Special Meeting of MAD called to consider Transactions
21 November 2018
Special Meeting of MAD called to consider Transactions
Energy Mad Limited (the Company) today announces that it has called a Special Meeting of
Shareholders to be held on 6 December 2018 at the offices of Link Market Services Limited, starting at
10.00am.
The resolutions being put forward at the Special Meeting are intended to approve transactions
(Transactions) whereby:
The assets of the Company, Energy Mad NZ Limited (EML Subco), Intellectual Property Energy
Mad Limited and Energy Mad Build Limited (each a directly wholly owned subsidiary of the
Company) are sold to Ecobulb Limited.
The Company makes an in-specie distribution to the shareholders of the Company of all of the
shares of EML Subco.
The Company acquires the business and assets of PaySauce Limited (PaySauce) through an
acquisition of 100% of the ordinary shares in PaySauce.
The consideration for the acquisition of the shares in PaySauce is satisfied by way of an issue to the
shareholders of PaySauce of fully paid ordinary shares in the Company.
The Directors of the Company consider that the Transactions are in the best interests of the Company
and its shareholders and have unanimously recommended that shareholders vote in favour of the
resolutions outlined in the Notice of Meeting.
The Notice of Meeting, Independent Adviser's Report and Profile in respect of the Transactions are
enclosed with this announcement and will be sent to the shareholders of the Company. Shareholders
are encouraged to read the enclosed documentation in its entirety, and consult with their financial or
professional adviser if there are any questions about the resolutions.
ENDS.
For more information, contact Brent Wheeler, Chairman, 021 834 279.
Brent Wheeler
Chair
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3557673 v19 1
21 November 2018
Dear Shareholder
Please find enclosed the notice of special meeting of Energy Mad Limited ("Company") which will be
held on 6 December 2018 at Link Market Services, Level 11, Deloitte Centre, 80 Queen Street,
Auckland, starting at 10:00am. Shareholder registration will open at 9:00am.
The Transactions
The resolutions being put forward at the meeting are intended to approve transactions
("Transactions") whereby:
• The assets of the Company, Energy Mad NZ Limited ("EML Subco"), Intellectual Property
Energy Mad Limited and Energy Mad Build Limited (each a directly wholly owned subsidiary of
the Company) are sold to Ecobulb Limited ("Ecobulb").
• The Company makes an in-specie distribution to the shareholders of the Company of all of the
shares of EML Subco (which, following a proposed restructure, will be the direct holding
company of Intellectual Property Energy Mad Limited, Energy Mad Build Limited,
EcoSmartHome Limited and Energy Mad US LLC).
• The Company acquires the business and assets of PaySauce Limited ("PaySauce") through
an acquisition of 100% of the ordinary shares in PaySauce ("Acquired Shares"). The total
consideration for the Acquired Shares is $10 million.
• The consideration for the Acquired Shares is ultimately satisfied by way of an issue to the
shareholders of PaySauce ("Vendors") of 5,667,706,766 fully paid ordinary shares in the
Company ("Share Consideration").
The Transactions constitute a reverse acquisition or a 'backdoor listing', which occurs where a private
company (PaySauce) is acquired by a listed company (the Company), and the listed company issues
its shares to the private company's shareholders, resulting in the listing of the business of the private
company. As a result of the Transactions:
• the Vendors will become new shareholders of the Company (together holding approximately
97% of the total shares in the Company);
• the Company's existing shareholders will retain their shares in the Company (with their
shareholding significantly diluted (to approximately 3% of the total shares in the Company)
due to the issue of the Share Consideration to the Vendors);
• the Company's existing directors will resign from the Board, and new directors, including the
current directors of PaySauce, will be appointed to the Board; and
• the essential nature of the Company's business will change, to focus on developing and
operating business interests in the cloud-based Software-as-a-Service payroll solutions
sector, which is the expertise of PaySauce and certain of its directors.
The Board intends to wind up and liquidate EML Subco following Completion. The Board does not
expect there to be any amounts available to shareholders from EML Subco's liquidation.
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The Notice of Meeting should be read in conjunction with the enclosed combined independent report
and independent adviser's report prepared by Simmons Corporate Finance Limited ("Simmons")
("Independent Report"), which assess the fairness of the Transactions, and the enclosed Profile
prepared by PaySauce which details the Acquired Shares and the associated business plan to be
pursued by the Company following the Transactions.
Consideration
The Company will satisfy the consideration for the Acquired Shares through the issue of the Share
Consideration, being the issue of 5,667,706,766 fully paid ordinary shares in the Company at a price
of 0.18 cents per share (rounded, being the agreed Company value of $310,243 (explained below)
divided by the current number of shares in the Company of 175,836,635).
In deriving the number of shares to be issued to the Vendors, the relevant transaction figures are:
• The consideration for the Acquired Shares is $10 million.
• The Company is valued at $310,243, being the implied equity value of the Company prior to
Completion, which was set by reference to the Company's 50 day average market
capitalisation to the date of the Term Sheet (defined below).
Both these numbers were negotiated between the Company and PaySauce, and agreed under a non-
binding term sheet dated 2 March 2018 ("Term Sheet"). Based on these numbers, the existing
shareholders of the Company will, in aggregate, have approximately a 3% interest in the Company,
and the Vendors will, in aggregate, have approximately a 97% interest in the Company, following
completion of the Transactions ("Completion"). Further information on the reasonableness of the
Consideration for the Acquired Shares (referred to as the "Purchase Price" in the Independent Report)
is in section 7 of the Independent Report.
Benefits of the Transactions
The board of directors of the Company ("Board") considers the effect of the Transactions to be of
significant benefit to shareholders because:
• The Transactions introduce new assets, business operations and growth prospects into the
Company with a focus on the cloud-based Software-as-a-Service payroll solutions sector. The
Transactions give shareholders an indirect shareholding in PaySauce for no cash
consideration.
• The Transactions will give shareholders a percentage shareholding in EML Subco equivalent
to their percentage shareholding in the Company as at 5:00pm on 7 December 2018 (being
the Record Date), although the EML Subco Distribution is not expected to provide any return
to shareholders following EML Subco's liquidation.
• Subject to completion of the Transactions, PaySauce has agreed to provide funding for the
Company and certain subsidiaries of the Company to satisfy their major outstanding creditors.
The Board considers that the Transactions provide a very worthwhile set of opportunities for the
Company's shareholders and believes the Transactions are in the shareholders' best interests. The
advantages to the shareholders of the Transactions and other issues for consideration are outlined in
further detail at sections 3.10 and 3.12 of the Independent Report.
The main potentially negative implication for shareholders of the Transactions is that their
proportionate interest in the Company will be significantly diluted by 97%, and the risk profile of the
3557673 v19 3
Company will change significantly. The negative implications for shareholders of the Transactions and
other issues for consideration are outlined in further detail at sections 3.11 and 3.12 of the
Independent Report.
If the Transactions do not proceed, the Company will be unlikely to seek to conduct a transaction of
the type contained in this Notice of Meeting again, and the Board considers there is limited likelihood
of finding an alternative counterparty with which to engage in this respect. PaySauce has agreed to
continue to meet the Company's out of pocket third party costs of the Transactions (this is discussed
in further detail in the Explanatory Notes to the Notice of Meeting).
Shareholder action required
Due to the nature of the Transactions, shareholder approval is required. A description of the
Transactions and the requirement for the resolutions to be considered at the meeting is set out in the
Explanatory Notes that form part of the enclosed Notice of Meeting.
The Directors believe that the Transactions will benefit shareholders and encourage you to read the
enclosed Notice of Meeting (including the Explanatory Notes), together with the enclosed Profile and
the Independent Report, and to exercise your right to vote.
The enclosed shareholder voting form has detailed instructions on how shareholders may lodge their
vote or appoint a proxy to vote on their behalf if they are unable to attend the meeting.
Directors' recommendation
The Directors consider that the Transactions are in the best interests of the Company and its
shareholders and, therefore, unanimously recommend that shareholders vote in favour of the
resolutions outlined in the Notice of Meeting.
Please read the enclosed documentation in its entirety, and consult with your financial or professional
adviser if you have any questions about the resolutions.
I look forward to seeing you at the meeting.
Brent Wheeler
Chairman
3557673 v19 4
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
Notice is hereby given that a Special Meeting ("Meeting") of shareholders of Energy Mad Limited
("Company") will be held on 6 December 2018 at Link Market Services, Level 11, Deloitte Centre, 80
Queen Street, Auckland, Auckland, starting at 10:00am. Shareholder registration will open at 9:00am.
The Explanatory Notes which accompany this Notice of Meeting set out the details of the transactions
which are the subject of the resolutions ("Transactions") and the approval required for each resolution
by the shareholders of the Company pursuant to the NZX Main Board Listing Rules ("Listing Rules"),
the Companies Act 1993 ("Companies Act"), the Takeovers Regulations 2000 ("Takeovers Code"),
and the constitution of the Company ("Constitution").
Capitalised terms used in this Notice of Meeting have the meaning given to them in the Glossary
commencing on page 40 of this Notice of Meeting.
AGENDA
A. Chairman's introduction.
B. Presentation to shareholders.
C. Shareholder discussion.
D. Resolutions.
RESOLUTIONS:
Ecobulb Asset Sale
To consider, and if thought fit, pass the following resolution as a special resolution:
(a) Resolution 1 – Ecobulb Asset Sale: that, in accordance with Listing Rules 9.1.1 and 9.2.1
and section 129 of the Companies Act, and pursuant to the agreement for the sale and
purchase of assets entered into between the Company, EML Subco, Intellectual Property
Energy Mad Limited, Energy Mad Build Limited (together, the "Ecobulb Vendors") and
Ecobulb Limited ("Ecobulb Agreement"), the Ecobulb Vendors sell to Ecobulb Limited all of
the assets set out in the Ecobulb Agreement, and the transactions described in the Ecobulb
Agreement are approved, and the Directors of the Company be authorised to take all
actions, do all things and execute all documents and agreements as necessary or
considered by them to be expedient to give effect to such transactions.
The PaySauce Transactions
To consider, and if thought fit, pass the following resolutions as special resolutions:
(a) Resolution 2 – EML Intercompany Loan Forgiveness: that, in accordance with Listing
Rule 9.1.1 and section 129 of the Companies Act, the forgiveness of any intercompany loan
balances owing between the Company on the one hand and EML Subco, Intellectual
Property Energy Mad Limited, Energy Mad Build Limited, EcoSmartHome Limited or Energy
Mad US LLC on the other hand (the “EML Intercompany Loan Forgiveness”) is approved,
and the Directors of the Company be authorised to take all actions, do all things and execute
3557673 v19 5
all documents and agreements as necessary or considered by them to be expedient to give
effect to the EML Intercompany Loan Forgiveness.
(b) Resolution 3 – EML Subco Distribution: that, in accordance with Listing Rule 9.1.1 and
section 129 of the Companies Act, the Company distribute in-specie all of the fully paid
ordinary shares in EML Subco to the existing shareholders of the Company as at 5:00pm on
7 December 2018 ("Record Date") on a pro rata basis for no cash consideration ("EML
Subco Distribution") and that the Directors be authorised to take all actions, do all things
and execute all documents and agreements as necessary or considered by them to be
expedient to give effect to the EML Subco Distribution;
(c) Resolution 4 - Acquisition: that, in accordance with Listing Rule 9.1.1 and section 129 of
the Companies Act, and pursuant to the Transaction Management Agreement dated 9
August 2018 entered into between the Company, EML Subco, the shareholders of
PaySauce Limited ("Vendors"), Asantha Wijeyeratne and Troy Tarrant (as the founders of
PaySauce) and Coulthard Barnes Capital Limited ("Acquisition Agreement"), the Company
acquire the business and assets of PaySauce Limited ("PaySauce") through the acquisition
of 100% of the shares on issue in PaySauce ("Acquisition"), and that the Directors be
authorised to take all actions, do all things and execute all documents and agreements as
necessary or considered by them to be expedient to give effect to the Acquisition;
(d) Resolution 5 - Issue of Consideration Shares: that, in accordance with Listing Rules 7.3.1
and 9.1.1 and rule 7(d) of the Takeovers Code, the Company issue 5,667,706,766 fully paid
ordinary shares ("Consideration Shares") to the Vendors (or their nominees), at an issue
price of 0.18 cents per share (rounded, being the Company value of $310,243 divided by the
current number of shares in the Company of 175,836,635), in satisfaction of the
consideration for the Acquisition under the Acquisition Agreement, and such Consideration
Shares when issued, shall rank pari passu (equally) with all existing ordinary shares of the
Company, and that the Directors be authorised to take all actions, do all things and execute
all documents and agreements as necessary or considered by them to be expedient to give
effect to the issue of Consideration Shares;
(e) Resolution 6 - Adoption of New Constitution: that, in accordance with section 32(2) of the
Companies Act, the constitution of the Company be revoked and the Company adopt the
new constitution described in this Notice of Meeting ("New Constitution"), with effect from
completion of the Acquisition; and
(f) Resolution 7 - Appointment of New Directors: that, in accordance with the Company's
existing constitution, Asantha Wijeyeratne, Andrew Barnes, Gavin Thompson, Mandy
Simpson and Nick Lewis each be appointed director of the Company with effect from
completion of the Acquisition.
By order of the Board of Directors
Brent Wheeler
Chairman
21 November 2018
3557673 v19 6
PROCEDURAL NOTES
1. Explanatory Notes
Explanatory Notes for Resolutions 1 to 7 are set out in the following pages. Additional information
about the subject matter of the resolutions is contained in the Profile that forms part of this document,
together with the Independent Report that accompanies this document.
2. Interdependence of Resolutions
Resolution 1 is not interdependent with any of the other Resolutions, meaning that transactions
recorded in the Ecobulb Agreement will be given effect to if Resolution 1 is passed by shareholders,
regardless of whether any of the other Resolutions are passed.
Each of the other Resolutions ("PaySauce Transaction Resolutions") are interdependent, and
requires that each of those Resolutions, as well as Resolution 1, be passed by shareholders in order
for the transactions referred to in the PaySauce Transaction Resolutions be effected.
3. Special Resolutions
All of the Resolutions are special resolutions. A special resolution is a resolution passed by a majority
of 75% or more of the votes of those shareholders entitled to vote and voting on the resolution in
person or by proxy. By comparison, an ordinary resolution is a resolution passed by a simple majority
of votes of those shareholders entitled to vote and are voting on the resolutions in person or by proxy.
The Company views the transactions contemplated under Resolutions 2 to 7 to be part of a series of
related transactions. Therefore, although Resolution 7 only requires approval by ordinary resolution of
the Company (as explained in the Explanatory Notes), Resolutions 2, 3,4, 5 and 6 all require approval
by special resolution of the Company, and overall, the higher approval threshold has been adopted for
Resolution 7.
4. Voting Restrictions
Under Listing Rule 9.3.1, a person who is a party or beneficiary to or of the transactions which are the
subject of a resolution under Listing Rule 9.2.1 will be prohibited from voting on any such resolution.
In relation to Resolution 1 (Ecobulb Asset Sale) and pursuant to Listing Rule 9.3.1, the Company's
shareholders who are Associated Persons of Ecobulb are prohibited from voting any shares that they
hold.
Under the Listing Rules, a person (first person) is an Associated Person of another person (second
person) if the first person is associated with the second person, which includes where:
(a) in making a decision or exercising a power affecting an issuer, the first person could be
influenced as a consequence of an arrangement or relationship existing between, or
involving, the first and the second person; or
(b) the first person and second person are acting jointly or in concert; or
(c) the first person is a company, and the second person is a Director, or a Related Company,
or a Director of a Related Company, of that company.
The Company will disregard any votes cast on Resolution 1 by any persons to whom the foregoing
applies. Any discretionary proxies given to persons disqualified from voting under the requirements
3557673 v19 7
set out above will not be valid. Discretionary proxies may be provided to any Director or the
Chairman, each of whom are not disqualified from voting on any of the Resolutions.
Those persons who are prohibited from voting on a resolution may not act as a discretionary proxy in
respect of a resolution, but may vote in accordance with express instructions.
3557673 v19 8
5. Proxies
All persons registered on the Company's register of shareholders as at 5:00pm on 4 December 2018
shall, subject only to the preceding restrictions, be entitled to vote at the Meeting in person or by
proxy.
Any shareholder of the Company who is entitled to attend and vote at the meeting may appoint a
proxy to attend and vote on their behalf. A corporation which is a shareholder may appoint a
representative to attend the meeting on its behalf in the same manner as it could appoint a proxy. A
proxy does not need to be a shareholder of the Company. A Proxy Form can be returned by delivery,
mail, email, fax, or online (as set out below).
The Chairman of the Meeting and the Directors are prepared to act as proxy. The Chairman and each
of the Directors intends to vote in favour of all of the Resolutions where appointed as a discretionary
proxy on those Resolutions.
To appoint a proxy you should complete and sign the enclosed Proxy Form and either return it by
delivery, mail, email or fax to the share registrar of the Company:
By delivery:
Link Market Services Limited
Level 11, Deloitte Centre,
80 Queen Street,
Auckland 1010
By mail:
Link Market Services Limited
PO Box 91976
Auckland 1142
By email: meetings@linkmarketservices.co.nz (please put the words "Energy Mad Limited
Proxy Form" in the subject line for easy identification)
By fax: +64 9 375 5990
You may also lodge your proxy online at https://investorcentre.linkmarketservices.co.nz/voting/MAD.
You will require your CSN/Holder Number and FIN to complete your proxy appointment. A
shareholder will be taken to have signed the Proxy Form by lodging it in accordance with the
instructions on the website.
The completed Proxy Form must be received by Link Market Services Limited no later than 48 hours
before the meeting, being 10:00am on 4 December 2018. Online proxy appointments must also be
completed by this time.
6. No Motions
The only matters being discussed and voted on at the Meeting are the Resolutions contained in this
Notice of Meeting. No motions will be allowed from the floor.
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7. Minority Buy-Out Rights
If Resolutions 1, 2, 3, and 4 are passed and any shareholder has cast all the votes attached to the
shares registered in that shareholder's name and having the same beneficial owner, against any of
those Resolutions, then that shareholder is entitled to require the Company to purchase those shares
in accordance with section 110 of the Companies Act ("Minority Buy-out Rights").
