory commitment is now measured against a tiny cash balance and ongoing reliance on banks.

What June 2026 Really Tests

Relief until June 2026 can sound comforting. In practice it mostly shows how tight the system already is.

What the filing does tell us:

There is one more issue the filing does not solve: it does not specify which of the three covenants failed at the second bank. The company does disclose the covenant set: a tangible-equity requirement, a ratio of net financial debt to operating working capital that cannot exceed 75%, and a debt-service coverage ratio that cannot fall below 1.2. But it does not tell the reader which one broke.

That matters because June 2026 probably does not test only whether one quarter looked better. It tests whether the whole mechanism starts to look acceptable again to the bank: equity cushion, operating working capital, and debt-service capacity. That is why the conservative reading is that June 2026 is not a bureaucratic date. It is a proof point for the whole funding structure.

The number that reinforces that reading is facility usage. Out of ILS 33.6 million of bank facilities, ILS 33.0 million were already used. Unused room of roughly ILS 600 thousand is not a real cushion for a company that ended the year with only ILS 209 thousand of cash. That is the difference between temporary relief and genuine funding flexibility.

Why The Treasury-Share Sale Still Matters

Inside that picture, the treasury-share sale may look small. It is not marginal. On December 31, 2025 the company signed agreements with two buyers for rights to receive 8 million ordinary shares for total consideration of ILS 2.4 million, at ILS 0.30 per share, a premium of about 24% to the market price at signing. The immediate report adds that 10% of the consideration was paid immediately and the balance will be paid in installments against collateral.

What matters is not only the price but the way the deal shows up in the accounts. The statement of changes in equity recorded a reissue of treasury shares for ILS 2.4 million. At the same time, the December 31, 2025 balance sheet still showed a receivable of ILS 2.4 million from treasury shares, and the non-cash appendix recorded an ILS 2.4 million change in receivables against treasury shares. In other words, by year-end the deal had already improved the equity picture, but it had not yet shown up as freely available cash in the cash balance.

That is exactly why the deal matters. Not because ILS 2.4 million solves the funding problem, but because in the current structure every non-bank source becomes immediately material. That amount is more than 10 times year-end cash, and about four times the unused bank-facility room.

That chart explains both why the deal matters and why it is not enough. On one hand, ILS 2.4 million is very meaningful in a company with almost no cash. On the other hand, it is still less than half of the cash shortfall created even before cash interest and debt repayments are added. So the transaction does not remove the June 2026 test. It only provides one more thin layer of room inside a structure that has already become tight.

There is also a quality point here. This is funding that does not add more interest burden. In a company where the banks already hold broad floating charges and line usage is nearly full, that is a real advantage. But even a real advantage like that does not change the heart of the story: the cash has to come in on time, and the operating business has to stop burning the cushion through working capital.

Conclusion

June 2026 will not judge whether Bubbles knows how to sell fashion. 2025 already showed that the retail engine still has life. What June 2026 will judge is whether the company can bring the business back to a place where sales, collections, and supplier terms create cash room rather than another need for credit.

That is why the cash bridge broke in the least glamorous part of the story. Not in the brand, not in the website, and not even mainly in gross margin. It broke in a working model that now asks for more advances, gives more credit to customers, and leaves the company with only ILS 209 thousand of cash at year-end against bank lines that are almost full.

The treasury-share sale matters because it is one of the few ways to add ILS 2.4 million without new debt. But the filings also show that at the end of 2025 it was still mainly a receivable rather than cash. So the real checkpoint remains the same: by June 2026 Bubbles has to turn accounting and equity improvement into actual cash, and prove to the bank that the relief it received was a short bridge, not a delay of an unresolved problem.