iSignthis (ASX:ISX) - Founder, John Karantzis - The Market Herald
Founder, John Karantzis
Sourced: Sydney Morning Herald
  • Embattled fintech company iSignthis (ISX) has posted its maiden annual profit for January to December 2019
  • The company said by completing the build-up of its core business, it could focus on strong growth over the year
  • The result was a 400 per cent increase in annual revenue and iSignthis' first-ever profit of $1.56 million
  • However, the company claims its ongoing battle with the ASX damaged company earnings by roughly $700,000
  • Shares were suspended in October due to ASX queries regarding share price concerns and are yet to be released from lock-up
  • The battle entered Federal Court territory in early December when iSignthis took legal action against the ASX
  • CEO John Karantzis said the "hugely successful year" has been "marred" by the ongoing share suspension
  • Shares in iSignthis last traded October 2, 2019, for $1.07 each

Embattled fintech company iSignthis (ISX) has posted its maiden profit over January to December 2019 in today's annual report.

The profit came on the back of a 400 per cent boost to revenue compared to 2018. With $31.2 million in revenue hitting iSignthis' books in 2019 compared to 2018's $6.1 million, iSignthis was able to post a $1.56 million profit after tax.

The company attributes the maiden profit to completing its "Tier 1 card scheme and central banking connections and infrastructure". Essentially, iSignthis claims by finalising the build-up of its core business, the company was able to focus on building scale over 2019 with both increased customer numbers and increased volumes from existing customers.

The company focusses on secure electronic money transfers. Its services provide identity verification and fraud checks as well as card processing and money settlement.

Further, ISX is authorised as a European Economic Area (EEA) Authorised financial institution, meaning it can issue e-money and operate banking transactions and card services in Europe.

However, iSignthis said in its announcement to shareholders today that its battle with the share market operator has had a measurable impact on company financials.

ASX and ISX butting heads

The fight began in early October 2019 when the ASX suspended iSignthis' shares based on concerns of unusual price movements.

The ASX and Australian Securities and Investment Commission (ASIC) had queries regarding iSignthis operations to which iSignthis responded a week after shares were suspended.

However, the response wasn't enough to get shares back up for trade: over the next six weeks, iSignthis would respond to several rounds of questioning to no avail.

Come early December, shares were still locked up, and the company launched subsequent legal action against the ASX. The company claimed the ASX has not been acting honestly, fairly, and in good faith in its examination of the company's operations. Moreover, the lawsuit alleges the ASX leaked important confidential iSignthis information.

With the case in Federal Court territory, shareholders in both ASX and ISX now have to wait to see the outcome of the legal action and what it means for both companies.

Frozen shares, tentative customers

Today, ISX made the bold claim that the suspension of shares has impacted company operations to the tune of $697,000. With the shares being clamped up, ISX claims company growth has been dampened as some customers defer onboarding.

iSignthis said it has "direct evidence" of the impact and damage caused by the suspension by way of statements from merchants, partners, suppliers, and regulators.

Managing Director and CEO John Karantzis said the suspension is a stain on an otherwise stellar year.

"Unfortunately though, what has been a hugely successful year for the company has been marred by the ASX suspension," John said in a letter to shareholders today.

"Despite answering scores of questions and providing more than 2000 pages of confidential documents dating back almost three years, the company’s shares have been suspended since October 2019," he explained.

"We believe that our shareholders have been denied the right to trade the company’s shares for far too long and therefore have commenced Federal Court proceedings against the ASX in December 2019. We remain committed to fighting for our shareholder's rights."

iSignthis said if it wins the court case the ASX will be "required to pay the company's legal expenses, and possibly even damages, consistent with the statement of claim".

The careful wording suggests this $697,000 in damages doesn't fall under a compulsory payout by the ASX should iSignthis win its case.

A tiny lost dividend

Further, company management said it would have declared a maiden dividend in light of its first profits if shares were not suspended by the ASX.

As it stands, iSignthis has decided to keep its earnings handy in case the ASX dispute becomes more costly. However, the company said directors will revisit the decision to not declare a dividend if the suspension is lifted "promptly" by the ASX.

Regardless, with over a billion shares on offer, any potential dividend could not have amounted to a huge payout. Even a half-cent dividend would cost iSignthis more than double its maiden annual profit, so perhaps an annual dividend would have been more of a gesture of goodwill than a happy payday for investors.

A blurry future

Looking ahead, John said the company is expecting more growth in 2020 now that its core business has been built up.

According to John, there are "several new products to market for additional revenue streams" on the way, although actual earnings are tough to predict while shares are still locked up.

"We are unable to provide market guidance until such time as the ASX induced suspension of our securities is lifted," John said.

"With the delivery of our first profit and the generation of positive cash flows in FY19, we have every reason to be excited about the Company’s 2020 outlook. We look forward to sharing further news and updates as the company develops and builds scale," he added.

Of course, with shares still suspended, it's uncertain how the market is reacting to today's news. Perhaps, however, with the battering the Australian share market has taken over the past week, it's a good time to have shares quarantined from the raging Covid-19 coronavirus.


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