If this right is validly exercised by any shareholders, the Companies Act provides for the Company to
acquire (or procure the acquisition of) the relevant shares at a fair and reasonable price as at the close
of business on 5 December 2018 (being the day before the date of the special meeting), disregarding
any value attributable to the shares from the Transactions.
Shareholders that wish to exercise their Minority Buy-out Rights should note that, if all of the
Resolutions are passed, they will still be distributed shares in EML Subco, because the Record Date
for entitlements will be 5:00pm on 7 December 2018.
Appendix One to this Notice of Meeting sets out the procedure for Minority Buy-out Rights.
Shareholders who become entitled to exercise this right are strongly encouraged to first seek
independent professional advice from a financial adviser.
8. Independent Report
Accompanying this Notice of Meeting is the Independent Report. The Independent Report has been
prepared by Simmons and constitutes an appraisal report on the Ecobulb Asset Sale for the purposes
of the NZX Listing Rules, an independent report on the Transactions as required by the NZX guidance
note titled "Guidance Note - Backdoor and Reverse Listing Transactions", and a report from an
independent adviser for the purposes of the Takeovers Code. Shareholders are urged to read the
Independent Report in full.
9. Profile
A Profile under Listing Rule 7.1.1 accompanies this Notice of Meeting.
The Profile discloses particulars of the assets and business of the Company if the Resolutions are
passed. The Profile is forward looking and assumes:
• the Resolutions contained in this Notice of Meeting have been passed; and
• the Transactions are implemented on the basis set out in this Notice of Meeting.
10. Special Division Approval
This Notice of Meeting has been approved by the Special Division of the New Zealand Markets
Disciplinary Tribunal ("Special Division"). However, the Special Division does not take responsibility
for any statement contained in this Notice of Meeting.
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EXPLANATORY NOTES
INTRODUCTION
Energy Mad Limited (“Company”) is an importer and distributor of energy efficient LED and compact
fluorescent light bulbs.
The Company is seeking the implementation of a significant operational and capital restructure which
has been negotiated and endorsed by the Board of the Company. The Company intends to acquire
the business of PaySauce Limited ("PaySauce") by purchasing 100% of the fully paid ordinary shares
in PaySauce ("Acquisition"). The consideration for the Acquisition shall ultimately be satisfied by way
of the Company issuing fully paid ordinary shares to the shareholders of PaySauce ("Vendors").
To this end on 9 August 2018, the Company entered into a Transaction Management Agreement
("Acquisition Agreement") with the Vendors, Asantha Wijeyeratne and Troy Tarrant (as the founders
of PaySauce), Coulthard Barnes Capital Limited and Energy Mad NZ Limited (“EML Subco”). The
various transactions contemplated in the Acquisition Agreement are each subject to approval by the
shareholders of the Company at the Special Meeting of Shareholders ("Meeting").
Summary of the Transactions
The principal transactions contemplated in the Acquisition Agreement, which shall each occur on or
immediately following completion of the Acquisition, are summarised below (together, the
"Transactions").
1. The assets of the Company, EML Subco, Intellectual Property Energy Mad Limited and
Energy Mad Build Limited (each a wholly owned subsidiary of the Company) are sold to
Ecobulb Limited (“Ecobulb”) ("Ecobulb Asset Sale").
2. Any intercompany loan balances owing between the Company on the one hand and EML
Subco, Intellectual Property Energy Mad Limited, Energy Mad Build Limited, EcoSmartHome
Intellectual
Property Energy
Mad Limited
EML SubCo
Energy Mad Build
Limited
EML
Ecobulb Limited
Ecobulb
Asset Sale
3557673 v19 11
Limited or Energy Mad US LLC on the other hand are forgiven (“EML Intercompany Loan
Forgiveness”).
3. The Company makes an in-specie distribution of all of the shares in EML Subco to the
Company's existing shareholders as at 5:00pm on 7 December 2018 ("Record Date") on a
pro rata basis for zero consideration ("EML Subco Distribution").
Energy Mad Build
Limited
Intellectual
Property Energy
Mad Limited
EcoSmart Home
Limited
EML
Energy Mad US
LLC
EML Subco
EML Shareholders
Any intercompany
loan balances are
forgiven
Energy Mad Build
Limited
Intellectual
Property Energy
Mad Limited
EcoSmartHome
Limited
EML
Energy Mad US
LLC
EML Subco
EML Shareholders
EML Subco Distribution
3557673 v19 12
4. The Company acquires 100% of the fully paid ordinary shares in PaySauce ("Acquired
Shares") for a total consideration of $10 million ("Consideration").
5. The Company issues 5,667,706,766 new fully paid ordinary shares in the Company
("Consideration Shares") to the Vendors (or their nominees), at an issue price of 0.18 cents
per share (rounded), in satisfaction of the Consideration for the Acquired Shares.
6. The Company revokes its existing constitution and adopts a new constitution ("New
Constitution").
7. The existing directors of the Company resign as directors, and Asanthe Wijeyeratne, Andrew
Barnes, Gavin Thompson, Mandy Simpson and Nick Lewis are appointed as new directors
of the Company.
8. The Company changes its name to PaySauce Limited, and PaySauce Limited changes its
name to PaySauce Operations Limited.
The following diagram illustrates the structure of the Company and EML Subco immediately following
Completion.
EML Shareholders PaySauce Shareholders
EML
PaySauce Limited
Issue of
Consideration
Shares
100%
Acquired Shares
(being shares in
PaySauce Limited)
3557673 v19 13
The Transactions will effectively result in the backdoor listing of PaySauce through the Company. If
the Transactions are approved by shareholders, the Company's business will change from an energy
efficient LED and compact fluorescent light bulb importation and distribution business to a cloud-based
Software-as-a-Service payroll solutions business. For further information on the Company's proposed
new business, please refer to the Profile accompanying this Notice of Meeting.
The Directors of EML unanimously support the Transactions and consider that the Transactions are in
the best interests of the Company. No director has a personal interest in the Transactions that is not
in common with shareholders.
This Notice of Meeting should be read in conjunction with:
• the Profile, which discloses particulars of the assets and business plan of the Company if the
Resolutions are passed; and
• the Independent Report, which assesses the fairness of the Transactions.
Summary of the Independent Report
The Independent Report summarises the shareholders' options in regards to voting on the
Transactions at sections 1.5, 3.2 and 4.2 of the Independent Report.
When considering these options, shareholders should also consider the following:
• Simmons has assessed the reasonableness of the Consideration for the Acquired Shares
(referred to as the "Purchase Price" in the Independent Report) by reference to the multiples
implied by comparable market evidence and recent share transactions involving the Vendors (see
section 7 of the Independent Report). In Simmons' opinion, the Consideration is not
unreasonable, albeit at the upper end of what would be considered reasonable;
Energy Mad
Build
Limited
Intellectual
Property
Energy Mad Ltd
EcoSmartHome
Limited
Energy Mad
US LLC
EML Subco
EML Shareholders
EML
(to be renamed "PaySauce Limited")
PaySauce Limited
(to be renamed "PaySauce
Operations Limited")
PaySauce Shareholders
Approximately
97%
Approximately
3%
100%
100%
100%
3557673 v19 14
• In Simmons' opinion, having regard to all of the relevant factors (see section 2.2 of the
Independent Report), the consideration and the terms and conditions of the Ecobulb Asset Sale
are fair to the non-associated shareholders (being shareholders other than the shareholders who
are Associated Persons of Ecobulb).
• In Simmons' opinion (see section 4.2 of the Independent Report), the terms of the PaySauce
Transactions are fair and reasonable to the shareholders and the PaySauce Transactions are in
the best interests of the Company given the options reasonably available to the Company at the
current time.
• In Simmons' opinion, based on the analysis of the merits of the PaySauce Transactions (see
section 3.2 of the Independent Report), after having regard to all relevant factors, the positive
aspects of the PaySauce Transactions significantly outweigh the negative aspects.
In assessing the merits of the Transactions, shareholders should consider sections 2, 3, and 4 of the
Independent Report. The impact on the control of the Company as a result of the Transactions is
discussed in section 3.7 of the Independent Report. The implications of the Transactions if the
Resolutions are not approved are set out in sections 2.5 and 3.16 of the Independent Report.
Simmons' opinion is to be considered as a whole. Selecting portions of the analyses or factors
considered by it, without considering all the factors and analyses together, could create a misleading
view of the process underlying the opinion. The preparation of an opinion is a complex process and is
not necessarily susceptible to partial analysis or summary. For the avoidance of doubt, shareholders
are encouraged to read the Independent Report in full.
The issue price of ordinary shares under the Acquisition does not necessarily reflect what those
shares will trade at on the NZX Main Board following Completion.
Key dates
The key dates leading up to completion of the Acquisition are as follows:
Event Date
This Notice of Meeting, the Profile and the
Independent Report are released to
shareholders.
21 November 2018
EML Shareholders' Meeting 10:00am on 6 December 2018
Record Date for EML Subco Distribution 5:00pm on 7 December 2018
Completion of the Ecobulb Asset Sale 21 December 2018
The EML Subco Distribution takes effect as per
Record Date entitlements
21 December 2018
Expected completion date of the Acquisition and
the issue of the Consideration Shares
21 December 2018
DESCRIPTION OF TRANSACTIONS
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The Resolutions put forward in this Notice of Meeting are intended to approve the following
Transactions:
• the Ecobulb Asset Sale;
• the EML Intercompany Loan Forgiveness;
• the EML Subco Distribution;
• the Acquisition and the issue of Consideration Shares;
• the adoption of New Constitution; and
• the appointment of new directors.
The Transactions will have the effect of changing the essential nature of the Company's business to a
cloud-based Software-as-a-Service payroll solutions business as is more fully described in the Profile.
Each of the key elements to the Transactions are discussed in further detail below.
Ecobulb Asset Sale
On 5 May 2017, the Company, EML Subco, Intellectual Property Energy Mad Limited, Energy Mad
Build Limited (as vendors) and Ecobulb (as purchaser) entered into an agreement under which
Ecobulb agreed to purchase the assets and assume certain liabilities of each the vendors (“Ecobulb
Asset Sale Agreement”).
The assets that are subject to the Ecobulb Asset Sale Agreement are specified stock, intellectual
property, contracts and physical assets belonging to the vendor companies.
The purchase price of the assets to be sold to Ecobulb was agreed between the parties to be $62,173
as at 1 April 2018 (based on stock values of $41,427 as at that date), with an adjustment to be applied
for reduction in stock (due to sales) between that date and the settlement date. By way of example,
as at 31 October 2018, the stock value was $13,868, so the purchase price as at that date would have
been $34,614 (being $62,173, less the difference between $41,427 (stock values as at 1 April) and
$13,868 (stock values as at 31 October)). The purchase price will further reduce to reflect any further
stock sales taking place prior to the settlement date. All amounts exclude GST. It is proposed that the
purchase price received under the Ecobulb Asset Sale will be used to meet the liabilities of the EML
Group.
The Ecobulb Asset Sale is conditional on shareholder approval.
In assessing the fairness of the Ecobulb Asset Sale, shareholders should consider section 2 of the
Independent Report.
EML Intercompany Loan Forgiveness
The Company proposes that, conditional on shareholder approval, any intercompany loan balances
owing between the Company on the one hand and EML Subco, Intellectual Property Energy Mad
Limited, Energy Mad Build Limited, EcoSmartHome Limited or Energy Mad US LLC on the other hand
be forgiven at or around the time of Completion. The EML Intercompany Loan Forgiveness is one of
the pre-conditions to Completion under the Acquisition Agreement.
3557673 v19 16
The intercompany loan balances in respect of amounts owing to the Company at or around the time of
Completion are estimated to total $6,738,066. It is estimated that no amounts will be owing by the
Company to the other companies in the EML Group at or around the time of Completion.
EML Subco Distribution
Immediately prior to Completion, the Company will undertake a restructure of the Company's
subsidiaries, whereby the Company will transfer all of its shares in Intellectual Property Energy Mad
Limited, Energy Mad Build Limited, EcoSmartHome Limited and Energy Mad US LLC to EML Subco
("EML Restructure"). Upon completing the EML Restructure, EML Subco will effectively hold all of
the remaining assets of the business of EML.
At Completion, EML will make an in-specie distribution of all of the shares in EML Subco to EML
shareholders on a pro rata basis ("EML Subco Distribution").
The effect of the EML Subco Distribution for shareholders is that, following completion of the
Acquisition, they will hold shares in two companies without paying any new money:
• The Company: Shareholders will continue to hold shares in the Company, although following
Completion those shares will represent a materially smaller percentage shareholding in the
Company (approximately 3%) than they do currently. Following Completion, the Company will
own the Acquired Shares and the business currently operated by PaySauce.
• EML Subco: Shareholders will receive shares in EML Subco, which will give shareholders a
percentage shareholding in EML Subco equivalent to their percentage shareholding in the
Company on the Record Date (5:00pm on 7 December 2018). Following the proposed
restructure outlined above, EML Subco will be the direct holding company of Intellectual
Property Energy Mad Limited, Energy Mad Build Limited, EcoSmartHome Limited and Energy
Mad US LLC.
The Board intends to wind up and liquidate EML Subco following the Completion. The Board does not
expect there to be any distribution available to shareholders from EML Subco's liquidation.
The Acquisition and the issue of Consideration Shares
On 9 August 2018, the Company entered into the Acquisition Agreement to acquire the Acquired
Shares from the Vendors for $10 million.
The following is a summary of the material commercial terms under the Acquisition Agreement.
Consideration for the Acquired Shares
The Consideration agreed under the Acquisition Agreement for the Acquired Shares is $10 million.
The Consideration for the Acquisition will ultimately be satisfied by the issue of 5,667,706,766 fully
paid ordinary shares in the Company ("Consideration Shares") to the Vendors, at an issue price of
0.18 cents per share (rounded), which PaySauce has advised the Company are to be split between
the Vendors on a pro-rata basis (based on the current shareholdings in PaySauce).
As a result of the issue of the Consideration Shares, the Vendors will hold approximately 97% of the
shares in the Company, and Shareholders will hold approximately 3% of the shares in the Company.
Further information on the reasonableness of the Consideration for the Acquired Shares (referred to
as the "Purchase Price" in the Independent Report) is in section 7 of the Independent Report.
3557673 v19 17
Issue Price
The issue price for each Consideration Share is 0.18 cents (rounded, being the agreed Company
value of $310,243 divided by the current number of shares in the Company of 175,836,635). The
Board believes that the issue price of 0.18 cents (rounded) represents fair value to the Company
taking into account the following considerations:
• The issue price for the Consideration Shares was negotiated between the Board and
PaySauce; and
• With an anticipated capital base of 175,836,635 shares on issue as at the date of the
completion of the Acquisition, and immediately prior to the issue of the Consideration Shares,
the issue price of 0.18 cents (rounded) effectively values the Company at approximately
$310,243, which, in the Board's opinion represents a fair valuation of the Company as a listed
vehicle having regard to the Company's current financial position and prospects, including the
current cash position of the Company, and the intangible value of the Company as a "listed
shell".
The Consideration Shares issue price represents a discount of 89% to the recent volume weighted
average price of the Company. However as outlined in further detail at section 8 of the Independent
Report, in Simmons' opinion the current share price for the Company reflects a heavy speculative
element and is not necessarily reflective of the fair market value of the shares. Simmons considers the
issue price of 0.18 cents (rounded) per share to be reasonable, as it significantly exceeds the asset
backing of the shares in the Company.
Conditions
Completion of the Acquisition (and the other Transactions) is conditional on (among other matters):
• approval of the shareholders at the Meeting; and
• the Special Division granting the Company any waivers sought from the requirements under the
NZX Listing Rules.
Any of the conditions are capable of being waived by agreement between the Company, the Founders
and the Vendors' Representative.
Completion of the Acquisition
The intended date for completion of the Acquisition is 21 December 2018 unless a deferral is required,
for example to enable all conditions under the Acquisition Agreement to be satisfied.
If all of the Resolutions are approved, the Consideration Shares shall be issued by the Company to
the Vendors contemporaneously with completion of the Acquisition.
The long stop date by which all of the conditions set out under the Acquisition Agreement must be
satisfied (unless the Company and PaySauce agree otherwise) is 31 December 2018. If all of the
conditions are not satisfied by that date then the Company, the Founders, or the Vendors'
Representative may terminate the Acquisition Agreement.
On completion of the Acquisition, in addition to the sale of the Acquired Shares to the Company:
• the Board will be replaced with appointees of PaySauce, comprising Asantha Wijeyeratne, Andrew
Barnes, Gavin Thompson, Mandy Simpson and Nick Lewis; and
3557673 v19 18
• the Company will change its name to "PaySauce Limited".
Warranties and indemnities
Under the Acquisition Agreement, each of the Company, EML Subco, the Founders, the Vendors, and
the Vendors' Representative provide a limited set of warranties and indemnities, including as to the
accuracy of the information provided to each prior to entering into the Acquisition Agreement.
Each party's total liability under these warranties and indemnities is limited to claims brought within 18
months of completion of the Acquisition and to an aggregate amount of $310,243.
Funding of the transaction costs associated with the Transactions
The Company has negotiated with PaySauce for PaySauce to fund the Company's costs associated
with the Transactions, subject to the qualification below. These costs include Simmons' fees, the
costs of preparing the Profile, NZX fees, registry fees, the costs of convening and holding the Meeting,
directors' fees, and legal and accounting fees.
It is envisaged that the quantum of the costs of the Transactions will be approximately $250,000.
PaySauce paid an initial sum of $100,000 to the Company on 6 March 2018. Once this amount has
been spent or committed in the manner agreed between the parties, and the Company has provided
evidence of such expenditure, PaySauce will pay further amounts to the Company (up to an aggregate
cap of $250,000) on production of a tax invoice addressed to PaySauce together with evidence of
costs incurred. These costs will be paid by PaySauce within 10 business days of the date of receipt by
PaySauce of EML tax invoices for the respective costs incurred.
