Delayed Disclosures and Audit Issues Put Rewardle’s Listing Compliance at Risk

Background on Rewardle’s Strategic Investments

Rewardle Holdings Limited (ASX, RXH) has been under scrutiny following a detailed letter from ASX Compliance seeking clarifications on multiple fronts. Central to the inquiry are Rewardle’s investments in Pepper Leaf, a Melbourne-based meal kit delivery service, and Beanhunter, an online community platform for independent cafes. Both investments were positioned as strategic moves to leverage Rewardle’s operations without requiring additional funding.

Rewardle announced in 2019 a strategic partnership with Pepper Leaf, acquiring a 54% stake through a $1.5 million cash investment. Similarly, in early 2023, Rewardle took a 51% shareholding in Beanhunter with a $178,000 investment. However, ASX’s letter questions the timing and completeness of disclosures related to these investments, particularly noting that some material information was only made public in annual or half-year reports rather than at the time of the transactions.

Financial Reporting Discrepancies and Loan Arrangements

The ASX letter highlights significant discrepancies between Rewardle’s half-year financial statements and its Appendix 4C cash flow report for the same period. For instance, receipts from customers and net cash from operating activities differ markedly between the two documents, raising questions about the accuracy and consistency of Rewardle’s financial reporting.

Further complicating matters are the loan arrangements between Rewardle and Pepper Leaf. Rewardle received a $1.5 million unsecured loan from Pepper Leaf, repayable by November 2024, and in turn extended loans to Pepper Leaf’s founders. ASX Compliance seeks updates on whether these loans have been repaid, and if any penalties or liabilities have arisen from delayed repayments.

Governance and Going Concern Concerns

Rewardle’s delayed lodging of financial statements has resulted in a trading suspension since October 2023. The delay is attributed to audit complications involving CloudHolter, a private company in which Rewardle holds a stake but lacks board representation or control over its audited accounts. This situation has raised material uncertainty about Rewardle’s ability to continue as a going concern, as noted in the independent auditor’s review.

ASX Compliance also probes Rewardle’s compliance with listing rules, particularly regarding continuous disclosure obligations and the adequacy of its operational structure to access necessary information. The letter requests confirmation that Rewardle’s board or authorized officers have approved responses to these inquiries in line with corporate governance standards.

Implications for Investors and Market Confidence

The ASX’s detailed questioning underscores the importance of timely and transparent disclosure for maintaining investor confidence. Rewardle’s complex investment structure, coupled with financial reporting inconsistencies and governance challenges, presents risks that investors will be watching closely. The company’s ability to clarify these issues and restore compliance will be critical in determining its market standing and future trading status.