Haven’t heard of the company IOUPay (ASX: IOU) in a while? You’re probably not alone because their shares have been suspended from trading since March 2023 while the new Board of Directors attempt to unravel the utter mess left to them from the previous Board, and it’s cost them $36 million according to the FY23 Annual Report which has finally been signed off by auditors and published. 

The company’s Chairman, David Halliday, addressed shareholders in a letter accompanying the report, shedding light on the challenges faced and outlining the strategic priorities moving forward.

The tumultuous saga pivoted with the appointment of Halliday and his fellow directors to the board in May 2023. Swiftly after, the Board successfully prosecuted a case in the Supreme Court of NSW [Halliday vs IOUpay Limited], leading to the removal of the Company from PricewaterhouseCoopers’ administrative purview and placing it back into the hands of the new directors. 

Following the legal victory, the board faced the challenging task of stabilising the Company’s affairs while continuing some of it its ongoing operations after shedding the headcount down to just 16 employees (full time equivalent) – a miniscule amount for a Company that last traded on the ASX with a market cap of $40 million. 

Substantial efforts, including numerous board meetings and visits to Malaysian operations, were undertaken to formulate a plan addressing strategic priorities aimed at creating shareholder value.

The first priority, funding, saw the board enter into various financial agreements, including a loan facility agreement with Finran and the issuance of shares through a convertible note agreement and an Extraordinary General Meeting. These measures amounted to $4.5 million in funding, effectively eliminating all company debt, albeit substantially diluting existing shareholders in the process. 

The Board then ordered the closure of the IOU Pay (Asia) business, and the relocation of office premises to Finran’s offices on favourable commercial terms. 

Another priority outlined the vigorous pursuit of alleged misappropriation of shareholder funds by previous management. IOUpay appointed Izral Partnership for a detailed investigation, whose findings were subsequently reviewed by legal experts. To prosecute the alleged frauds, the Board engaged the services of internationally recognized law firm Herbert Smith Freehills whose recovery efforts are ongoing. 

Finally, the reinstatement priority aimed to ensure compliance with regulatory obligations and the ultimate re-quotation of IOU shares on the ASX is one step closer with the release of the FY23 Annual Report. 

With some operations having continued despite the corporate matters unravelling, IOUPay reported $9.5 million in revenue from its fintech products, including buy-now-pay-later (BNPL) operations. 

That revenue, however, did not even come close to offsetting the $36 million net loss after tax recorded by the Company which primarily consisted of $20.6 million of write offs from their receivables, $3.0 million in goodwill impairments, $2.8 million in corporate and compliance fees, and $7.4 million of investment impairments. 

In his concluding remarks, Chairman David Halliday expressed gratitude to shareholders for their continued support, acknowledging the challenging year faced by the Company. He pledged the Board’s commitment to executing the outlined strategic pillars and promised regular updates on progress in pursuit of having IOU shares reinstated for trading.