The amounts paid by PaySauce will constitute an unsecured interest free loan by PaySauce to the
Company. If the transaction proceeds that loan will be repayable on demand to PaySauce (which will
be a subsidiary of the Company) at any time following completion of the Acquisition.
If the Transactions do not proceed (but subject to the paragraph below), the Company will, in full and
final settlement of the loan, provide to PaySauce the benefit of, and its title to, the reports and work in
progress on which the advanced funds have been expended.
If the Transactions do not proceed because:
(i) the Company's shareholders vote against any of the Resolutions; or
(ii) the Company terminates the Transactions without cause; or
(iii) the Founders or Coulthard Barnes Capital Limited terminates the Acquisition Agreement in
accordance with its terms as a consequence of a material breach by the Company of the
Acquisition Agreement,
then, in addition to PaySauce obtaining the benefit and title to the reports and work in progress, the
loan will convert to an unsecured interest free loan, repayable by the Company over a 36 month term.
Funding of EML Group creditors
PaySauce has agreed to fund the payment of outstanding creditors of EML and its subsidiaries
following Completion.
Subject to Completion occurring:
3557673 v19 19
• certain agreed outstanding debts of EML as at Completion will be funded by PaySauce
following Completion; and
• PaySauce will guarantee the payment of certain agreed outstanding debts of EML Subco and
Intellectual Property Energy Mad Limited as at Completion.
The Board estimates the total of the outstanding debts of EML as at Completion to be funded by
PaySauce, and the debts of EML Subco and Intellectual Property Energy Mad Limited guaranteed by
PaySauce (together, the "Estimated EML Debt"), to be $576,339.18 as at the date of this Notice.
Adoption of New Constitution
The Company adopted its current constitution on 13 July 2011. The Company considers the current
constitution requires replacing in order for the Company to:
• comply with current market practice and replace references to legislation no longer in force with
the relevant provisions;
• meet the requirements of the Australian Securities Exchange Listing Rules (ASX Listing Rules) in
the event that the Company decides in the future to apply to dual list on the ASX.
Accordingly, the Company proposes to revoke its current constitution, and adopt the New Constitution.
If there are any provisions in the New Constitution that are inconsistent with the NZX Listing Rules
relevant to the Company, the NZX Listing Rules will prevail (also see below regarding treatment of
inconsistencies between the New Constitution and the ASX Listing Rules).
Key changes
The principal changes proposed by the New Constitution from the provisions of the Company's current
constitution are:
• Clause 2.6 incorporates the ASX Listing Rules into the New Constitution by reference (should the
Company wish to dual list in the future). This means that if the Company applies to be listed on
the ASX, it will not need to further amend its constitution and, once listed:
o the Company will be subject to the ASX Listing Rules; and
o where there is a conflict between an ASX Listing Rule and an NZX Listing Rule, the Directors
must take all reasonable steps to obtain a waiver of the inconsistent ASX Listing Rule from the
ASX.
While the Company has no current intention to list on the ASX, it considers it prudent to provide for
this flexibility in the New Constitution now, to enable the Company to pursue such a listing in the future
should it so wish. The Special Division has approved the New Constitution for the purposes of NZX
Listing Rule 6.1.1. However, the Special Division does not take responsibility for any statement
contained in this Notice of Meeting.
Availability
A full copy of the New Constitution is available online on the Company's website at
http://www.energymad.com/Investors.
A copy of the New Constitution can also be viewed at Link Market Services Limited's Auckland office
at Level 11, Deloitte Centre, 80 Queen Street, Auckland 1010, New Zealand or its Ashburton office at
3557673 v19 20
138 Tancred Street, Ashburton 7740, New Zealand, or obtained upon request by emailing
enquiries@linkmarketservices.com.
A copy of the NZX Listing rules is available on NZX’s website at nzx.com.
Appointment of New Directors
The constitution of the Company and the Listing Rules require there to be at least three directors of
the Company, two of whom must be resident in New Zealand, and two of whom must be independent
directors (as that term is defined in the Listing Rules).
It is anticipated that following completion of the Acquisition:
• Each of the existing directors of the Company – being, David Jarman, Aidan Johnstone and
Brent Wheeler - will resign from the Board; and
• Asantha Wijeyeratne, Andrew Barnes, Gavin Thompson, Mandy Simpson and Nick Lewis will
be appointed to the Board of the Company.
PaySauce considers that following the completion of the Acquisition, Mandy Simpson and Nick Lewis
will be independent directors of the Company.
Biographies for each of Asantha Wijeyeratne, Andrew Barnes, Gavin Thompson, Mandy Simpson and
Nick Lewis are provided below.
Asantha Wijeyeratne QSM – Director (Non-Independent)
Asantha moved to New Zealand in his twenties and built a number of successful businesses prior to
founding New Zealand’s largest SME payroll provider, SmartPayRoll, with software licenced from
Datacom. He sold that business due to technical limitations which prevented SmartPayRoll from
responding rapidly to customer needs. He founded PaySauce to bring a fresh approach to payroll
software and revolutionise the way SME owners pay staff and manage employment obligations.
Asantha’s vision and success in the payroll industry are critical to PaySauce’s early access to capital,
recruitment of critical team members, and customer-first philosophy.
Andrew Barnes – Director (Non-Independent) / Chairman
Andrew has a track record of market-changing innovations and the digitisation of various industries.
Andrew is the founder of Perpetual Guardian and Managing Director of Complectus.
Andrew was previously a director and founder of Just Wills Holdings Limited, a UK-based will writing
and estate planning business. Prior to this, he was CEO of Bestinvest, a US$5.7 billion, UK-based
investment management and advisory company; leading the sale to private capital in 2007, and was
managing director of Australian Wealth Management Limited, a major Australian wealth management
and trustee business which he led to IPO in 2005. Andrew was also Chairman of realestate.com.au
Limited (now REA Group) which he led to IPO in 1999, and an Executive Director of Macquarie Bank.
Andrew holds an MA from Selwyn College, Cambridge and an ACIB (UK), and has attended the
Program for Management Development at Harvard Business School.
Gavin Thompson – Director (Non-Independent)
Gavin is the founder and a director of Catalyst IT, New Zealand’s largest open-source IT service
provider. He has over 25 years’ experience in developing software systems in the manufacturing,
engineering, financial, and government sectors. This experience is critical in advising on technical
matters as PaySauce scales.
3557673 v19 21
Mandy Simpson – Independent Non-Executive Director
Mandy Simpson is a director, consultant and keynote speaker with a focus on the business and
human impacts of technology. Over the past decade, Mandy has held a number of senior executive
roles in New Zealand including Chief Financial Officer at Fronde and Chief Operating Officer at NZX.
Mandy is a blockchain and cryptocurrencies faculty member at Singularity University, a US think tank
exploring the opportunities and implications of exponential technologies, and a director at Punakaiki
Fund, a company investing in high growth New Zealand companies.
Originally from the UK, Mandy has a law degree from Cambridge University. She is a Fellow of the
Institute of Chartered Accountants in England and Wales, a member of the New Zealand Institute of
Directors and a member of New Zealand Global Women.
Nick Lewis – Independent Non-Executive Director
Nick currently chairs the board of Mojo Coffee, and is on the boards of renewable electricity generator
Pioneer Energy and CarboNZero-certified energy retailer Ecotricity.
A graduate of Lehigh University in Pennsylvania, US with a mechanical engineering degree, Nick
initially worked in the commercial nuclear power industry before founding a successful data
management firm. On the sale of his business, he became an investment banker at JP Morgan and
CIBC World Markets in New York where he worked on mergers & acquisitions, divestitures, initial
public offerings, bond, bank, and derivatives deals. Nick next took-up the role of CEO of a smart meter
and data management technology company in Wellington, then was the founding CEO of the climate
change website, Celsias.com, before co-founding the financial advisory and institutional stock broking
firm, Woodward Partners.
Nick is an angel investor in early-stage tech companies, and was the first chair of the crowdfunding
website PledgeMe.
EFFECT OF RESOLUTIONS
Effect of Resolutions Passing
Resolution 1 is not interdependent with any of the other Resolutions, meaning that transactions
recorded in the Ecobulb Agreement will be given effect to if Resolution 1 is passed by shareholders,
regardless of whether any of the other Resolutions are passed.
Each of the PaySauce Transaction Resolutions are interdependent, and requires that each of those
Resolutions, as well as Resolution 1, be passed by shareholders in order for the transactions referred
to in the PaySauce Transaction Resolutions be effected. If all of the Resolutions are passed:
• The Ecobulb Asset Sale will be completed.
• The EML Intercompany Loan Forgiveness will be completed.
• The EML Subco Distribution will be completed.
• The Acquisition will be completed, including the Company issuing the Consideration Shares to the
Vendors. The Acquisition and the issue of the Consideration Shares to the Vendors will result in
the backdoor listing of PaySauce through the Company.
• The New Constitution will be adopted for the Company and will come into force on Completion.
• On Completion:
3557673 v19 22
o The essential nature of the Company's business will change from a company which
imports and distributes energy efficient LED and compact fluorescent light bulbs to a
company which provides cloud-based Software-as-a-Service payroll solutions.
o The shareholders will continue to have an interest in the Company and its new
business plans (although their interest will represent a significantly smaller percentage
shareholder in the Company).
1
The shareholders will also receive shares in EML
Subco, which will give shareholders a percentage shareholding in EML Subco
equivalent to their percentage shareholding in the Company on the Record Date.
Following the proposed restructure of the EML Group, EML Subco will be the direct
holding company of Intellectual Property Energy Mad Limited, Energy Mad Build
Limited, EcoSmartHome Limited and Energy Mad US LLC.
o The name of the Company will change to PaySauce Limited (NZX:PYS).
o Each of David Jarman, Aidan Johnstone and Brent Wheeler will resign from the
Board, and Asantha Wijeyeratne, Andrew Barnes, Gavin Thompson, Mandy Simpson
and Nick Lewis will be appointed to the Board.
This Notice of Meeting should be read in conjunction with:
• The Profile, which discloses the particulars of the assets and business plan of the Company if the
Resolutions are passed; and
• the Independent Report which assesses the fairness of the Transactions.
Effect of Resolutions Not Passing
If Resolution 1 is not passed, the Ecobulb Asset Sale and the PaySauce Transactions will not go
ahead. The Company will likely need to offer its New Zealand inventory to another party to sell and its
Australian inventory would likely be sold through a clearing house (also see below the explanation of
the effects of the PaySauce Transactions not going ahead).
If Resolution 1 is passed, but any of Resolutions 2 to 7 are not passed, the Ecobulb Asset Sale will be
completed, but none of the PaySauce Transactions will go ahead. Consequently:
• The Company will not acquire PaySauce and the current business will remain the business of the
Company.
• The Company will be liable to repay to PaySauce the amounts paid by PaySauce to the Company
on account of the Company's costs in connection with the Transactions within 36 months. The
quantum of the costs of the transaction is estimated to be approximately $250,000.
• The current constitution will remain in force and the New Constitution will not be adopted.
• The EML Subco Distribution will not go ahead and EML Subco will continue to be a wholly owned
subsidiary of EML.
• The Company will be unlikely to seek to conduct a transaction of the type contained in this Notice
of Meeting again and the Board considers there is limited likelihood of finding an alternative
counterparty with which to engage in this respect.
1
Refer to Dilution Effect table on page 23 of this Notice of Meeting.
3557673 v19 23
Independent Report
In assessing the merits of the Transactions, shareholders should consider sections 2, 3 and 4 of the
Independent Report. The impact on the control position of the Company as a result of the
Transactions is discussed in section 3.7 of the Independent Report. The implications of the
Transactions if the Resolutions are not approved are set out in sections 2.5 and 3.16 of the
Independent Report.
Change in the essential nature of the Business of the Company
If the Transactions are approved by the shareholders, the Company's business will change from a
business which imports and distributes energy efficient LED and compact fluorescent light bulbs to a
business which provides cloud-based Software-as-a-Service payroll solutions.
PaySauce enables small and medium enterprise owners to pay staff accurately and efficiently using
web, iOS, and Android applications. The services provided by the PaySauce platform includes mobile
timesheets, payroll calculations, banking integration, PAYE filing, labour costing, automated general
ledger entries, and digital employment contracts.
For further information on the Company's proposed new business, please refer to the Profile
accompanying this Notice of Meeting.
Dilution Effect
If Resolution 5 is passed, the issue of Consideration Shares will have the following dilutionary effect
on shareholders:
Total shares on issue prior to the issue of Consideration Shares 175,836,635
Consideration Shares to be issued under Resolution 5 5,667,706,766
Total shares on issue after the issue of Consideration Shares 5,843,543,401
Percentage of shares held by shareholders of the Company prior to the
issue of Consideration Shares
100%
Percentage of shares held by shareholders of the Company after the issue
of Consideration Shares
3.0%
Example shareholder: pre-Transactions percentage holding 10%
Example shareholder: post-Transactions percentage holding 0.3%
The issue of shares under Resolution 5 will result in each shareholder's shareholding in the Company
being materially diluted.
The number of shares that each shareholder has in the Company following the issue of Consideration
Shares will remain unchanged, but the percentage of the Company that the shareholder holds will be
materially reduced because of the dilutionary effect of issuing the Consideration Shares.
The Company's share price may also be volatile as the Company's new business operations are
assessed and priced by the market.
3557673 v19 24
When assessing the dilutionary impact of the Acquisition, shareholders should consider section 3.8 of
the Independent Report.
Liquidity risk
As a result of the Acquisition and the issue of Consideration Shares, the majority of the shares on
issue will not be widely held and there will be reduced liquidity in the shares.
Major shareholders
Following the issue of Consideration Shares, the major shareholdings in EML are likely to be:
• the Wijeyeratne Persons, who together will hold approximately 35.74% of the shares in the
Company;
• the Barnes Persons, who together will hold approximately 24.01% of the shares in the
Company; and
• Gibson Sheat Trustees Limited and Troy Tarrant (as trustees of the Gondolin Trust), who will
hold approximately 14.31% of the shares in the Company.
Following the issue of Consideration Shares, the shareholdings of the Company are expected to be:
Shareholders No. of Shares (000s) Percentage (%) rounded to 2
decimal places
Wijeyeratne Persons 2,088,507,476 35.74%
Barnes Persons 1,403,257,187 24.01%
Gibson Sheat Trustees Limited
and Troy Tarrant (as trustees of
the Gondolin Trust)
836,481,557 14.31%
Other PaySauce Shareholders 1,339,460,547 22.92%
Total PaySauce Shareholders 5,667,706,766 96.99%
Total Existing EML
Shareholders
175,836,635 3.01%
Total 5,843,543,401 100.00%
This table assumes that:
• 5,843,543,401 shares will be on issue after the issue of Consideration Shares; and
• no shares are acquired by the Company under the Minority Buy-Out Rights.
Each of the following persons have agreed that they will not dispose of their shareholdings in the
Company following Completion, without the prior written approval of the Special Division, until audited
financial statements for the Company for financial year ended 31 March 2019 are available to the
public:
• Coulthard Barnes (PaySauce) Limited, who will hold 1,169,332,884 shares following Completion;
3557673 v19 25
• Gibson Sheat Trustees Limited (as trustee of the Gondolin Trust) and Troy Tarrant (as trustee and
sole beneficiary of the Gondolin Trust), who will, together, hold 836,481,557 shares following
Completion; and
• the Wijeyeratne Persons, who will, together, hold 2,088,507,476 shares following Completion,
(together, the "Escrowed Persons").
One or more shareholders who are not the Escrowed Persons, including the Barnes Persons (other
than Coulthard Barnes (PaySauce) Limited), may wish to sell some or all of their shareholdings
following Completion. Should this happen then, depending on the level of demand for the shares, the
sale could depress the share price.
The major shareholders of the Company will collectively have a major influence over matters that
require the passing of ordinary resolutions by shareholders unless they are required to abstain from
voting by law and/or the NZX Listing Rules.
When assessing the impact of the Acquisition on liquidity, shareholders should consider section 3.9 of
the Independent Report.
Minority buy-out rights
In respect of those shareholders who vote against any of Resolutions 1, 2, 3 or 4, section 110 of the
Companies Act gives those shareholders certain rights to require the Company to purchase their
shares in the Company, if all of the Resolutions are approved.
The right to have shares purchased must be exercised by the dissenting shareholder giving written
notice to the Company within 10 business days of passing of the Resolutions. Appendix One to this
Notice of Meeting sets out the procedure in more detail.
REQUIREMENTS FOR RESOLUTIONS
The Ecobulb Asset Sale
Shareholder approval for Resolution 1 is required under Listing Rules 9.1.1 and 9.2.1, and section 129
of the Companies Act.
Listing Rule 9.1.1 – Disposal or Acquisition of Assets
The Ecobulb Asset Sale constitutes a transaction to dispose of assets of the Company which has the
effect of changing the essential nature of the business of the Company under Listing Rule 9.1.1(a).
Listing Rule 9.2.1 – Transactions with Related Parties
The Ecobulb Asset Sale also constitutes a Material Transaction with a Related Party under Listing
Rule 9.2.1(a).
For the purposes of Listing Rule 9.2.1:
1. a "Material Transaction" includes a transaction or a series of related transactions whereby an
Issuer sells or otherwise disposes of assets having an Aggregate Net Value in excess of
10% of the average market capitalisation of the Issuer; and
3557673 v19 26
2. a "Related Party" includes a person who is at the time of a Material Transaction, or was at
any time within six months before a material transaction:
(a) a director of the Issuer or any of its subsidiaries; or
(b) an Associated Person of the Issuer or of the persons referred to in (a) above.
Under Listing Rule 1.8.3, a person (first person) is an Associated Person of another person (second
person) if the first person is a company and the second person is a director of the first person.
Chris Mardon is both a shareholder, and the sole director, of Ecobulb. Chris Mardon was also a
director of various Company subsidiaries until 5 May 2017. On the date of the Ecobulb Agreement
(being 5 May 2017):
• Chris Mardon was a Related Party of the Company;
• Ecobulb was an Associated Person of Chris Mardon; and
• Ecobulb was Related Party of the Company by virtue of being an Associated Person of Chris
Mardon.
