The ASX is looking closely at the company’s financial performance during the period, as a major spike in revenue helped to deliver shares, now worth hundreds of millions of dollars, to iSignthis insiders, including company founder John Karantzis.
The company’s latest reply revealed that 63 per cent of its revenue for the 2018 half year was generated by just four customers. Two of these customers, FCorp and Nona Marketing, were the subject of warnings by the Australian Securities and Investments Commission as potential scams.
Last month the company revealed that more than one-quarter of the revenue it generated during the June 2018 half year came from two customers being wound up by ASIC, alleging unconscionable conduct.
It means that more than 45 per cent of iSignthis’ revenue for the period came from companies which have either been wound up by ASIC or have been the subject of warnings by the corporate regulator.
iSignthis defended its conduct and disclosure to the market. In reply to queries about its misallocation of revenue, the company said its “previous response was mistaken” but confirmed that the revenue should have been recognised in the June half year.
The company also said it did not consider any one customer contract to be material.
“iSignthis considers that it is the actual sustainable gross processing turnover volume (GPTV) which affects the price or value of its shares.”
iSignthis markets itself as a provider of automated payment verification services to clients such as contracts for difference providers and forex dealers so they can meet “know your client” requirements under anti-money laundering regulations.
It makes most of its money from customers then using its payment service and collecting a fee on the transactions processed on its payments platform.
Announcements of the fast growing “actual annualised GPTV” on its platform saw the stock rise more than ten-fold from a market valuation of just $150 million to an astounding $1.9 billion in September.
The company’s most recent financial report revealed half-year revenue totalling just $7.5 million.
The stock plunged that month after a report from shareholder advisory firm Ownership Matters raised governance concerns and queried the circumstances surrounding the company awarding performance-related shares to its executives last year which are currently worth more than $330 million.
The three tranches of performance rights were in danger of expiring by the end of June 2018 when the company unveiled a spike in half-year revenue which exceeded the performance hurdles for all three tranches. Ownership Matters noted in its report that revenue fell 78 per cent in the following half year.
Colin Kruger is a business reporter. He joined the Sydney Morning Herald in 1999 as its technology editor. Other roles have included the Herald’s deputy business editor and online business editor.
Sarah Danckert is a business reporter.