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iSignthis responds to ASX enquiries

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The iSignthis Ltd (ASX: ISX) share price remains in a trading halt on Friday.

But that hasn’t stopped the embattled payments company from responding to an ASX query.

What was in the response?

For those that have been watching the company closely in recent months, it will come as no surprise to learn that the ASX had a lot of queries. In fact, a total of 15 queries were listed in this announcement and still the matter remains ongoing.

Amongst the many queries was a request for a summary of its customers and where its revenue was being generated from. The ASX was particularly interested if cryptocurrency companies were amongst its clientele.

The company responded: “To the best of our knowledge and belief, the Company currently has 20 relatively small customers (among over 310 current and former contracted legal entities) who deal in cryptocurrency who commenced as customer of the Company between September 2015 to September 2019.”

And in response to how much revenue was generated from them, the company revealed 6.5% of its preliminary unaudited revenue was generated from servicing customers which operate cryptocurrency exchanges during the September quarter. The majority of its revenue (~69%) came from sectors including general e-commerce, online advertising and marketing, online video games, consulting services, and travel.

Unfortunately, the ASX didn’t request a breakdown on where the spike in revenue came from which allowed management to achieve its performance rights last year.

Moving on. The ASX also requested details on a loan between it and a subsidiary of Etherstack. Management noted that the loans were directly negotiated between the respective chief financial officers of each company. And that the “director that was common to both entities was not involved in, nor had knowledge of, any of the loans prior to their execution.”

One final key query that caught my eye was whether the company was subject of any regulatory investigation. It advised that it is. Revealing that on October 8 ASIC issued a notice to produce certain books in relation to its compliance with its continuous disclosure obligations.

What now?

Things certainly do not look good for iSignthis. Especially given the revelation that there are family connections with its major shareholder Red 5 Solutions after the company previously denied any knowledge of who was behind this mysterious entity.

I recently wrote how iSignthis was in the too hard basket for me. Whereas now, I’m taking it out of that basket and putting it in the avoid at all costs basket. There are simply too many red flags.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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