On the date of the Ecobulb Agreement, the value of the assets to be sold to Ecobulb under the
Ecobulb Asset Sale was valued at approximately $390,798. EML's average market capitalisation on
the date of the Ecobulb Agreement was $2,358,986. Therefore, on the date of the Ecobulb
Agreement, the Ecobulb Asset Sale contemplated in the Ecobulb Agreement constituted a Material
Transaction for the purposes of Listing Rule 9.2.1.
Section 129 of the Companies Act – Major Transaction
The Ecobulb Asset Sale is likely to be a major transaction under section 129 of the Companies Act, as
it may involve the Company indirectly disposing of assets which are more than half the value of the
Company's assets before the disposition.
The PaySauce Transactions
EML Intercompany Loan Forgiveness
Shareholder approval for Resolution 2 is required under Listing Rule 9.1.1 and section 129 of the
Companies Act.
Listing Rule 9.1.1 – Disposal or Acquisition of Assets
The EML Intercompany Loan Forgiveness is likely to be a transaction (or, together with the other
PaySauce Transactions, part of a series of related transactions) which has the effect of changing the
essential nature of the business of the Company under Listing Rule 9.1.1(a).
Section 129 of the Companies Act – Major Transaction
The EML Intercompany Loan Forgiveness is also a major transaction under section 129 of the
Companies Act, as it involves the Company disposing of assets which are more than half the value of
the Company's assets before the acquisition.
EML Subco Distribution
Shareholder approval for Resolution 3 is required under Listing Rule 9.1.1 and section 129 of the
Companies Act.
Listing Rule 9.1.1 – Disposal or Acquisition of Assets
3557673 v19 27
The EML Subco Distribution is a transaction (or, together with the other PaySauce Transactions, part
of a series of related transactions) which has the effect of changing the essential nature of the
business of the Company under Listing Rule 9.1.1(a).
Section 129 of the Companies Act – Major Transaction
The EML Subco Distribution is also a major transaction under section 129 of the Companies Act, as it
involves the Company disposing of assets which are more than half the value of the Company's
assets before the acquisition.
The Acquisition
Shareholder approval for Resolution 4 is required under Listing Rule 9.1.1 and section 129 of the
Companies Act.
Listing Rule 9.1.1 – Disposal or Acquisition of Assets
The Acquisition is a transaction (or, together with the other PaySauce Transactions, part of a series of
related transactions) which has the effect of the Company:
• changing the essential nature of the business of the Company under Listing Rule 9.1.1(a);
and
• acquiring assets having a gross value that exceeds 50% of the average market capitalisation
of the Company under Listing Rule 9.1.1(b).
Section 129 of the Companies Act – Major Transaction
The Acquisition is also a major transaction under section 129 of the Companies Act, as it involves the
Company acquiring assets which are more than half the value of the Company's assets before the
acquisition.
Issue of Consideration Shares
Shareholder approval for Resolution 5 is required under Listing Rules 7.3.1 and 9.1.1 and rule 7(d) of
the Takeovers Code.
Listing Rule 7.3.1(a) – Issue of New Equity Securities
The Company wishes to issue the Consideration Shares in accordance with Listing Rule 7.3.1(a).
Listing Rule 7.3.1(a) provides that shareholders must approve the precise terms and conditions of a
share issue by an issuer and that the share issue must be completed within 12 months of the date that
the shareholders approve the share issue.
The table below sets out the specific disclosures required by Listing Rule 6.2.1 for the issue of
Consideration Shares:
Share Issues
The number of shares to be
issued:
5,667,706,766 fully paid ordinary shares.
3557673 v19 28
Purpose of, and
consideration for, issue:
The purpose of, and the consideration for, the issue of Consideration
Shares are as follows:
• The Company has entered into the Acquisition Agreement
with the Vendors which provides for the Acquisition.
• The Acquisition Agreement provides for, amongst other
matters, the Company to issue the Consideration Shares to
the Vendors in satisfaction of the Consideration for the
Acquired Shares.
Issue Price:
0.18 cents per share (rounded, being the agreed Company value of
$310,243 divided by the current number of shares in the Company of
175,836,635).
3557673 v19 29
Parties to whom shares will
be issued
• Cloud Investments Limited
• Gibson Sheat Trustees Limited and Troy Tarrant (as the
trustees of The Gondolin Trust)
• Wijeyeratne & Co Limited
• Coulthard Barnes (PaySauce) Limited
• Cloud Investments Two Limited
• Kevin McDonald Trustee Limited and Lisa Bentley Spelling
(as the trustees of the Be Brave Trust)
• Ian Stewart Frame and Pamela Anne Frame
• Krishnakumar Guda
• McKay Nominees Limited
• Gavin Thompson
• Robert John Woodward and Tracey Jan Woodward (as
trustees of the Woodward Family Trust)
• Amanda Higgins, Patrick Higgins and Paul Philipson (as
trustees of the Higgins Family Trust)
• Cameron McKeown
• Bruce Gilmour, Lucy Robertshawe and Tim Aitken (as
trustees of the Steyning Trust
• Pradeep Anthony Fernando
• Corey Robert Marsland and Rachel Pike Marsland (as
trustees of the CR and RP Marsland Investment Trust)
• Jennifer Roseanne Sabina Fernando
• Hasitha Liyanaarachchi and Saranga Hitihamillage
• Andrew Bell
• Right Click Universal Limited
• Perrow Capital No.2 Limited
• Hibernian Capital No.2 Limited
• Adrian Blot
• Ben Colgate
• Logan Tyson
• Vicki Taylor
• Lal Teshi
• Lynne Fursdon
• Tina O'Shea
• Rauno Birger Engel, Adithi Pandit and Johnston Lawrence
Trustee Services Limited (as trustee of the Pandit Engel
Family Trust)
• Nick Lewis and Diane Lewis (as trustee of the Lewis Family
Trust)
• Chris and Tracey Pound
• Public Trust Class 10 Nominees Limited
• Will Mahon-Heap
• Anusha Fernando Barnes
• Lance Jones
Time period for the issue:
The issue of Consideration Shares will occur at Completion
Ranking of new shares:
The Consideration Shares will rank equally in all respects with all
other ordinary shares on issue.
3557673 v19 30
Listing rule 9.1.1 – Disposal or acquisition of Assets
The issue of Consideration Shares is a transaction (or, together with the other PaySauce
Transactions, part of a series of related transactions) which has the effect of the Company:
• changing the essential nature of the business of the Company under Listing Rule 9.1.1(a);
and
• acquiring assets having a gross value that exceeds 50% of the average market capitalisation
of the Company under Listing Rule 9.1.1(b).
Takeovers Code – Rule 16
The Company is a "Code Company" under the Takeovers Code. The Takeovers Code restricts
persons and their associates acquiring voting rights (or the control of voting rights) above a 20%
threshold in the Company.
Rule 7(d) of the Takeovers Code permits the Company's non-associated shareholders to approve an
acquisition of voting rights above the threshold by ordinary resolution.
For the purposes of the Takeovers Code, the following Vendors are associates, which together will
hold over 20% of the shares in the Company following the issue of Consideration Shares:
PaySauce shareholders Explanation of Association
•
Cloud Investments Limited ("CIL"); and
• Wijeyeratne & Co Limited ("WCL"),
(together, the "Wijeyeratne Persons")
Asantha Wijeyeratne is the sole director and a
shareholder of both CIL and WCL – therefore,
CIL and WCL are associates of each other for
the purposes of the Takeovers Code.
• Coulthard Barnes (PaySauce) Limited
("CBPL");
•
Perrow Capital No.2 Limited ("Perrow");
•
Hibernian Capital No.2 Limited
("Hibernian");
•
Cloud Investments Two Limited ("CITL");
and
• Anusha Fernando Barnes.
(together, the "Barnes Persons")
Andrew Barnes is the sole director and sole
shareholder of CBPL.
Mark Perrow is the sole director and a
shareholder of Perrow. Patrick Gamble is the
sole director and sole shareholder of Hibernian.
Mark Perrow and Patrick Gamble are the sole
directors of CITL. Perrow and Hibernian are the
sole shareholders of CITL.
Anusha Fernando Barnes has a personal
relationship with Andrew Barnes.
By virtue of the business relationship between
Andrew Barnes and each of Mark Perrow and
Patrick Gamble, and the personal relationship
between Andrew Barnes and Anusha Fernando
Barnes, CBPL, Perrow, Hibernian, CITL and
Anusha Fernando Barnes are associates of
each other for the purposes of the Takeovers
Code.
The table below sets out the specific disclosures required by rule 16(a) and (b) of the Takeovers Code
for the issue of the Consideration Shares.
The date used to determine the particulars set out in the table below is 21 November 2018. The
assumptions on which the particulars in the table below are calculated are as follows:
3557673 v19 31
a) the number of shares on issue immediately prior to the issue of the Consideration Shares is
175,836,635;
b) following the issue of the Consideration Shares, the total number of shares on issue shall be
5,843,543,401; and
c) no Minority Buy-out Rights are exercised.
All percentages have been rounded to two decimal places.
Information required by Rule 16 of the Takeovers Code
The identity of the allottee
2
Number of voting
securities being
allotted
% of the aggregate
of all existing
voting securities
and all voting
securities being
allotted that the
number represents
% of voting
securities held or
controlled by the
allottee after
completion of the
allotment
% of voting
securities held or
controlled by the
allottee and the
allottee's
associates after
completion of the
allotment
Cloud Investments Limited 641,651,402 10.98% 10.98% 35.74%
Gibson Sheat Trustees
Limited and Troy Tarrant (as
the trustees of The Gondolin
Trust)
836,481,557
14.31%
14.31%
14.31%
Wijeyeratne & Co Limited 1,446,856,073 24.76% 24.76% 35.74%
Coulthard Barnes (PaySauce)
Limited
1,169,332,884 20.01% 20.01% 24.01%
Cloud Investments Two
Limited
167,159,292 2.86% 2.86% 24.01%
Kevin McDonald Trustee
Limited and Lisa Bentley
Spelling (as the trustees of the
Be Brave Trust)
131,160,785
2.24% 2.24% 2.24%
Ian Stewart Frame and
Pamela Anne Frame
116,058,480 1.99% 1.99% 1.99%
Krishnakumar Guda 78,724,554 1.35% 1.35% 1.35%
McKay Nominees Limited 90,727,775 1.55% 1.55% 1.55%
Gavin Thompson 88,104,652 1.51% 1.51% 1.51%
Robert John Woodward and
Tracey Jan Woodward (as
trustees of the Woodward
Family Trust)
95,522,987
1.63% 1.63% 1.63%
Amanda Higgins, Patrick
Higgins and Paul Philipson
(as trustees of the Higgins
Family Trust)
52,734,033
0.90%
0.90%
0.90%
Cameron McKeown 52,734,033 0.90% 0.90% 0.90%
Bruce Gilmour, Lucy
Robertshawe and Tim Aitken
(as trustees of the Steyning
Trust
52,484,064
0.90%
0.90% 0.90%
Pradeep Anthony Fernando 64,360,759 1.10% 1.10% 1.10%
Corey Robert Marsland and
Rachel Pike Marsland (as
trustees of the CR and RP
Marsland Investment Trust)
26,367,016
0.45% 0.45% 0.45%
Jennifer Roseanne Sabina
Fernando
37,999,914 0.65% 0.65% 0.65%
Hasitha Liyanaarachchi and
Saranga Hitihamillage
11,572,602 0.20% 0.20% 0.20%
Andrew Bell 10,497,121 0.18% 0.18% 0.18%
Right Click Universal Limited 3,857,534 0.07% 0.07% 0.07%
Perrow Capital No.2 Limited 18,545,836 0.32% 0.32% 24.01%
2
And if different from the allottee, the identity of any person who will become a controller of an increased percentage of voting
securities in the code company as a result of the allotment or allotments.
3557673 v19 32
Information required by Rule 16 of the Takeovers Code
The identity of the allottee
2
Number of voting
securities being
allotted
% of the aggregate
of all existing
voting securities
and all voting
securities being
allotted that the
number represents
% of voting
securities held or
controlled by the
allottee after
completion of the
allotment
% of voting
securities held or
controlled by the
allottee and the
allottee's
associates after
completion of the
allotment
Hibernian Capital No.2
Limited
18,545,836 0.32% 0.32% 24.01%
Adrian Blot 22,255,004 0.38% 0.38% 0.38%
Ben Colgate 37,091,673 0.63% 0.63% 0.63%
Logan Tyson 46,364,591 0.79% 0.79% 0.79%
Vicki Taylor 55,637,509 0.95% 0.95% 0.95%
Lal Teshi 1,854,584 0.03% 0.03% 0.03%
Lynne Fursdon 3,709,167 0.06% 0.06% 0.06%
Tina O'Shea 3,709,167 0.06% 0.06% 0.06%
Rauno Birger Engel, Adithi
Pandit and Johnston
Lawrence Trustee Services
Limited (as trustee of the
Pandit Engel Family Trust)
7,418,335
0.13% 0.13% 0.13%
Nick Lewis and Diane Lewis
(as trustee of the Lewis
Family Trust)
37,091,673 0.63% 0.63% 0.63%
Chris Pound and Tracey
Pound
14,836,669 0.25% 0.25% 0.25%
Public Trust Class 10
Nominees Limited
185,458,365 3.17% 3.17% 3.17%
Will Mahon-Heap 3,709,167 0.06% 0.06% 0.06%
Anusha Fernando Barnes 29,673,338 0.51% 0.51% 24.01%
Lance Jones 7,418,335 0.13% 0.13% 0.13%
The issue price for the voting securities to be allotted
The issue price is 0.18 cents (rounded, being the agreed Company value of $310,243 divided by the
current number of shares in the Company of 175,836,635) for each Consideration Share issued to
each of the allottees. The total consideration for the allotment of the Consideration Shares is $10
million in aggregate.
The consideration will be satisfied upon the completion of the Acquisition. The consideration for the
subscription for the Consideration Shares will ultimately be satisfied by the transfer of the Acquired
Shares to the Company.
Reasons for the allotment
The reasons for the Company issuing and allotting the Consideration Shares to the allottees are as
follows:
• The Company has entered into the Acquisition Agreement with the allottees which provides for
the Acquisition;
• The Acquisition Agreement provides for, amongst other matters, the Company to issue the
Consideration Shares to the allottees in satisfaction of the consideration for the Acquired
Shares.
The allotment of Consideration Shares, if approved, will be permitted under rule 7(d) of the Takeovers
Code as an exception to rule 6 of the Takeovers Code.
The allottees have confirmed that there are no agreements or arrangements (whether legally
enforceable or not) that have been, or are intended to be, entered into between the allottees and any
other person (other than between the allottees and the Company in respect of the matters referred to
in this Notice of Meeting) relating to the allotment, holding or control of the voting securities to be
allotted, or to the exercise of voting rights in the Company.
3557673 v19 33
Independent Report and Directors' Recommendation
The Independent Report accompanies this Notice of Meeting. The directors of the Company
recommend approval of Resolution 5 for the reasons set out in the "Directors' Recommendation" at
the end of this Notice of Meeting.
Dilution effect and liquidity risk
The Vendors are expected to hold or control not less than 97% of the total number of voting securities
on issue in the Company in aggregate immediately following the completion of the Acquisition. The
dilution effect of the issue of Consideration Shares and the liquidity risk of the Acquisition are
discussed at page 23 of this Notice of Meeting.
Adoption of New Constitution
Shareholder approval for Resolution 6 is required under section 32(2) of the Companies Act.
3557673 v19 34
Section 32(2) of the Companies Act
In accordance with section 32(2) of the Companies Act, the adoption of the New Constitution must be
approved by special resolution of shareholders.
Listing Rules
The Special Division has approved the New Constitution in accordance with Listing Rule 6.1.1.
Appointment of New Directors
Shareholder approval for Resolution 7 is required under clause 20.3 of the Company's constitution.
The Listing Rules and (by its incorporation of the Listing Rules by reference) the constitution of the
Company both require there to be at least three directors of the Company, two of whom must be
resident in New Zealand, and two of whom must be independent directors (as that term is defined in
the Listing Rules).
3557673 v19 35
DIRECTORS' RECOMMENDATION – RULE 19 OF THE TAKEOVERS CODE
The directors of the Company unanimously recommend that shareholders vote in favour of Resolution
5 for the purposes of the Takeovers Code.
The reasons for this recommendation are:
1. Shareholders of the Company will retain their shares in the Company which will give them an
interest in a business which provides Software-as-a-Service payroll solutions with strong
growth prospects;
2. Through the EML Subco Distribution, Shareholders will obtain a shareholding in EML Subco
equivalent to their percentage shareholding in the Company as at the Record Date, as well
as retaining their existing indirect proportionate interests in Intellectual Property Energy Mad
Limited, Energy Mad Build Limited, EcoSmartHome Limited and Energy Mad US LLC;
3. Shareholders are put to no cost to receive the outcomes under paragraphs 1 and 2 above;
4. The Company has limited commercial opportunities at present in light of its current financial
position, and this is reflected in the current market for the Company’s shares;
5. The funding arrangement with PaySauce will ensure that certain agreed major outstanding
creditors of EML and its subsidiaries are satisfied following Completion;
6. The proposed Acquisition provides an opportunity to improve the financial position of the
Company;
7. Having regard to the financial resources of the Company, the value attributed to the
Company as a listed shell under the Transactions, and the business opportunity afforded to
the Company with the Acquisition, the Board believes that the proposed Acquisition presents
a credible opportunity for the Company and its shareholders;
8. Having undertaken an extensive consideration of all of its options, the Directors consider that
the proposed Acquisition offers the best of the available alternatives for the Company and
that proceeding will avoid circumstances that would likely to lead to significant financial
distress; and
9. Simmons Corporate Finance Limited, as independent adviser, has:
(a) in section 2.2 on page 9 of the Independent Report opined that the consideration
and the terms and conditions of the Ecobulb Asset Sale are fair to the non-
associated shareholders (being shareholders other than the shareholders who are
Associated Persons of Ecobulb).
