Ann: Response to ASX Query Letter, page-87

Let's see if we can decipher what the ASX/ASIC is asking about:

Question 1: (European Licences) Looks like they will be double checking that all of ISX's transactions in Europe were consistent with their license. We know that ISX did banking with KAB. Did they have any other institutions which they used to process transactions?

Question 2: (Performance awards - Customer transactions) Drilling into specific transactions, all of them, by country, customer and ISX service. They are particularly interested in the bonus period. They are also interested in false transactions, it looks like, since they inquire about refunds post the share award. It looks like two lines of enquiry: a) ML transactions and b) false entries. Also interested in customer agreements (perhaps mutual purchase arrangements or other not-allowed agreements, I suppose). Regardless, it looks like ISX had four dodgy customers (I think one is referred to twice for two different reasons) who are the focus of the ASX queries. Did these customers provide the huge revenue kick that met the performance award threshold? Definitely interested in the time period around the share award, though.

Question 2: (Performance awards - Accounting standards) It looks like they are questioning ISX's decision to include gov't R&D grants as revenue in the period that would trigger the performance awards. It seems that ASX want to check if the R&D policy was a fortuitous change which happened in the last few weeks of June 2018 or long standing policy.

Question 3: (Binary options) It seems that ASX is still checking whether ISX were doing these or not.

Question 4: (Forex, CFD, Bitcoin) It seems that ASX continues to check about ISX transactions in this space as two ISX customers were suspended by ASIC and those customer provided these services.

Question 5: (Specific customers) The ASX is very interested in four specific customers. I assume these are the same four customers referred to by number in questions 2 & 4. During the performance period over 25% of ISX's revenue came from these three customers alone with just one of them accounting for over 23% of ISX's revenue.

Question 6: (Customer confirmation quality) The ASX is checking whether ISX does the proper work to identify a customer before they certify it. Checking, I suppose, if ISX's KYC service is properly robust.

Question 7: (Specific customer checks) And back to the named four customers and the specific checks that ISX took before confirming those customers' identities. Two of these customers have been suspended by ASIC and the link to the ASIC info is provided so some good research can be done there.

Question 8: (Consistency of revenue recognition) The ASX is asking for clarity on the revenue recognition rules for ISX. I guess they are looking to see if formula have ever been conveniently changed, etc.

Question 9: (Quality of revenue estimates) The ol' GSW question. Are ISX playing loose with the estimates and definitions to make themselves shine more? That's where this appears to be going.

Question 10: (Ability to certify identification) A partner is named, Worldline, who long followers note were having issues at the same period KAB had problems and the performance shares were awarded. Obviously great amount of detail required here.

Question 11: Worldline alternatives. It's not apparent what this line of questioning adds.

Question 12: Questioning again the timing of the sudden revenue burst for performance shares declaring all problems solved and then the next quarter claiming the problems were suppressing revenue. Most interesting, the KAB issues caused revenue suppression. Obviously KAB was doing more than just holding a few bucks for ISX. KAB was processing, somehow, revenue transactions for ISX even though ISX provided no services to KAB. This question also probes if ISX has been properly open about the KAB issues, their timing and impact on ISX.

Question 13: (Guilt by association) The ASX is wondering how it is that of all the banks ISX could have done business with, they happened to pick a disorganised money launderer caught cheating with other digital identity providers.

Question 14: (Analyst briefing pre-KAB) there was an analyst briefing just before the KAB matter and the ASX wants a transcript. ISX is unable to provide one. I guess that the ASX is looking to see if ISX mentioned the KAB issues in that briefing before they did a market release or even acknowledge being aware of them.

Question 15: (Equities research). Dunno. Maybe the ASX is searching for disclosable information released to analysts and not the market?



Wow. Lots of investigations. A lot of detailed looking at KAB (which I expected and received significant abuse for noting earlier) and the types of transactions for specific companies. Some research on those four may show where this is headed next.