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TV2U International (ASX:TV2) - CEO, Nick Fitzgerald - The Market Herald
CEO, Nick Fitzgerald
Source: TVB Europe
  • In the first cashflow-positive quarter of FY20, TV2U International (TV2) shook up its board and saw a key payment become the centre of a legal stoush
  • The receipt in question — a €3 million (approximately A$5 million) payment from Jayplus — was sent to TV2U under a licencing agreement
  • However, the claimants allege it was received with constructive knowledge of supposed misrepresentations said to have been made by a former TV2U director
  • The claim, which arose in June, kicked off legal proceedings late in FY20's final quarter, while the disputed payment brought TV2U's operational balance sheet into the black — both for the fourth quarter and the full financial year
  • Meanwhile, TV2U Director Bret Silvey — whose conduct was called into dispute by the claimants — resigned on July 1
  • On the same day, Graeme Smith, who joined TV2U as company secretary in late May, stepped up as a Non-Executive Director, while Hannah Field took the wheel as company chair in mid-July
  • TV2U shares have been suspended since late November 2019, and the company says its stock will remain locked up until the legal battle subsides

In the first cashflow-positive quarter of FY20, TV2U International (TV2) shook up its board and saw a key payment become the centre of a legal stoush.

Financials

On its June quarterly cashflow report, TV2U said it received nearly $5 million in customer receipts. The huge increase offset just over $1 million in operational costs — the majority of which were staff, admin and corporate expenses, totalling nearly $800,000.

All up, TV2U ended up with nearly $4 million from operating activities at quarter's end, which was enough to pull its year-to-date cash flow figures into the black. For the full financial year, TV2U netted just over $2.6 million from operations.

In terms of financing activities, TV2U repaid half a million in borrowings, but received $150,000 in proceeds over the period.

Significantly, at the start of the quarter, TV2U had just $25,000 in the bank, but boosted its reserves to over $3.6 million by the financial year's end. Along with $5.6 million in unused finance facilities, it means the company has $9.2 million in available funding.

However, the large cash influx, triggered by a €3 million (approximately A$5 million) payment from Jayplus, is now the subject of legal proceedings.

The agreement that started it all

Back in November 2019, Swiss sports media agency Jayplus inked a ten-year strategic partnership agreement (SPA) with webtech developer Talico.

The SPA came five months after TV2U signed a deal with Talico in June 2019, to acquire its intellectual property portfolio and Internet of Things (IoT) commercial projects.

The acquisition was seen as a significant milestone for TV2U, which said Talico's assets had impacted its business model and provided an in to become a tech provider for IoT players.

Then one month later, in July 2019, TV2U and Talico became the exclusive technology partner for Jayplus, leading to the SPA licencing agreement.

Prior to the November SPA announcement, TV2U shares were voluntarily suspended as it tied up the last of the agreement details. That suspension was extended twice in late November as the agreement was finalised.

However, when the SPA was finally announced, TV2U admitted its shares would need to stay locked up until Jayplus could pay the initial licence fee, all up valued at €3 million.

The fee was broken into two segments; half for the exclusive licence to stream sports content on the NextGen Sports 360 Platform, and the other half to cover the development of intellectual property for the platform.

TV2U finally received that payment in June 2020 — over six months after the agreement was announced to the Australian market.

Proceedings commence

Despite making progress on the licencing deal, TV2U experienced another setback just a fortnight later.

In late June, it received notice that legal proceedings regarding the €3 million payment were now underway.

The claimants — NJLH Investments, Far Super, and the Humich Superannuation
Fund — allege a constructive trust applies to the funds to their benefit.

As a result, they're alleging the Jayplus payment was received with constructive knowledge of supposed misrepresentations said to have been made by former TV2U director Bret Silvey and his private entity, Cancun Trading.

TV2U categorically denies any actual knowledge or notice of alleged misrepresentations made by Mr Silvey and Cancun Trading.

While little else is known so far about the case, TV2U is fighting back.

"TV2U categorically denies any actual knowledge or notice of alleged misrepresentations made by Mr Silvey and/or Cancun Trading," it said in a statement in late June.

In the same update, TV2U said it would provide updates on the proceedings as necessary.

Most recently, in its June 2020 quarterly, the company said it was still considering its legal position.

Board shake-up

While the legal battle waged on, TV2U's June quarter was also peppered with a number of board resignations and new appointments.

Director Bret Silvey — whose conduct was called into dispute by the claimants — resigned on July 1. On the same day, Graeme Smith, who joined TV2U as company secretary in late May, stepped up as a Non-Executive Director.

In late May, Arshad Muhammad was appointed as a Non-Executive Director, while Hannah Field took the wheel as company chair in mid-July.

Whether the board shake-ups will bring TV2U a step closer to bringing its shares out of suspension remains to be seen.

TV2U shares have been suspended since late November 2019, and the company says its stock will remain locked up until the legal battle subsides.


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