(b) in section 3.2 on page 14 of the Independent Report opined that the positive
aspects of the PaySauce Transactions significantly outweigh the negative aspects
from the perspective of the shareholders; and
(c) in section 4.2 on page 29 of the Independent Report opined that the terms of the
PaySauce Transactions are fair and reasonable to shareholders and in the best
interests of the Company given the options reasonably available to the Company at
the current time.
3557673 v19 36
3557673 v19 37
Appendix One
Minority Buy-out Rights
The information in this Appendix contains information about the ability of shareholders, who vote
against any of Resolutions 1, 2, 3, and 4, to require the Company to acquire their shares in
accordance with section 110 of the Companies Act 1993.
Shareholders may require Company to purchase shares
Section 110 of the Companies Act provides that where:
(a) a shareholder is entitled to vote on a major transaction; and
(b) the shareholders of the Company approve the resolution approving the major transaction; and
(c) a shareholder ("Dissenting Shareholder") cast all the votes attached to shares registered in
the Dissenting Shareholder's name and having the same beneficial owner against the
resolution approving the major transaction,
(d) that Dissenting Shareholder is entitled to require the Company to purchase those shares held
by the Dissenting Shareholder in accordance with the provisions of the Companies Act.
Notice requiring purchase
Section 111 of the Companies Act provides that the Dissenting Shareholder may within 10 working
days of the passing of the resolution at the meeting of shareholders give a written notice to the
Company requiring the Company to purchase those shares.
Within 20 working days of the Company receiving the Dissenting Shareholder’s notice, the Board of
the Company must:
(a) agree to the purchase of the shares by the Company; or
(b) arrange for some other person to agree to purchase the shares; or
(c) apply to the Court for an order under section 114 or section 115 of the Companies Act (the
details of which are referred to below); or
(d) arrange, before taking the action concerned, for the special resolution approving the major
transaction to be rescinded in accordance with section 106 of the Companies Act or decide in
the appropriate manner not to take the action concerned, as the case may be; and
(e) give written notice to the shareholder of the Board's decision regarding its proposed course of
action.
Price for shares to be purchased by Company determined
Within 5 working days of the Board giving the notice referred to above in (e), the Board must give to
the Dissenting Shareholder written notice of the price the Company offers to pay for those shares.
The price the Company intends to pay for the Dissenting Shareholders Shares must be a fair and
reasonable price (as at the close of business on the day before the date on which the resolution was
passed) for the Dissenting Shareholders shares, calculated as follows:
(a) first, the fair and reasonable value of the total shares in each class to which the shares belong
must be calculated (the “Class Value”):
3557673 v19 38
(b) secondly, each class value must be adjusted to exclude any fluctuation (whether positive or
negative) in the Class Value that has occurred (whether before or after the resolution was
passed) that was due to, or in expectation of, the event proposed or authorised by the
resolution:
(c) thirdly, a portion of each adjusted Class Value must be allocated to the Dissenting Shareholder
in proportion to the number of shares the Dissenting Shareholders holds in the relevant class.
However, a different methodology from that set out above may be used to calculate the fair and
reasonable price for the shares if using the methodology set out in those paragraphs would be clearly
unfair to the Dissenting Shareholder or the Company. The written notice to the shareholder must state
how (a) to (c) above was calculated or why using this methodology was clearly unfair to the Company
or the shareholder.
The Dissenting Shareholder may object to the price offered by the Board for the shares by giving
written notice to the Company no later than 10 working days after the date on which the Board gave
written notice to the Dissenting Shareholder.
If the Company does not receive an objection to the price, the Company must purchase all the
Dissenting Shareholders shares at the nominated price no later than 10 working days after:
(a) the date on which the Board’s offer is accepted; or
(b) if the Board has not received an acceptance, the date that is 10 working days after the date on
which the Board gave written notice to the shareholder.
The time periods above do not apply if there is a written agreement between the board and the
Dissenting shareholder that specifically sets a different date for purchase of the shares.
Price for shares referred to arbitration if shareholder objects to price
If the Company receives an objection to the price offered for the shares by the Company:
(a) the following issues must be submitted to arbitration:
(i) the fair and reasonable price for the shares, on the basis set out in section 112(2) and
(3) of the Companies Act; and
(ii) the remedies available to the Dissenting Shareholder or the Company in respect of
any price for the shares that differs from that determined by the Board; and
(b) the Company must, within 5 working days of receiving the objection, pay to the Dissenting
shareholder a provisional price in respect of each share equal to the price offered by the
Board.
If the price determined by the arbitrator for the Dissenting Shareholder’s shares:
(a) exceeds the provisional price paid, the arbitrator must order the Company to pay the balance
owing to the Dissenting Shareholder;
(b) is less than the provisional price paid, the arbitrator must order the Dissenting Shareholder to
pay the excess to the Company.
3557673 v19 39
Except in exceptional circumstances, an arbitrator must award interest on any balance owing or
excess to be paid. If a balance is owing to the Dissenting Shareholder, an arbitrator may award to the
Dissenting Shareholder, in addition to or instead of an award of interest, damages for loss attributable
to the shortfall in the initial payment. Any sum that must be paid in accordance with the arbitrator's
decision must be paid no later than 10 days after the date of the arbitrator's determination, unless the
arbitral tribunal specifically orders otherwise.
Timing of transfer of shares
On the day on which the Board gives notice that the Board agrees to the purchase of the Dissenting
Shareholder’s shares by the Company, the legal title to those shares passes to the Company and the
rights of the Dissenting Shareholder in relation to those shares end.
Where the Company agrees to arrange a third party to purchase the shares, the provisions set out
above apply (subject to such modifications as may be necessary) to that purchase of the shares.
Every Dissenting Shareholder whose shares are purchased through a third party pursuant to such an
arrangement is indemnified by the Company in respect of loss suffered by reason of the failure by the
third party who has agreed to purchase the shares to purchase them at the price nominated or fixed
by arbitration, as the case may be.
3557673 v19 40
Glossary
The following terms have the following meaning where used in this Notice of Meeting unless the
context otherwise requires:
"Acquired Shares" means 100% of the ordinary shares in PaySauce.
"Acquisition" means the acquisition of the Acquired Shares.
"Acquisition Agreement" means the Transaction Management Agreement entered into between the
Company, the Vendors, the Founders, the Vendors Representative, and EML Subco.
"average market capitalisation" means, in relation to the Company and the Transactions, the volume
weighted average market capitalisation of the EML shares calculated from trades on the NZX Main
Board over the 20 business days before 9 August 2018, being the day the Acquisition Agreement was
entered into and the Transactions were announced to the market.
"ASX Listing Rules" means the listing rules of the Australian Securities Exchange.
"associate" has the meaning in the Takeovers Code.
"Associated Person" has the meaning in the NZX Listing Rules.
"Barnes Persons" means Coulthard Barnes (PaySauce) Limited, Cloud Investments Two Limited,
Perrow Capital No.2 Limited, Hibernian Capital No.2 Limited and Anusha Fernando Barnes, each of
whom are associates of each other for the purposes of the Takeovers Code.
"Board" means the board of directors of EML.
"Companies Act" means the Companies Act 1993.
"Completion" means completion of the Acquisition.
"Consideration" means the total consideration for the Acquired Shares, being $10 million.
"Consideration Shares" means the 5,667,706,766 of ordinary shares of the Company to be issued to
the shareholders of PaySauce in satisfaction of the Consideration for the Acquired Shares.
"Constitution" means the constitution of the Company.
"Directors" means the directors of EML.
"Ecobulb" means Ecobulb Limited.
"Ecobulb Agreement" means the agreement for the sale and purchase of assets entered into
between the Ecobulb Vendors and Ecobulb dated 5 May 2017.
"Ecobulb Asset Sale" means the sale of the assets of the Company, EML Subco, Intellectual
Property Energy Mad Limited and Energy Mad Build Limited to Ecobulb, in accordance with the
Ecobulb Agreement.
"Ecobulb Vendors" means the Company, EML Subco, Intellectual Property Energy Mad Limited, and
Energy Mad Build Limited.
3557673 v19 41
"EML" or "Company" means Energy Mad Limited.
"EML Group" means, the Company and its subsidiaries prior to Completion, comprising EML Subco,
Intellectual Property Energy Mad Limited, Energy Mad Build Limited, EcoSmartHome Limited and
Energy Mad US LLC.
“EML Intercompany Loan Forgiveness” means the forgiveness of any intercompany loan balances
owing between the Company on the one hand and EML Subco, Intellectual Property Energy Mad
Limited, Energy Mad Build Limited, EcoSmartHome Limited or Energy Mad US LLC on the other hand.
"EML Subco" means Energy Mad NZ Limited.
"EML Subco Distribution" means the in-specie distribution of 100% of the shares in EML Subco by
the Company to the Company's existing shareholders as at the Record Date on a pro rata basis for
zero consideration.
"Escrowed Persons" means Coulthard Barnes (PaySauce) Limited, Gibson Sheat Trustees Limited
(as trustee of the Gondolin Trust), Troy Tarrant (as trustee and sole beneficiary of the Gondolin Trust),
Wijeyeratne & Co Limited and Cloud Investments Limited.
"Estimated EML Debt" means the outstanding debts of EML as at Completion to be funded by
PaySauce, and the debts of EML Subco and Intellectual Property Energy Mad Limited guaranteed by
PaySauce (as explained at pages 18 and 19 of this Notice of Meeting).
"Explanatory Notes" means the explanatory notes that form part of this Notice of Meeting.
"Founders" means Asantha Wijeyeratne and Troy Tarrant, as the "Founders" under the Acquisition
Agreement.
"Independent Report" means the independent adviser's report and the independent appraisal report
prepared by Simmons Corporate Finance Limited, a copy of which accompanies this Notice of
Meeting.
"major transaction" has the meaning in the Companies Act.
"Meeting" means the special meeting of shareholders of the Company to be held on 6 December
2018 at Link Market Services, Level 11, Deloitte Centre, 80 Queen Street, Auckland starting at
10:00am.
"Minority Buy-out Rights" means a shareholder's right to require the Company to purchase that
shareholder's shares in accordance with section 110 of the Companies Act, as discussed in Appendix
One.
"New Constitution" means the proposed new constitution of the Company, approval for which is
sought in Resolution 6.
"Notice of Meeting" or "Notice" means this notice of special meeting, including the Explanatory
Notes.
"NZX" means NZX Limited.
3557673 v19 42
"NZX Listing Rules" means the listing rules of the NZX Main Board and "Listing Rule" means a rule
contained in the NZX Listing Rules.
"NZX Main Board" means the main board equity securities market operated by NZX.
"PaySauce" means PaySauce Limited.
"PaySauce Group" means PaySauce and Right Remuneration Limited.
"PaySauce Transactions" means the transactions contemplated under Resolutions 2 to 7 (inclusive).
"Profile" means the NZX profile prepared by the Company in relation to the Acquired Shares and the
associated business plan to be pursued by the Company following the Transactions, a copy of which
accompanies this Notice of Meeting.
"Proxy Form" means a proxy form in relation to this Notice of Meeting, a personalised copy of which
accompanies this Notice of Meeting.
"Record Date" means 5:00pm on 7 December 2018.
"Resolutions" means the resolutions set out in the Notice of Meeting.
"shareholder" means a shareholder of EML.
"Simmons" means Simmons Corporate Finance Limited.
"Special Division" means the Special Division of the New Zealand Markets Disciplinary Tribunal.
"Takeovers Code" means the Takeovers Regulations 2000 (SR 2000/210).
"Transactions" means the EML Subco Distribution, the Ecobulb Asset Sale, the Acquisition and the
issue of Consideration Shares.
"Vendors" means the shareholders of PaySauce.
"Vendors' Representative" means Coulthard Barnes Capital Limited, as the "Vendors'
Representative" under the Acquisition Agreement.
"Wijeyeratne Persons" means Cloud Investments Limited and Wijeyeratne & Co Limited, who are
associates of each other for the purposes of the Takeovers Code.
---
ENERGY MAD LIMITED
NZX Listing Profile
21 November 2018
Prepared in connection with the proposed acquisition of PaySauce Limited by Energy Mad
Limited.
Prepared pursuant to Listing Rule 7.1.1.
2
1. INTRODUCTION
Proposed Acquisition
Energy Mad Limited ("Company") is currently listed on the NZX Main Board. The Company has
been actively seeking a high-quality acquisition opportunity to present to its shareholders ("EML
Shareholders").
The acquisition which EML Shareholders are being asked to vote on under Resolutions 4 and 5
of the Notice of Meeting that accompanies this Profile is the acquisition by the Company of 100%
of the ordinary shares in PaySauce Limited ("PaySauce") from the existing shareholders of
PaySauce ("PaySauce Shareholders") ("Acquisition").
Prior to the Acquisition, the existing assets of the Company, Energy Mad NZ Limited ("EML
Subco"), Intellectual Property Energy Mad Limited and Energy Mad Build Limited (each a direct
wholly-owned subsidiary of the Company) will be sold to Ecobulb Limited as described in the
Notice of Meeting ("Ecobulb Asset Sale"). The Company will then make an in-specie
distribution of all of the shares in EML Subco to the shareholders of the Company as at 5:00pm
on 7 December 2018 ("Record Date") on a pro rata basis for zero consideration ("EML Subco
Distribution").
The Company, which, by the time of the Acquisition, will be a "shell" company with no other
assets or operations, will then acquire all of the shares in PaySauce from PaySauce
Shareholders for consideration of $10 million, which will ultimately be satisfied by the Company
issuing 5,667,706,766 Shares to PaySauce Shareholders ("New Shares"), at a price of
approximately 0.18 cents
1
per New Share. The Company will then change its name to "PaySauce
Limited".
Following completion of the Acquisition, the Company expects to have 5,843,543,401 Shares on
issue, of which 5,667,706,766 Shares (representing approximately 97% of the total Shares) will
be held by the PaySauce Shareholders, and 175,836,635 Shares (representing approximately
3% of the total Shares) will be held by EML Shareholders.
If the Acquisition proceeds, you will retain your Shares in the Company, which will effectively be
an interest in PaySauce. You will also receive New EML Shares, which will give you a percentage
shareholding in EML Subco equivalent to your percentage shareholding in the Company on the
Record Date.
The Transactions constitute a reverse acquisition or a 'backdoor listing', which occurs where a
private company (PaySauce) is acquired by a listed company (the Company), and the listed
company issues its shares to the private company's shareholders, resulting in the listing of the
business of the private company.
The Acquisition is conditional upon the approval of EML Shareholders at a special meeting to be
held on 6 December 2018. The purpose of this Profile is to assist EML Shareholders to make a
decision whether to approve the Acquisition.
1
The per share price has been rounded to two decimal places and determined by dividing the agreed value of $310,243 by
the current number of shares in the Company (175,836,635).
3
Key Dates
Key dates in relation to the Acquisition are as follows:
Company Shareholder Meeting 10:00am on 6 December 2018
Record Date for EML Subco Distribution 5:00pm on 7 December 2018
Last day for EML Shareholders to exercise Minority
Buy-out Rights
20 December 2018
Completion of the Ecobulb Asset Sale 21 December 2018
The EML Subco Distribution takes effect as per Record
Date entitlements
21 December 2018
Completion of the Acquisition and the issue of New
Shares
21 December 2018
New Shares issued pursuant to the Acquisition expected
to commence trading on NZX Main Board
21 December 2018
About PaySauce
If the Acquisition proceeds, the Company will own PaySauce.
PaySauce is a multiple award-winning
2
cloud-based FinTech business, delivering Software as a
Service ("SaaS") payroll solutions to small and medium sized enterprises ("SMEs"). PaySauce
has a particular focus on agricultural SMEs. PaySauce enables SME owners to pay staff
accurately and efficiently using web, iOS, and Android applications. The PaySauce platform
includes mobile timesheets, payroll calculations, banking integration, PAYE filing, labour costing,
automated general ledger entries and digital employment contracts.
PaySauce was founded in 2015 by Asantha Wijeyeratne, a New Zealand FinTech entrepreneur
with a record of success in building SME service businesses
3
, and Troy Tarrant, a software
architect and developer with a background in creating payroll and human resource solutions.
Their vision is to take the Kiwi-grown PaySauce software platform to businesses around the
globe, helping SME owners spend less time paying staff and more time doing what they love.
PaySauce is further described in Section 2: "PaySauce and what it does" and Section 4:
"PaySauce's financial information".
Key risks affecting PaySauce
If the Acquisition proceeds, you will retain your shares in the Company, which will effectively
become an interest in PaySauce. PaySauce considers that the most significant risk factors that
could affect the value of PaySauce are:
• Loss of key personnel – certain PaySauce employees contribute materially to service
delivery and business performance, including Troy Tarrant, its Chief Technology Officer.
2
PaySauce was the winner of the Financial Innovation category at the 2017 Innovation Awards (under the brand name
Simply Payroll), and was the second place winner in the Launch Category at Fieldays 2018 Innovation Awards.
3
Prior to founding PaySauce, Asantha also founded SmartPayRoll in 2004.
4
Loss of a key employee may adversely impact PaySauce’s ability to meet product
development deadlines.
• Security risks – PaySauce is reliant on Information Technology systems to manage a
large amount of client funds and extensive personal data, which introduces risks
presented by malicious third parties. PaySauce adopts best practice measures, such as
engaging Cloudflare internet security services and outsourced penetration testing, to
mitigate ongoing third party security risks. Any security risks that cannot be mitigated by
PaySauce may have a material adverse effect on PaySauce’s reputation and future sales.
• Interpretation of payroll legislation – PaySauce performs certain employment obligations
on behalf of clients, including calculation and filing of PAYE in accordance with payroll
legislation. Any error in these calculations or failure to complete a material obligation
could adversely impact PaySauce’s reputation and financial performance.
• Change in payroll legislation – the Holidays Act 2003 is currently under review by a
taskforce established by the New Zealand Government. If the ongoing review results in a
successful simplification of the Holidays Act 2003, payroll obligations may become easier
to calculate. Under these circumstances, delivery of payroll services may be simplified,
and PaySauce's services may be less attractive to customers. Simplification of payroll
legislation may also lower barriers to entry in the payroll market and increase competition,
as it becomes easier for competitors to develop payroll software products. Increased
competition may have an adverse impact on revenue growth and customer acquisition.
