After a particularly tumultuous FY23—ending with $0 in cash equivalents and a resulting ASX suspension, the engagement and loyalty management platform My Rewards International (ASX: MRI) has entered into a $1 million loan agreement with promotional intelligence company iGoDirect Group. This loan is expected to support the Company for the medium term.
It is critical that it does so, given that the Company has been suspended from the ASX for over a month after being unable to prove its financial health.
iGoDirect offers a suite of marketing, rewards, insights and promotional services that help improve loyalty, sales, and staff morale for businesses and customers.
This loan follows an ongoing dispute between My Rewards and a Melbourne-based digital marketing agency, Frankly Agency, which the Company decided to acquire in May 2023. Frankly serves some big names, including Marvel Stadiums and AFL. My Rewards and Frankly entered a binding asset purchase agreement amounting to $1.8 million.
My Rewards was to pay $750,000 of the amount in cash, comprising $250,000 cash on completion and $100,000 cash at each of 30, 60, 90, 120 and 150 days following completion.
The dispute happened over the transfer of these funds. The Company paid $100,000 on June 29, 2023, but since then, no instalments have been paid despite the duo having a monthly payment plan. According to My Rewards, further payments were withheld due to an ongoing disagreement about the payment schedule with the vendors.
Besides that, for its annual report, auditors could not share an opinion citing a lack of adequate information. In the subsequent ASX inquiry, the Company acknowledged auditor concerns about the same. However, the ASX was unsatisfied with the responses, resulting in a continued suspension of My Rewards.
Of course, it didn’t help that in FY23, the Company had “cash and cash equivalents of nil” —that’s right, it had zero dollars. To make matters worse, it had a bank overdraft of $8,598, total current liabilities of $4,923,628, a working capital deficit of $3,460,576, and cash outflows from operations amounting to $1.7 million.
Following this result, the Company’s secretary and CFO, Phillip Hains, stepped down on October 27, 2023, being replaced by Daniel Goldman. In Q1 FY24, the Company reaffirmed the Frankly acquisition, saying that the dispute would be resolved. Its net cash outflow was $978k, and it ended the quarter with $153k in cash after borrowings.
The $1 million loan from iGoDirect provides an additional semblance of relief to the Company. The loan has a term of four months, and My Rewards can draw on the loan immediately. It has to pay an interest of 12% per annum, payable at the end of the term, similar to its AMRAM Corp credit facility.
The iGoDirect loan is to be repaid in full within four months.
Alinda is a Business Reporter for The Sentiment
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