Rewardle Holdings (RXH) confirms plans to lodge delayed financial reports by mid-February 2025, addressing audit complexities linked to its CloudHolter investment and ongoing partnership negotiations.
- RXH to lodge Half Year Accounts by 18 February 2025, with Full Year Accounts to follow
- Audit requirement for CloudHolter accounts caused reporting delays
- RXH holds nearly 50% stake in CloudHolter through fee-to-equity conversions
- Consultant role of RXH Executive Director at CloudHolter clarified
- Ongoing negotiations to revise Growth Services Agreement terms with CloudHolter
Background to the ASX Query
Rewardle Holdings Limited (ASX: RXH) has responded to a detailed ASX query regarding its delayed financial reporting and the status of its strategic partnership with CloudHolter Pty Ltd (formerly Cardiac Rhythm Diagnostics). The ASX's concerns stemmed from RXH's failure to lodge its Half Year Accounts for the period ended 31 December 2023 and Full Year Accounts for 30 June 2024, which triggered a trading suspension under Listing Rule 17.5.
Audit Challenges and Reporting Timelines
RXH confirmed it expects to lodge its Half Year Accounts and Appendix 4D by 18 February 2025, with Full Year Accounts and Appendix 4E to follow shortly thereafter, contingent on auditor availability. The delay primarily arose because CloudHolter's accounts, integral to RXH's equity accounting, required auditing, a process not previously anticipated as CloudHolter is a private company not mandated by law to produce audited financials.
This audit requirement emerged during discussions with RXH's auditors while preparing the 30 June 2023 accounts, complicating timely reporting. RXH emphasized that CloudHolter's audited accounts are beyond its control, as RXH holds no board representation and CloudHolter is independently managed.
Clarifying Roles and Equity Stakes
The ASX also queried the role of RXH's Executive Director, Mr Ruwan Weerasooriya, in CloudHolter. RXH clarified that Mr Weerasooriya is not formally appointed to any executive role at CloudHolter but acts as a consultant providing management and strategic advisory services under a professional services agreement. His occasional references as 'Manager' or 'General Manager' are commercial conveniences without conferring additional authority.
RXH has steadily increased its equity interest in CloudHolter through converting fees owed into shares, now holding approximately 49.9%. This stake has been built over several quarters, with the latest capital raising valuing CloudHolter at $100 million, a significant uplift from prior valuations around $35 million. RXH's fee-to-equity conversions at this higher valuation underpin its growing ownership, although it remains precluded from acquiring a controlling interest.
Partnership Terms and Future Outlook
The Growth Services Agreement between RXH and CloudHolter, initially a three-year contract commencing July 2021, is under renegotiation as CloudHolter internalizes more operations. While an updated agreement has been agreed in principle, commercially sensitive elements remain unresolved and discussions continue. RXH confirmed it continues to provide services and receive remuneration under the existing terms pending formal documentation.
RXH also addressed discrepancies noted by the ASX regarding shareholding records, confirming it holds legal entitlement to its CloudHolter shares despite ASIC registry differences, and has taken steps to rectify compliance issues brought to its attention.
Strategic Significance and Market Implications
CloudHolter represents RXH's most significant commercial initiative, accounting for over 95% of revenue in FY23, though this concentration has begun to diversify. The partnership's success and CloudHolter's valuation uplift are pivotal to RXH's growth strategy centered on its proprietary B2B2C software platform. However, the audit-induced reporting delays and ongoing negotiations highlight operational complexities in managing strategic investments in private companies.
Bottom Line?
RXH’s ability to resolve audit and partnership uncertainties will be critical to restoring market confidence and unlocking value from its CloudHolter investment.
Questions in the middle?
- Will RXH finalize and announce the revised Growth Services Agreement terms with CloudHolter soon?
- How will CloudHolter’s $100 million valuation impact RXH’s future equity conversions and earnings?
- What measures will RXH take to prevent future reporting delays linked to third-party audits?