• Early stage company – as a "start up" business, PaySauce has employed, and is likely to
continue to employ, a growth strategy where spending exceeds revenues, a situation
commonly referred to as "cash burn". If, for any reason, PaySauce experienced a
decreased rate of customer acquisition and revenue growth, PaySauce may need to find
additional funding to finance operations.
This summary does not cover all of the risks of the Acquisition. You should also read Section 5:
"Risks to PaySauce's business and plans" and refer to other places in this Profile that describe
risk factors.
About this Profile
Given the Acquisition will result in a change in the essential nature of the Company, from a
company which imports and distributes energy efficient LED and compact fluorescent light bulbs,
to a company which provides cloud-based SaaS payroll solutions, the Company is required to
prepare this profile document ("Profile") containing all the information prescribed in the Listing
Rules.
This Profile contains important information about PaySauce's business, the industry in which it
operates, financial performance and risks associated with PaySauce's business. Further
information about PaySauce and the Acquisition is available in the Notice of Meeting that
accompanies this Profile, and on PaySauce's website (
www.paysauce.com).
5
Table of Contents
1. INTRODUCTION 2
2. PAYSAUCE AND WHAT IT DOES 8
3. KEY FEATURES OF THE SHARES 26
4. PAYSAUCE'S FINANCIAL INFORMATION 27
5. RISKS TO PAYSAUCE'S BUSINESS AND PLANS 32
6. TAXATION 36
7. WHERE YOU CAN FIND MORE INFORMATION 37
8. CONTACT INFORMATION 38
9. GLOSSARY 39
6
Letter from the chairperson of PaySauce's Board
21 November 2018
Dear Shareholder
My name is Andrew Barnes and, subject to shareholder approval and completion of the proposed
acquisition of the payroll software and SaaS business of PaySauce Limited, I will become the
chair of Energy Mad Limited (to be renamed PaySauce Limited).
I am pleased to present you with this profile document and further information on PaySauce.
PaySauce is a multiple award-winning
4
cloud-based FinTech business, delivering SaaS payroll
solutions to SMEs throughout New Zealand. PaySauce has a particular focus on agricultural
SMEs.
The company was founded in 2015 by Asantha Wijeyeratne, a New Zealand FinTech
entrepreneur with a record of success in building SME service businesses, and Troy Tarrant, a
software architect and developer with a background in creating payroll and human resource
solutions (further information on PaySauce can be found in Section 2: "PaySauce and what it
does" and Section 4: "PaySauce's financial information").
The Proposed Directors believe that a range of genuine organic growth opportunities are
available to PaySauce, including international expansion. The Proposed Directors are excited by
the potential of these opportunities to take PaySauce’s Kiwi-grown FinTech software platform to
businesses around the globe, helping SME owners spend less time paying staff and more time
doing what they love.
The transaction will involve EML acquiring the payroll software and SaaS business of PaySauce,
together with the shares in PaySauce (which will be renamed following the acquisition). In
consideration for this acquisition, EML will issue shares in EML to the current shareholders in
PaySauce. Following completion of the acquisition, the current shareholders of PaySauce will
hold approximately 97% of the shares in EML.
Following the acquisition, EML intends to change its name to PaySauce Limited.
All the existing directors will retire and will be replaced by a new board of directors with in-depth
industry and governance experience. The proven and experienced PaySauce senior
management team will continue in their current positions. Further biographical details can be
found on pages 17 to 19 of this document.
The proposed transaction is conditional upon the approval of EML shareholders at a special
meeting to be held at 10:00am on 6 December 2018.
This document contains detailed information about PaySauce and the payroll software and SaaS
industry in which it operates (including information about risks affecting PaySauce). I encourage
you to read it carefully and seek professional advice should you need to.
The Proposed Directors believe that the PaySauce business provides EML shareholders with an
attractive FinTech investment opportunity. Following the acquisition, your directors will focus on
realising growth opportunities and adding further value for shareholders.
4
PaySauce was the winner of the Financial Innovation category at the 2017 Innovation Awards (under the brand name
Simply Payroll), and was the second place winner in the Launch Category at Fieldays 2018 Innovation Awards.
7
We recommend this proposal to you and look forward to your support.
Yours sincerely
Andrew Barnes
Chairman Designate
8
2. PAYSAUCE AND WHAT IT DOES
Overview
PaySauce is a multiple-award-winning
5
, cloud-based FinTech business, delivering SaaS payroll
solutions for New Zealand SMEs. PaySauce’s technology is accessible on the internet and on
iOS and Android mobile devices. The PaySauce platform provides mobile timesheets, digital
employment contracts, payroll calculations, banking integration, PAYE filing, labour costing, and
automated general ledger entries. PaySauce has grown rapidly to service over 1,000 paying
employers as at the date of this Profile.
Significant market opportunity
In all OECD countries, SMEs constitute over 90% of all businesses by number. New Zealand is
home to over 499,000 SMEs employing 614,000 staff. These SMEs generate 42% of new jobs
annually and an estimated 28% of national GDP.
Unlike many other FinTech systems, payroll software is becoming all but a necessity for SMEs.
Paying staff and Inland Revenue accurately and on time are business-critical functions. However,
SME owners identify payroll compliance as a key employment-related challenge, with New
Zealand ranked 13
th
in the world for payroll complexity. The New Zealand Ministry of Business
Innovation and Employment (“MBIE”) estimates that chronic underpayment of leave entitlements
has affected 700,000 employees with a total cost of over $2 billion. The SME compliance burden
is growing, including as a result of an international shift towards payday filing of tax obligations,
which will increase the frequency of PAYE filing obligations.
SME owners often cannot afford to hire an internal expert to understand and implement
complicated payroll software to stay compliant. Outsourcing payroll processing to an accountant
or book-keeper can be expensive and inefficient, and requires the preparation and delivery of
accurate timesheets and payroll updates to the service provider.
Competitive landscape
The SME payroll services market in New Zealand is mature, but fragmented. Despite the
availability of a variety of software and service offerings, 40% of New Zealand SMEs are still
calculating payroll and filing PAYE manually. The directors of PaySauce ("Directors") believe the
lack of penetration by SME payroll providers can be explained by limitations in existing service
delivery models.
From desktop to SaaS
The international payroll market is dominated by desktop providers. Desktop software is limited in
a number of ways. Subscribers often pay substantial annual licence fees up front. The software
must be installed on a single device, which users must have access to on pay day. If that device
fails, employers may lose critical payroll information. Desktop payroll users often pay for every
software upgrade, including those required by legislative changes. Infrequent updates restrict the
pace of product development. Because data is not held online, support teams for desktop payroll
software cannot view and manipulate client data without relying on third-party software.
5
PaySauce was the winner of the Financial Innovation category at the 2017 Innovation Awards (under the brand name
Simply Payroll), and was the second place winner in the Launch Category at Fieldays 2018 Innovation Awards.
9
By contrast, PaySauce is SaaS, accessible from any device with access to the internet. This
model allows customers to pay staff from wherever they are, giving SME owners greater flexibility
to spend time out of the office on payday. Additionally, as a true SaaS provider, PaySauce
charges a subscription fee, giving PaySauce customers the choice of whether to continue using
the service. Payroll service providers typically display a “sticky” relationship with customers,
meaning clients infrequently change providers. Typically, less than 0.5% of customers switch
from PaySauce to another payroll software service provider each month.
Because PaySauce is delivered online, updates and improvements can be developed and
released more rapidly. SaaS support teams can see customer data in real time and offer
improved support. The Proposed Directors are confident the SaaS model will rapidly replace
desktop software in the payroll services market.
Online competitors
While successful New Zealand-grown FinTech businesses and SaaS platforms like Xero and
Vend are well established in categories such as accounting and point of sale software, no SaaS
payroll provider has achieved mainstream adoption in New Zealand. New Zealand’s most popular
SaaS payroll provider has less than 15% market share.
A small number of competitors in New Zealand and abroad offer online payroll software with
limited mobile functionality. The feature sets and delivery models available have remained
broadly consistent for the past decade, similar to the accounting software market prior to Xero’s
entry in 2007. In only a three-year lifespan, PaySauce has surpassed existing products in the
SME market with key features such as complete smart-device functionality and digital
employment contract delivery.
Desktop and limited online solutions ignore the modern realities of software and internet use.
Internationally, SME owners are spending less time on their computers and more time on their
phones, with smartphone ownership having increased sharply over the past decade. The
Proposed Directors believe the future of SME computing is FinTech; online, and mobile. For this
reason, PaySauce was also designed to process complete pay runs from iOS and Android mobile
applications. While many payroll providers offer mobile applications with limited features, the
Proposed Directors are not aware of any other payroll provider in the world that lets business
owners prepare and complete a full pay run on iOS and Android applications, including banking
and tax filing obligations.
Technical advantages
The Directors believe the lack of continued innovation in the payroll market can be partly
attributed to certain technical restrictions faced by aging products built in dated environments.
PaySauce has been created in a “Cloud 2.0” environment. Instead of renting server space at
fixed levels, which incurs fixed costs and needs to be upgraded as a business expands,
PaySauce accesses on-demand computing power, which increases and decreases to match
customer demand placed on the system. This keeps fixed costs low while allowing scalable
computing power as the business grows.
In 2016, Xero completed a major data migration to Amazon Web Services to take advantage of
Cloud 2.0 architecture. Leading industry figures expect all successful business software vendors
to migrate to Cloud 2.0 in coming years. This transition enables software providers to deliver
services globally without incurring significant infrastructure costs.
10
Further advantages of Cloud 2.0 include the ability to develop, test, and release product updates
rapidly, as well as increased service availability for customers, and improved security. PaySauce
Co-founder and Chief Technology Officer, Troy Tarrant, has capitalised on these advantages to
deliver what the Proposed Directors believe to be market-leading payroll technology in less than
four years with a small development team. PaySauce is well placed to continue to innovate
rapidly and deliver improved business efficiency to SME owners around the world with smart,
mobile payroll technology.
PaySauce Products and Services
Mobile timesheets
SME owners in New Zealand rely predominately on paper forms for collecting information from
staff on hours worked and jobs completed. This information is critical to calculating accurate
payroll, and is often used for costing labour to internal departments or client accounts and
generating invoices. Collating and processing this information is often time consuming and prone
to human error. PaySauce offers a digital, mobile-based timesheet solution that allows mobile
workforces to enter activity on-the-go for review and approval by managers and business owners.
Digital timesheet solutions offer real-time visibility, greater administrative efficiency, and improved
accuracy.
Payroll calculations
Many employers struggle to accurately calculate payroll.
6
This issue is exacerbated for SME
owners, who often do not have the time or expertise to dedicate to a complete understanding of
how to calculate wages, PAYE, KiwiSaver, holiday pay, and other statutory requirements. These
challenges are pressing in New Zealand due to the complexity of payroll legislation. By
outsourcing these responsibilities to a product or service that enables timely, accurate payroll
calculations, SME owners ensure compliance and free up time to dedicate to other important
matters. PaySauce’s web and mobile applications provide complete and accurate payroll
calculations.
Integrated banking
Having accurately calculated their payroll, employers need to make payments to staff. Traditional
desktop payroll software generates a banking file which must be uploaded by the user to an
internet banking portal to complete payments. PaySauce integrates directly with customer bank
accounts via direct debit to eliminate an additional step in the payroll process.
PAYE payment and filing
Along with paying PAYE to Inland Revenue, New Zealand employers are obliged to file the
“Employer Monthly Schedule” and “Employer Deductions” forms each calendar month. For many
employers, the technical nature of these documents presents a significant challenge. Employers
not using payroll software must prepare and file these documents manually. Thousands of New
Zealand employers fail to make PAYE payments and the associated filings on time, generating
significant financial penalties imposed by Inland Revenue. PaySauce (through its wholly-owned
subsidiary, Right Remuneration Limited, a registered “PAYE intermediary”) prepares and files
these documents automatically, along with making payment to Inland Revenue on behalf of its
customers.
6
Data released by MBIE indicates widespread non-compliance with payroll legislation, in particular the Holidays Act 2003
(for more information, refer to the following: www.mbie.govt.nz/info-services/employment-skills/payroll-compliance-with-the-
holidays-act).
11
Labour costing
Many New Zealand employers need to track additional information alongside hours worked,
including tasks, locations, and client or job codes. Where manual timesheets are used, this data
must be tallied and manually entered into payroll solutions and accounting software. By using an
integrated timesheeting solution such as PaySauce, employers are able to save administrative
time and improve accuracy by removing the need for additional human intervention. PaySauce
customers can also report on this data in a flexible manner for other purposes, including
establishing profitability on certain tasks or jobs, generating invoice data like hours worked at a
particular site, or allocating labour cost to particular offices or locations.
Automated general ledger entries
Accurate accounting processes are critical to SME success. Employers using manual or desktop
payroll solutions must then transmit this data to accounting records with manual data entry or file
uploads with limited capability. PaySauce integrates directly with market-leading accounting
software such as Xero and CashManager Rural for automated general ledger entries. Labour can
be costed to primary expense categories, such as wages, PAYE, KiwiSaver, and Employee
Superannuation Contribution Tax, as well as more in-depth tracking codes broken down by
business unit, office location, job number, or other categories. This integration saves PaySauce
customers additional administrative time and improves accuracy.
PaySauce’s product is compelling to SMEs
PaySauce’s payroll platform is different to most SME payroll systems available in the following
ways:
• true mobility – the Directors believe that PaySauce is the first payroll solution in the
world to allow SME owners to process and complete an entire pay run, including banking
and tax filing obligations, from any location using only a smart device;
• beyond payroll – inclusion of digital timesheets and employment contracts within the
platform reduces paper-based administrative tasks and opportunities for human error;
• full service – PaySauce (through its wholly-owned subsidiary, Right Remuneration
Limited) is registered with Inland Revenue as a PAYE intermediary, making payments to
staff and Inland Revenue as appropriate, and completing all PAYE filing obligations on
behalf of customers;
• cloud SaaS – customers are no longer reliant on a single device with installed software,
allowing greater flexibility and security of records;
• cost effective – pay-as-you-go model eliminates substantial, industry-standard, up-front
licence fees and gives customers greater choice;
• confidence – sweeping audits by the Labour Inspectorate, MBIE’s employment
compliance investigative arm, have indicated broad non-compliance with payroll
obligations. These failures have significant potential consequences for employers. The
PaySauce platform and support services give customers confidence in accurate
compliance.
12
PaySauce has already generated momentum
Since its establishment in 2015, PaySauce has:
• raised capital of $2 million from the founders, Directors, and close associates of the
Directors (and PaySauce proposes to raise a further $1.145 million of capital as part of
the PaySauce Funding Initiatives, as described at page 31 of this Profile);
• developed an SME software platform delivering payroll solutions in a small fraction of the
time it has taken competitors to establish their software services;
• recruited strong governance and management teams with the skills to grow PaySauce
internationally;
• established critical relationships with international software providers, chartered
accountancy firms, retail banks, industry partners, and other businesses which the
Proposed Directors believe will help accelerate market penetration and international
expansion;
• onboarded over 1,000 paying customers as at the date of this Profile (as shown in the
graph below); and
• generated strong customer satisfaction, indicated by a Net Promoter Score (being an
index which measures the willingness of customers to recommend a company's products
or services to others) of 60 in June 2018, comparing favourably to the international
average score of 41 for SaaS, business-to-business products.
13
The quarters referenced above are to the quarters of a calendar year commencing 1
January and ending 31 December. The figures used in the above graph have not been
determined in accordance with GAAP. Full GAAP-complaint financial statements for FY16,
FY17 and FY18 for the PaySauce Group are available on PaySauce's website
www.paysauce.com. Please also read the note under Section 4: "PaySauce's Financial
Information" explaining the information used to calculate the financial measures in the
above graph.
2017 saw rapid growth in both customer numbers and annualised recurring revenue as
PaySauce established itself as the dominant payroll provider to the dairy sector in New Zealand.
The PaySauce customer base grew by 473% during the course of 2017, with the majority of
these customers operating dairy farms.
Payday Filing
Inland Revenue is making changes to the way New Zealand employers report on PAYE collected.
The Proposed Directors believe this will drive additional SME owners to consider moving to a
complete SaaS payroll solution.
Business owners paying over $50,000 in PAYE and Employer Superannuation Contribution Tax
per year are required by Inland Revenue to move to ‘payday filing’ on or before 1 April 2019.
From that date onwards, affected SME owners will be required to file PAYE within two business
days of payday. For SME owners filing their own PAYE reports, this means an increase in
administrative burden and an increased risk of late filing and associated penalties, making them
more likely to select a service like PaySauce.
0
200
400
600
800
1,000
1,200
TOTAL Number of Entities Processing with us
TOTAL Number of Entities Processing with us
$0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
$800,000
$900,000
Quarterly Recurring Revenue Annualised
Quarterly Recurring Revenue Annualised
14
Typically, SME owners choose a payroll software provider and use their services for a lengthy
period. The change to payday filing represents a substantial growth opportunity for payroll
software providers who will meet the new requirements, including PaySauce.
PaySauce automatically completes all PAYE filing obligations on behalf of its customers.
Therefore, existing PaySauce clients will not be affected by the change to payday filing.
Focus on primary industry
PaySauce services customers from a broad range of industries, including retail, hospitality,
construction, manufacturing, and professional services. However, the Directors have elected to
focus primarily on developing the product for use in primary industry SMEs. As at July 2018,
nearly 60% of PaySauce’s customers are primary industry business owners, with the majority of
these in the dairy sector.
New Zealand is home to nearly 70,000 primary industry SMEs. Owners of farms, orchards, and
fishing vessels rarely get into business because they enjoy office work. They are mobile
employers, running their businesses on-the-go. PaySauce, with its uniquely strong mobile
functionality, is particularly well suited to looking after the needs of this large group of business
owners.
Additionally, primary industry businesses are often subject to a high level of scrutiny from the
Labour Inspectorate for compliance with employment law. Inspectors regularly visit farms and
orchards in person to check on compliance, including examining payroll. This close monitoring
has created a strong industry awareness of the importance of accurate compliance. The Directors
believe that primary industry SME owners understand the value of a FinTech system like
PaySauce that ensures accurate payroll.
