Ann: Quarterly Activities Report, page-189

Here's my understanding.

From the 4C cashflow for Sep Qtr:

7.1 Loan Facilities $10,999,975

7.6 Details:

$10m unsecured facility with Moneytech Finance Pty Ltd with a margin rate of 1.91% per annum plus the base rate of 6.27%, and a monthly line fee of $6,475 at a term of 36 months.

$999,975 funding from various Mezzanine holders with an interest rate of 15% per annum.

Note that Cirralto intend to repay the current Mezzanine holders during the quarter ended 31 December 2021, which will result in an immediate saving of $150k per annum in interest repayments.

Note that the previous June Qtr cash flow shows no loan facilities under section 7. I recall that Adrian said in yesterday's briefing that the loan facilities are related to Invigo and came onto our books through the Invigo acquisition. So they are legacy of the Invigo business.

Yesterday Adrian mentioned that the board had approved allocating $10m of the current cash on hand as capital reserve to finance the debt warehouse. This $10m capital reserve allows us to lend out up to $100m. He also mentions this again in the Canaccord Genuity South-West Connect showcase presentation also gave yesterday.

He explained that at the moment, using their own cash on hand as capital reserve for the debt warehouse, that is, funding the debt warehouse up to a lending capacity of $100m by internally allocating a $10m cash reserve, is the best use of that cash at the moment. I agree. Firstly, it is being deployed to grow a revenue arm of the business and secondly it will be earning a return on that money and positive cash flow in the short term that can be used to extend the capital reserve and grow the loan book internally. Secondly, Adrian mentioned in the showcase presentation that by internally funding the growth of the finance arm of the business they are also building up data (defaults and arrears data) and a track record that they can then take to external lenders to demonstrate the model so that they can get better terms from external lenders. That all makes sense to me.

Let's not forget that in the acquisition of Invigo we gained two very smart cookies in Andy Hilton and Corrie Hassan who are no doubt driving a lot of the work we are doing with Neu Capital in planning out the establishment of the debt warehouse.

Back to the current debt, well I am assuming that because it came with the Invigo business, that debt, although expensive, has all been modeled into whatever legacy loans they have on the loan book and that it will all unwind when existing loans are on the loan book get repaid.