I started putting the below notes together for my own...

I started putting the below notes together for my own understanding of the SOR, but happy to share this to the wider audience in HC (if it helps). Disclaimer: I’m a holder and have been since 2015/16. I’m also not a legal expert nor an expert on the corporation's act/listing rules. I have only used the commonly available skills of ‘inference, common sense, and observation’ to prepare these notes.

I went through the SOR page by page, while the SOR is comprehensive and allegedly a collective account of ASX’s review of the previous query letters, it, however, reveals nothing new that diligent holders didn’t already know of.

The first 12 (5 to 12) pages of financials is essentially ‘Job Costing’ in accounting jargon. In other words, one could have skipped this entire portion and instead referred to ISX’s 4E annual accounts (29th August 2018) that showed ISX had significant costs (operating costs) vs revenue during that period (snippet 1). Also, note in the 2nd snippet (FYI), ISX total assets grew 3 fold making it a much stronger company vs PY (FYI only).

Snippet 1


Snippet 2



ASX suppositions noted below that were relevant to filter out facts from theory.
“but for reasons not apparent to ASX”“substantially identical terms ”
“Authenticate BV would have incurred a loss”
“This presumably meant within 7 days of acceptance of the Variation Letter"
“included in ISX’s revenue for that month (ie before the parties had even entered into the Variation Letter).”

There are off course more, but does any on its own carry any weight in the courts, however when one juxtaposes these phrases with their numerical tables, the meaning can be misinterpreted by most.If we go by ISX’s view, these integrations while had huge COGS impacts were fundamental in building a future, e.g. soon to be launched clearpay and many more in the pipe line (e.g. gaming platform).

Then from page 12 to 15, it goes on to explain why these contracts were material to the milestones (performance shares). I skimmed past this exercise, nothing new to be seen.

ASX suppositions noted below in this section
“If the revenue from all four Key Contracts was excluded”
“If any one of the IMMO Agreement”
“Under several other scenarios”

Point 5 to 7. (pages 15 to page 22), ASX’s arguments broadly covered the materiality of the key contracts and the alleged disclosure breaches, e.g. not disclosing names, etc.

ASX suppositions
“the Key Contracts were, in ASX’s view, ‘out of the ordinary’ in the sense”

First of all, none of these contracts were material from an earnings or EBITDA perspective, furthermore, if one observed share price movements during the Jan to June 2018 period, it hovered around the 15 to 18 cents range while at least 12 price-sensitive announcements were made. One will also need to take into perspective the smaller base (share price) & low liquidity, which makes larger % swings.

I suppose ASX might have a point that ISX might have known the revenue significance (read poor earnings) of the key contracts, but again not disclosing (might be a breach?), does it make the revenue null or void? Was it possibly ISX’s view that no disclosure is needed if ongoing revenue is unknown? I would leave this for an independent party to cast some light.

Point 8, Page 23, ASX highlights potential misrepresentation around the ‘<15% representation’, where ISX represented that ‘one off’ revenues were less than 15% of revenue.

ASX considers ‘<15% representation’ was false and materially misleading and cited market research from Patterson Securities to support this view. ASX might have a point here as ISX disclosed that $2,923,960 should have been classified as ‘Integration/Set up services’; Note not ‘one off’ as alleged by ASX.

Point 9, Page 24 onwards discuss Milestones, if they were validly met. ASX starts by saying that they do not accept the submission that ISX’s financial statements are compliant with Australian accounting standards. ASX believes these were not ordinary revenue but were generated for meeting milestones.

How do they prove this? What the evidence? Its ISX view these integrations were a fundamental aspect of their business growth.

ASX suppositions
“ASX considers there is a reasonable argument that”,
” There are serious questions to be determined as to whether the revenue derived”
“In ASX’s view, the Key Contracts were all ‘out of the ordinary”
“was also claimed by ISX to have been performed within a short period”
“This begs the question – if the relevant trading platform software licences”
“The three Certificates of Practical Completion use the same template produced by ISX” Okay, so what is the contract illegal?

Point 10, ASX states that ASIC provided information in confidence to ASX in a teleconference on 1 October 2019 that ASIC had concerns with ISX’s books and records for the Relevant Period.Well, hope that ASIC takes over the investigation and does a thorough job using facts and figures.

Then there are many more suppositions, theory, potential breaches, conclusions, etc, all stemming from their views of the facts related to the above points 1 to 10.

I’m certain that I have missed some key matters or issues raised by ASX, but from a general sense, I believe its ASX views vs ISX’s. These are only allegations (in my opinion), without evidence as rightly pointed out by many holders. Some relevant questions that come to mind are

• Does any law of land stop a business from exploiting new revenue streams or other opportunities regardless of whether its to hit a target or generate future revenue streams? And ISX is a start-up, its blue sky
• Does revenue need to be recurring for it be considered as revenue?
• Will one hold ISX responsible for the failure or closure of any business?

And finally, we have the views of Her Honour, deduct what you may out of it.