PaySauce has made a number of product customisations to cater to primary industry employers.
One example is the “minimum wage top-up”. In many industries, salaried employees receive a
consistent pay each week, month, or fortnight, and are not required to track how many hours they
work. In agriculture, salaried staff are required to keep timesheets to ensure that during busy
periods, staff are paid at least minimum wage per fortnight. This requires a “top-up” calculation
during busy periods, for example, during calving in the dairy industry. Dairy farm owners using a
general SME payroll solution need to calculate these top-ups using a spreadsheet or some other
system in addition to their payroll software, creating extra work and further risk of non-
compliance. PaySauce automatically calculates these top-ups and applies them to employee
pays to minimise compliance during the busiest time of year for dairy farmers.
Horticultural employers face similar issues with their “piece rate” staff, who are paid per unit of
work (for example, bins of fruit picked). Employers must demonstrate that staff have been “topped
up” to minimum wage level. This obligation creates additional compliance work during busy
periods featuring huge staff variations. The majority of SME horticultural employers address these
issues with manual paper systems, which create a significant administrative burden. PaySauce’s
custom product “Season” allows for easy data collection in the orchard by supervisors and
automated import to PaySauce for compliant payroll calculations.
Both locally and abroad, primary industry SMEs are experiencing increasing pressures on their
businesses in areas such as water usage, weather events, labour availability, biosecurity, and
increasing regulatory burdens. The Directors are proud to support primary industry, assisting
business owners to stay efficient and focused on high-value tasks. PaySauce will continue to
provide services to SMEs from a broad range of industries, while focusing new developments on
the primary sector. Often, customisations made for agricultural customers suit customers from
other sectors.
15
Looking ahead: Opportunities for growth
The Proposed Directors are confident that PaySauce is well placed to follow the international
success of New Zealand-grown FinTech SaaS businesses such as Xero and Vend.
Internationally, SME owners share many characteristics of Kiwi employers, while international
payroll software markets are less mature than in New Zealand. PaySauce has developed various
payroll modules allowing for calculations to be processed in a number of tax jurisdictions. Once a
strong foundation has been laid in New Zealand, PaySauce intends to establish subsidiaries and
recruit staff in-market to develop its business in international locations. The Proposed Directors
intend to focus on markets with similar primary industry SME characteristics to those found in
New Zealand.
Additionally, PaySauce plans to move beyond simple payroll provision with a range of new
features. The first of these initiatives is a digital contract tool being built in partnership with
Federated Farmers, which will allow agricultural employers to purchase industry-specific
agreements, populate these with relevant details, and distribute them for digital review and
signature by employees or contract partners. Farm owners in New Zealand are often both
employers and landlords, providing accommodation to staff. Often, new staff move from different
regions and countries for their new roles. Because of the complex relationship with staff and the
need for a signed employment contract to be in place prior to the commencement of an
employment relationship, paper contracts are less than ideal. The Directors expect this digital
contracts tool to be released to market prior to completion of the transaction.
The development of the digital contracts tool is the first step in PaySauce’s transition from a
timesheets and payroll provider to true people management software, where employers can cost-
effectively manage a range of administrative tasks related to their employees, replacing paper-
based systems and driving efficiency.
16
Organisational Structure
The current PaySauce Group comprises PaySauce Limited and its wholly-owned subsidiary,
Right Remuneration Limited. As a registered PAYE intermediary with Inland Revenue, Right
Remuneration Limited is responsible for managing customer PAYE payment and filing
obligations. PaySauce Limited is responsible for all other group operations. Following completion
of the Acquisition, PaySauce Limited will become a wholly owned subsidiary of the Company.
The Company will then change its name to "PaySauce Limited", and PaySauce Limited will
change its name to PaySauce Operations Limited.
EML
(to be renamed "PaySauce Limited")
PaySauce Limited (to be
renamed PaySauce
Operations Limited)
Existing PaySauce
Shareholders
New Shares
PaySauce
Shares
Existing
shareholdings
in EML
Existing EML
Shareholders
PaySauce Shares to be acquired under the Transactions
Right Remuneration
Limited
17
Proposed Directors
With effect from completion of the Acquisition, the current directors of the Company will resign
and the following persons will be appointed as directors, leaving the Company with a small,
focused board with a diversity of experience and skills. Asantha Wijeyeratne, Andrew Barnes
and Gavin Thompson are the current directors of PaySauce, and each will be appointed as non-
independent directors of the Company following completion of the Acquisition. Mandy Simpson
and Nick Lewis will be also appointed as independent non-executive directors of the Company
following completion of the Acquisition.
Asantha Wijeyeratne QSM – Director (Non-Independent)
Asantha moved to New Zealand in his twenties and built a number of successful businesses prior
to founding New Zealand’s largest SME payroll provider, SmartPayRoll, with software licenced
from Datacom. He sold that business due to technical limitations which prevented SmartPayRoll
from responding rapidly to customer needs. He founded PaySauce to bring a fresh approach to
payroll software and revolutionise the way SME owners pay staff and manage employment
obligations.
Asantha’s vision and success in the payroll industry are critical to PaySauce’s early access to
capital, recruitment of critical team members, and customer-first philosophy.
Andrew Barnes – Director (Non-Independent) / Chairman
Andrew has a track record of market-changing innovations and the digitisation of various
industries. Andrew is the founder of Perpetual Guardian and Managing Director of Complectus.
Andrew was previously a director and founder of Just Wills Holdings Limited, a UK-based will
writing and estate planning business. Prior to this, he was CEO of Bestinvest, a US$5.7 billion,
UK-based investment management and advisory company; leading the sale to private capital in
2007, and was managing director of Australian Wealth Management Limited, a major Australian
wealth management and trustee business which he led to IPO in 2005. Andrew was also
Chairman of realestate.com.au Limited (now REA Group) which he led to IPO in 1999, and an
Executive Director of Macquarie Bank.
Andrew holds an MA from Selwyn College, Cambridge and an ACIB (UK), and has attended the
Program for Management Development at Harvard Business School.
Gavin Thompson – Director (Non-Independent)
Gavin is the founder and a director of Catalyst IT, New Zealand’s largest open-source IT service
provider. He has over 25 years’ experience in developing software systems in the manufacturing,
engineering, financial, and government sectors. This experience is critical in advising on technical
matters as PaySauce grows.
Mandy Simpson – Independent Non-Executive Director
Mandy Simpson is a director, consultant and keynote speaker with a focus on the business and
human impacts of technology. Over the past decade, Mandy has held a number of senior
executive roles in New Zealand including Chief Financial Officer at Fronde and Chief Operating
Officer at NZX.
Mandy is a blockchain and cryptocurrencies faculty member at Singularity University, a US think
tank exploring the opportunities and implications of exponential technologies, and a director at
Punakaiki Fund, a company investing in high growth New Zealand companies.
18
Originally from the UK, Mandy has a law degree from Cambridge University. She is a Fellow of
the Institute of Chartered Accountants in England and Wales, a member of the New Zealand
Institute of Directors and a member of New Zealand Global Women.
Nick Lewis – Independent Non-Executive Director
Nick currently chairs the board of Mojo Coffee, and is on the boards of renewable electricity
generator Pioneer Energy and CarboNZero-certified energy retailer Ecotricity.
A graduate of Lehigh University in Pennsylvania, US with a mechanical engineering degree, Nick
initially worked in the commercial nuclear power industry before founding a successful data
management firm. On the sale of his business, he became an investment banker at JP Morgan
and CIBC World Markets in New York where he worked on mergers & acquisitions, divestitures,
initial public offerings, bond, bank, and derivatives deals. Nick next took-up the role of CEO of a
smart meter and data management technology company in Wellington, then was the founding
CEO of the climate change website, Celsias.com, before co-founding the financial advisory and
institutional stock broking firm, Woodward Partners.
Nick is an angel investor in early-stage tech companies, and was the first chair of the
crowdfunding website PledgeMe.
Proposed Senior Managers
With effect from the completion of the Acquisition, the Company's senior management team is
proposed to comprise the following:
Asantha Wijeyeratne – Chief Executive Officer / Co-Founder
See previous.
Troy Tarrant – Chief Technology Officer / Co-founder
Troy has over 20 years’ experience in IT development, product design, and architecture. Ten of
those years focused solely on HR and payroll applications, including projects ranging from small
business to government. His technical innovations and lean development philosophy are
fundamental to PaySauce’s rapid development, scalability, and security.
Krishnakumar Guda – Chief Financial Officer
Krishna has a wealth of experience in technology businesses around the globe, including as
Director of Mergers & Acquisitions, Business Unit Global Services, at Ericsson. Krishna’s
background in best-practice technology operations around the globe will be critical to PaySauce’s
international growth.
Warren Choisy – Head of Development
Warren has spent over 10 years as a software developer and solutions architect. His experience
includes projects ranging from small mobile applications, to full enterprise platforms and systems
integration, across diverse domains including payroll, distribution, and HR.
Vicky Taylor – Head of Customer Experience
Vicky has over 20 years’ experience in customer service, including managing large support teams
at online payroll providers. Vicky’s experience with customers from a broad range of industries
has direct impact on PaySauce’s product development, while her commitment to customer
satisfaction helps us deliver elite support services.
19
Rachel Marsland – Operations
Rachel has managed payroll operations for over 15 years, overseeing PaySauce’s relationships
with retail banks, chartered accountancy practices, and Inland Revenue. Rachel ensures
completion of business-critical functions including PAYE intermediary responsibilities.
Logan Tyson – Head of Growth and Partnerships
Logan joined the PaySauce team with a background in corporate law and sales. He is
responsible for customer acquisition through partnership channels including industry bodies, retail
banks, software providers, and chartered accountancy practices.
Ben Colgate – Head of Design
Ben has worked with some of New Zealand’s top SaaS companies and is responsible for
PaySauce’s user experience and interface. Ben’s input is critical in differentiating PaySauce from
its competition.
20
Substantial shareholders and relevant interests held by directors and senior managers,
etc
Current substantial shareholders of the Company
As at 21 November 2018 the following shareholders have a relevant interest in 5% or more of the
shares in the Company.
Substantial product holders prior to the Acquisition
Product holders with relevant
interests in 5% or more of a
class of relevant securities
Legal ownership or other nature of the
interest
Number of
relevant
securities
held
% of relevant
securities held
(rounded to 2
decimal places)
New Zealand Central
Securities Depository Limited
Registered holder. Shares held on behalf
of Smartshares Limited.
133,549,530 75.95%
Smartshares Limited Ability to control the exercise of the right
to vote attached to shares (due to
provisions of the SuperLife Invest Trust
Deed which is available on the Disclose
Register).
133,549,530 75.95%
Christopher Anthony Mardon,
Mardon Family Holdings
Limited
Christopher Anthony Mardon is the
registered holder and beneficial owner of
two separate parcels of Shares totalling
139,050 in his personal capacity.
Mardon Family Holdings Limited is the
registered holder and beneficial owner of
a further 13,481,000 Shares. Christopher
Anthony Mardon is the sole director of
Mardon Family Holdings and is joint
holder of 100% of the shares together
with Vernon Thomas Mardon.
13,620,050 7.75%
Vernon Thomas Mardon and
Kathleen Frances Mardon,
Mardon Family Holdings
Limited
Vernon Thomas Mardon and Kathleen
Frances Mardon are the joint registered
holders of two separate parcels of Shares,
totalling 136,000.
Mardon Family Holdings Limited is the
registered holder and beneficial owner of
a further 13,481,000 Shares. Vernon
Thomas Mardon is joint holder of 100% of
the shares in Mardon Family Holdings
Limited, together with Christopher
Anthony Mardon.
13,617,000 7.74%
21
Substantial shareholders immediately after completion of the Acquisition
The following persons are likely to have a relevant interest in 5% or more of the shares in the
Company (which will change its name to PaySauce Limited) immediately following completion of
the Acquisition.
The date used to determine the particulars set out in the table below is 21 November 2018. The
assumptions on which the particulars in the table below are calculated are as follows:
a) the number of shares on issue immediately prior to the issue of New Shares is
175,836,635;
b) following the issue of New Shares, the total number of shares on issue shall be
5,843,543,401; and
c) no Minority Buy-out Rights are exercised.
Likely substantial product holders after the Acquisition
Product holders with relevant
interests in 5% or more of a
class of relevant securities
Legal ownership or other nature of the
interest
Number of relevant
securities likely to
be held
% of relevant
securities likely
to be held
(rounded to 2
decimal places)
Gibson Sheat Trustees
Limited and Troy Tarrant
(trustees of Gondolin Trust)
Registered holders as trustees of the
Gondolin Trust.
836,481,557
14.31%
Asantha Wijeyeratne,
Wijeyeratne & Co Limited
and Cloud Investments
Limited.
Asantha Wijeyeratne is the sole
director and 50% shareholder of
Wijeyeratne & Co Limited, which will
be the registered holder and beneficial
owner of 1,446,856,073 Shares.
He is also the sole director and sole
shareholder of Cloud Investments
Limited, which will be the registered
holder and beneficial owner of
641,651,402 Shares.
2,088,507,476
35.74%
Minonsari Wijeyeratne 50% shareholder of Wijeyeratne & Co
Limited, which will be the registered
holder and beneficial owner of
1,446,856,073 Shares.
1,446,856,073 24.76%
Coulthard Barnes
(PaySauce) Limited.
Coulthard Barnes (PaySauce) Limited
will be the registered holder and
beneficial owner of 1,169,332,884
Shares.
1,169,332,884 20.01%
22
Current shareholdings held by Proposed Directors and Proposed Senior Managers
As at the date of this Profile, none of the Proposed Directors or Proposed Senior Managers have
a relevant interest in any shares in the Company.
Shareholdings held by Proposed Directors and Proposed Senior Managers immediately
following completion of the Acquisition
The following Proposed Directors and Proposed Senior Managers will likely have the following
relevant interest in the Company immediately following completion of the Acquisition.
The date used to determine the particulars set out in the table below is 21 November 2018. The
assumptions set out at page 21 of the Profile also relate to the particulars in the table below.
23
Interest Holder Legal ownership or other nature
of the interest
Immediately after the Acquisition
Number of
relevant
securities likely
to be held
% of relevant
securities likely to
be held (rounded
to 2 decimal
places)
Asantha Wijeyeratne (Director
and Chief Executive Officer)
Asantha Wijeyeratne is the sole
director and 50% shareholder of
Wijeyeratne & Co Limited, which
will be the registered holder and
beneficial owner of 1,446,856,073
Shares.
He is also the sole director and
sole shareholder of Cloud
Investments Limited, which will be
the registered holder and
beneficial owner of 641,651,402
Shares.
2,088,507,476 35.74%
Andrew Barnes
(Director)
Andrew Barnes will be the sole
director and sole shareholder of
Coulthard Barnes (PaySauce)
Limited, which will be the
registered holder and beneficial
owner of 1,169,332,884 Shares.
1,169,332,884 20.01%
Gavin Thompson (Director) Registered holder and beneficial
owner.
88,104,652 1.51%
Nick Lewis (Independent non-
executive Director)
Registered holder as the trustee of
the Lewis Family Trust
37,091,673 0.63%
Troy Tarrant
(Chief Technology Officer)
Registered holder as trustee of the
Gondolin Trust.
836,481,557
14.31%
Krishnakumar Guda
(Chief Financial Officer)
Registered holder and beneficial
owner.
78,724,554 1.35%
Vicky Taylor
(Head of Customer Experience)
Registered holder and beneficial
owner.
55,637,509 0.95%
Rachel Marsland
(Operations)
Registered holder as trustee of the
CR and RP Marsland Investment
Trust.
26,367,016 0.45%
Ben Colgate
(Head of Design)
Registered holder and beneficial
owner.
37,091,673 0.63%
Logan Tyson
(Head of Growth and
Partnerships)
Registered holder and beneficial
owner.
46,364,591 0.79%
24
Each of the following persons have agreed they will not dispose of their shareholdings in the
Company following completion of the Acquisition, without the prior written approval of the Special
Division of the New Zealand Markets Disciplinary Tribunal, until audited financial statements for
the Company for the financial year ended 31 March 2019 are available to the public:
• Coulthard Barnes (PaySauce) Limited;
• Gibson Sheat Trustees Limited (as trustee of the Gondolin Trust) and Troy Tarrant (as
trustee and sole beneficiary of the Gondolin Trust); and
• Cloud Investments Limited and Wijeyeratne & Co Limited,
(together, the "Escrowed Persons").
The New Shares to be issued under the Acquisition to persons other than the Escrowed Persons
(including those to be issued to Proposed Directors and Proposed Senior Managers) are not
subject to any lock-up or escrow arrangements. Therefore, those persons are free to sell or
otherwise dispose of the New Shares at any time they may wish.
Interests of directors, senior managers, etc
Director remuneration and benefits
Historically, EML agreed to pay fees to directors of $50,000 per annum, and fees to the chair of
$75,000 per annum. However, EML suspended payment of all directors' fees in July 2016 (and,
no directors' fees have been paid in the most recently completed accounting period). Directors'
fees continued to accrue as unsecured obligations from July 2016 until 31 March 2018 (when
directors' fees stopped accruing altogether). The following amounts remain payable to past and
present directors of the Company as at 30 September 2018:
• Brent Wheeler – $50,312.50 for services provided between June 2016 and December
2016;
• David Jarman – $47,916.70 for directors' fees between June 2016 and March 2017;
• Andrew Meehan – AUD$35,560.42 for directors' fees between July 2016 and March
2017; and
• Andrew Plympton – AUD$49,000 for directors' fees between July 2016 and August 2017.
Following completion of the Acquisition, the outstanding directors' fees will be paid by PaySauce
as and when amounts become available, after meeting all other outstanding debts of the
Company.
David Jarman has also been paid a fee of $500 per month from October 2017 and Brent Wheeler
and Aidan Johnstone have been paid on a contracted hourly rate for work undertaken in
connection with the restructuring of EML.
No directors of PaySauce have been paid directors' fees or other remuneration to date. Asantha
Wijeyeratne is paid a salary of $90,000 per annum for his role as Chief Executive.
Once the Proposed Directors become directors of the Company they will receive director
remuneration as set out below for services provided in the Proposed Director's capacity as
director:
25
Director or proposed
director
Total remuneration and value of other benefits
received
Asantha Wijeyeratne Nil (except for salary for role as Chief Executive).
Andrew Barnes Nil.
Gavin Thompson Nil.
Mandy Simpson Expected to receive director remuneration of $30,000
per annum.
Nick Lewis Expected to receive director remuneration of $30,000
per annum.
Employee remuneration over $100,000 per annum
There was one employee of PaySauce, not being a director of PaySauce who, during the period
from April 2015 to the date of this Profile, received remuneration and other benefits in their
capacity as employee, that in value was or exceeded $100,000 per annum. This employee's
remuneration was between $120,000 - $129,999. On 12 November 2018, PaySauce hired an
additional employee who is expected to receive remuneration and other benefits over $100,000
per annum in their capacity as employee (this employee's remuneration is likely to be between
$120,000 - $129,999).
As other employee remuneration has not been determined for FY2020, PaySauce is not able to
determine whether any other employees will receive remuneration and other benefits in their
capacity as employee that in value is or exceeds $100,000 per annum. However, the Proposed
Directors expect that remuneration to be paid to employees in the next financial year will not differ
significantly from the employment remuneration paid by other companies in the same industry
and of the same level of maturity.
Material interests in PaySauce (or any of its subsidiaries)
PaySauce is party to a service agreement with Catalyst.Net Limited ("Catalyst"), a subsidiary of
Catalyst I T Limited, under which Catalyst provides cloud hosting and related infrastructure and
support services to PaySauce. Asantha Wijeyeratne (Proposed Director and co-founder of
PaySauce) and Gavin Thompson (Proposed Director) are joint holders of a 20.34% shareholding
in Catalyst I T Limited. Gavin Thompson is also a director of Catalyst I T Limited. Neither
Asantha Wijeyeratne nor Gavin Thompson are employees of Catalyst or Catalyst I T Limited.
Catalyst IT provides essential hosting and IT services to PaySauce, including enabling the Cloud
2.0 architecture described in detail under the "Technical Advantages" heading above.
26
3. KEY FEATURES OF THE SHARES
Shares
The key features of the Shares will not differ from those that apply to ordinary shares in the
Company or a company generally. Following completion of the Acquisition, there will be no
agreements or arrangements providing for a right, entitlement or option for any person to take
Shares, convertible securities or other securities in the Company and the PaySauce Group.
New Shares
All New Shares issued under the Acquisition will be fully paid ordinary shares in the Company
which rank equally with each other and all other ordinary shares in the Company on issue.
The principal terms of the New Shares to be issued under the Acquisition are identical to those of
the ordinary shares in the Company on issue as at the date of this Profile.
Dividend Policy
PaySauce has not declared or paid any dividends since its incorporation in January 2015. The
Proposed Directors have no plans for the Company (to be renamed PaySauce Limited following
the Acquisition) to pay dividends. Profits, if any, will be reinvested to promote growth of the
PaySauce business. If this strategy is successful, shareholders may benefit from an increase in
the share price.
Dividends are not guaranteed and will be at the discretion of the directors of the Company from
time to time. Dividends will be declared only after the Company meets appropriate solvency
requirements.
27
4. PAYSAUCE'S FINANCIAL INFORMATION
This section contains the following information about the PaySauce Group's historical financial
performance only:
• A table of selected financial information.
• A table of selected financial information, adjusted for the ASB Sponsorship Payment
(defined below).
• Explanatory notes and further information on the selected financial information.
These tables provide key financial information about the PaySauce Group. Full GAAP-compliant
financial statements for FY16, FY17 and FY18 for the PaySauce Group are available on
PaySauce's website www.paysauce.com. If you do not understand this financial information, you
can seek advice from a financial adviser or an accountant.
Note: All of the information used to calculate the financial measures in this section are derived
from PaySauce Group's financial statements that have not been audited by a qualified auditor.
The PaySauce Group is not required under any regulation or law in New Zealand to have its
financial statements audited by a qualified auditor. The Directors note that it is not unusual for
companies in PaySauce's financial position to present unaudited financial statements.
Selected financial information ($)
Financial information FY2016
FY2017
FY2018
Revenues 9,853 130,383 511,680
EBITDA (292,339) (450,776) (711,803)
Net profit after tax (300,620) (549,899) (856,793)
Dividends on all equity securities of
PaySauce
- - -
Total assets 636,038 332,157 490,195
Cash and cash equivalents 97,177 28,753 204,279
Total liabilities 444,606 360,647 205,478
Total debt - - 37,267
Net cash flows from operating activities (204,592) (205,395) (954,424)
Selected financial information (adjusted for the ASB Sponsorship Payment) ($)
Financial information FY2016
FY2017
FY2018
Adjusted revenues 9,853 67,883* 361,680*
Adjusted EBITDA (292,339) (513,276)* (861,803)*
Adjusted net profit after tax (300,620) (612,399)* (1,006,793)*
Dividends on all equity securities of
PaySauce
- - -
Adjusted total assets 291,038* 332,157 490,195
Cash and cash equivalents 97,177 28,753 204,279
28
$0
$10,000,000
$20,000,000
$30,000,000
$40,000,000
$50,000,000
$60,000,000
$70,000,000
Total Value of Gross Payroll processed
TOTAL Value of Gross Payroll processed
Adjusted total liabilities 144,606* 123,147* 117,978*
Total debt - - 37,267
Adjusted net cash flows from operating
activities
(204,592) (505,395)* (954,424)
*The financial measures in the table above denoted with an asterisk are not determined in accordance with GAAP
(for the reasons set out in the explanatory notes below). Full GAAP-compliant financial statements for FY16,
FY17 and FY18 for the PaySauce Group, and a reconciliation of the adjusted financial measures in the table
above with the GAAP-compliant financial statements, are available on PaySauce's website www.paysauce.com.
Please also read the note at the beginning of Section 4: "PaySauce's Financial Information" explaining the
information used to calculate the financial measures in this table.
Explanatory notes
The adjusted financial measures in the adjusted selected financial information table above
exclude a one-off, non-recurring sponsorship payment from ASB Bank of $300,000 ("ASB
Sponsorship Payment"). The Proposed Directors have presented the adjusted information in
the table above as they consider that these adjustments better show the true growth of revenue
from PaySauce Group's business activities between FY16 to FY18. Disregarding the ASB
Sponsorship Payment, PaySauce's revenue growth was steady from FY16 through to FY18. Full
GAAP-compliant financial statements for FY16, FY17 and FY18 for the PaySauce Group, and a
reconciliation of the adjusted financial measures in the table above with the GAAP-compliant
financial statements, are available on PaySauce's website www.paysauce.com.
FY17 and FY18 saw expansion of the PaySauce support, development, design, and marketing
teams, with resulting increases in salary expenses. Along with increased promotional
expenditure, focusing on primary sector events and tradeshows, the increased salary expenditure
has resulted in growing net operating losses.
The quarters referenced above are to the quarters of a calendar year commencing 1
January and ending 31 December. The figures used in the above graph have not been
determined in accordance with GAAP. Full GAAP-compliant financial statements for FY16,
FY17 and FY18 for the PaySauce Group are available on PaySauce's website
www.paysauce.com. Please also read the note at the beginning of Section 4: "PaySauce's
Financial Information" explaining the information used to calculate the financial measures in
the above graph.
The graph above reflects the total value of quarterly client payrolls administered by PaySauce,
including wages, PAYE, KiwiSaver, and other statutory deductions. In July 2018, PaySauce
administered $18.4 million of client payroll funds.
29
$0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
$800,000
$900,000
Monthly Recurring Revenue Annualised (Last month of each Quarter)
The quarters referenced above are to the quarters of a calendar year commencing 1
January and ending 31 December. The figures used in the above graph have not been
determined in accordance with GAAP. Full GAAP-compliant financial statements for FY16,
FY17 and FY18 for the PaySauce Group are available on PaySauce's website
www.paysauce.com. Please also read the note at the beginning of Section 4: "PaySauce's
Financial Information" explaining the information used to calculate the financial measures in
the above graph.
2017 saw rapid growth in both customer numbers and annual recurring revenue as PaySauce
established itself as the dominant payroll provider to the dairy sector in New Zealand. The
PaySauce customer base grew by 473% during the course of 2017, with the majority of these
customers operating dairy farms.
In the dairy sector, each new season officially starts at June 1. Stock and employees often
relocate farms at this time, in preparation for the busiest period of the year on the farm. Over the
past two years, PaySauce has seen rapid client acquisition for the period leading up to, and
during the beginning of, the new season. This acquisition reflects farm owners organising
systems to manage their new staff prior to the busy season.
$0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
$800,000
$900,000
Quarterly Recurring Revenue Annualised
Quarterly Recurring Revenue Annualised
30
The quarters referenced above are to the quarters of a calendar year commencing 1
January and ending 31 December. The figures used in the above graph have not been
determined in accordance with GAAP. Full GAAP-compliant financial statements for FY16,
FY17 and FY18 for the PaySauce Group are available on PaySauce's website
www.paysauce.com. Please also read the note at the beginning of Section 4: "PaySauce's
Financial Information" explaining the information used to calculate the financial measures in
the above graph.
The “sticky” nature of payroll service relationships and low levels of customer churn deliver
predictable monthly revenue for PaySauce. Strong growth in customer numbers explains the
rapid monthly revenue growth in the graph above. 2016 saw slow growth as the business
established a reputation as a reliable processor and began working within the primary sector.
Once this reputation was established, 2017 saw rapid growth which has continued into 2018.
No prospective financial information
There is no prospective financial information in this Profile. The Proposed Directors have,
following careful consideration and after due enquiry, concluded that the provision of prospective
financial statements for the period to 31 March 2019, and the subsequent accounting period to 31
March 2020, may be misleading for potential investors with regard to particulars that are material
to the Acquisition. The Proposed Directors believe that it is not practicable to formulate
reasonable assumptions on which to base prospective financial statements.
The Proposed Director's reasons for this opinion are as follows:
• The Company’s growth to date has been extremely rapid. Although the Proposed
Directors believe that there is no reason that growth may not continue at similar rates, or
possibly even accelerate, it would be imprudent to forecast growth continuing at historic
rates. Equally, given there is no evidence of PaySauce’s growth slowing, it may be
misleading to produce a forecast which assumed growth at anything less than historic
levels;
• There are a number of significant growth opportunities available to PaySauce, both
domestically and abroad. These include new markets, new products, and new clients
within existing markets. Several of these opportunities have the potential to materially
positively affect the growth, profitability, and prospects for PaySauce. However, the effect
of these opportunities on PaySauce’s accounts is not yet certain enough to be accurately
forecast.
Given the inability to reliably determine reasonable assumptions for the periods that would be
covered by prospective financial information, the Proposed Directors are of the view that any
prospective financial statements may be misleading for potential investors in a material manner
because actual operating revenue or expenditure for that period could be materially different from
that forecast.
31
Funding of the transaction costs associated with the Transactions and EML Group
creditors
The Company has negotiated with PaySauce for PaySauce to fund the Company's costs
associated with the Transactions. Subject to completion of the Acquisition, PaySauce has also
agreed to fund the payment of certain outstanding debts owed to creditors of the Company and
its subsidiaries ("Estimated EML Debt") following completion. Further details on these matters
are set out at pages 18 to 19 of the Notice of Meeting.
PaySauce's funding requirements in the future
Given PaySauce's current trading trajectory, the Proposed Directors believe PaySauce is on a
path to profitability. PaySauce's cost base is currently fixed, and annual recurring revenue has
been growing by more than 10 per cent on a monthly basis.
Immediately prior to completion of the Acquisition, PaySauce also proposes to:
• undertake a capital raising whereby $1.145 million will be raised from the issue of
550,481 ordinary shares in PaySauce to certain PaySauce Shareholders and new
investors ("PaySauce Capital Raising"); and
• enter into a loan facility with Coulthard Barnes (PaySauce) Limited ("CBPL"), an entity
related to Andrew Barnes, whereby CBPL agrees to make available up to $500,000 to
PaySauce on an interest free basis, which is repayable on demand by CBPL ("Loan
Facility"),
(together, the "PaySauce Funding Initiatives").
On the basis of its current trading trajectory, and as a result of the PaySauce Funding Initiatives,
the Proposed Directors are comfortable that the Company (through PaySauce) will have sufficient
funds following completion of the Acquisition to fund the transaction costs associated with the
Transactions (including the obligations to fund the payment of outstanding creditors of the
Company and its subsidiaries following completion), as well as PaySauce's ongoing funding
needs without undertaking any further capital raising before the end of financial year 31 March
2019.
Following completion of the Acquisition, the Company will not undertake a capital raise which
would require the production of a product disclosure statement under the Financial Markets
Conduct Act 2013, or which relies on clause 19 of Schedule 1 of that Act, until audited financial
statements for the Company (for the financial year ended 31 March 2019) are available.
32
5. RISKS TO PAYSAUCE'S BUSINESS AND PLANS
This section sets out a description of the circumstances that the Proposed Directors are aware of
that exist or are likely to arise that significantly increase the risk to PaySauce's financial position,
financial performance or stated plans. This section outlines the Proposed Directors' assessment
of the likelihood, nature and potential magnitude of the impact of the circumstances. These risks
are based on the knowledge and assessment of the Proposed Directors as at the date of this
Profile, and it is possible that other risks may emerge over time.
The current directors of the Company have not independently verified the information contained
in this section. The current directors of the Company have, however, reviewed the process
undertaken by PaySauce in preparing the information contained in this section and consider that
the process undertaken was appropriate for a document in the nature of this Profile.
Loss of Key Personnel
What is it? PaySauce operates in a specialised industry, and as a result relies on
key personnel with specialised knowledge. If PaySauce was not able
to retain one or more of those key personnel, this could adversely
affect PaySauce’s operations and profitability.
Why is it significant? PaySauce operates in a number of complex and technical fields, which
require specialised skills and institutional knowledge to provide
customers with a high level of service. As a result, PaySauce’s ability
to execute its growth strategy is dependent on retaining an
experienced management team, as well as employees in key positions
who are sufficiently skilled in their area of operation.
If the Company is not able to retain key personnel, and is unable to
recruit and/or train a suitable replacement in a timely manner, it may
be more difficult for the Company to successfully service its existing
customers and to attract new customers. Significant time and cost may
also be expended to replace specialist skills and knowledge. This
could impact growth in the Company’s customer base, revenues and
market share.
In particular, Chief Technology Officer Troy Tarrant’s contribution to
the PaySauce software platform is significant. Loss of Troy’s input
would necessitate hiring a replacement to fill his position. Loss of any
other senior manager may have a substantial adverse impact on
existing commercial relationships and business operations.
Assessment of the
likelihood, nature and
potential magnitude
PaySauce is implementing a number of measures to develop the skills
of its employees on an ongoing basis, and to spread responsibilities
across expanding software development, support, and business
development teams. The Directors also believe that PaySauce offers
competitive remuneration, an attractive working environment and
proposition for its employees, and is seen as an attractive employer
and a leader in its market.
As a co-founder, Troy will continue to be a significant shareholder
following the Acquisition. Troy has stated his commitment to remaining
in his role as Chief Technology Officer for the foreseeable future,
including through PaySauce’s possible expansion into international
33
markets.
Security Risks
What is it? PaySauce’s business involves the holding of a large amount of client
funds and extensive personal data, and relies heavily on the use of
Information Technology (“IT”) systems to manage these. A successful
cyber security attack could result in the loss of client funds or
unauthorised access to client data, which could have a material
adverse effect on PaySauce's business and particularly on its
reputation to properly hold the assets of others.
Why is it significant? PaySauce holds extensive client data and is responsible for the
holding and payment of client funds to Inland Revenue. PaySauce is
reliant on its systems, processes and the knowledge and skills of its
employees to ensure that client data and funds are appropriately
protected from becoming corrupted, unavailable or made available
inappropriately to other parties.
A successful cyber attack on PaySauce’s IT systems, or unauthorised
access to client data or funds, could cause damage to PaySauce’s
reputation which is founded on its ability to reliably hold others’ data
and property and which could lead to a loss of business and revenues.
This could also lead to litigation against PaySauce if it was found to
have breached its contractual or fiduciary duties in respect of cyber
security.
Assessment of the
likelihood, nature and
potential magnitude
PaySauce implements best-practice cyber security systems and
processes. The technology environment has been independently
reviewed and tested. Independent review is intended to be repeated
annually. PaySauce is also insured against a range of cyber risks.
However, it is possible that the financial exposure arising from one or
more cyber security breaches may exceed the level of insurance
cover.
Interpretation of Payroll Legislation
What is it? The rules which determine how payroll is calculated are contained in
pieces of legislation, including the Holidays Act 2003, the Minimum
Wage Act 1983 and the Income Tax Act 2007. This legislation requires
interpretation. At times, providers of payroll services disagree as to the
calculation of certain payroll components. Any incorrect interpretation
of a piece of payroll legislation by PaySauce staff or systems could
result in an incorrect payroll calculation on behalf of one or more
customers.
Why is it significant? Any errors in payroll calculation could result in incorrect payments
being made to customer staff or Inland Revenue. PaySauce would
likely be required to assist any affected customers in addressing the
errors. This may involve additional payments to, or recovery of funds
from, staff or Inland Revenue. Such errors could result in the loss of
customers, or in one or more customers bringing a claim against
PaySauce.
34
Assessment of the
likelihood, nature and
potential magnitude
PaySauce formulates its interpretation of payroll legislation with the
help of leading industry figures. Additionally, PaySauce’s
interpretations have been externally audited for compliance.
Compliance is reviewed on an ongoing basis as legislation is updated.
Change in payroll legislation
What is it? The Holidays Act 2003 is currently under review by a taskforce
established by the New Zealand Government. This Act determines a
major part of how payroll obligations are calculated. PaySauce helps
customers calculate these obligations. Any change in the Holidays Act
2003, or other relevant legislation, would likely require PaySauce to
update the payroll product.
Why is it significant? If the ongoing review results in a successful simplification of the
Holidays Act 2003, payroll obligations may become easier to calculate.
Under these circumstances, delivery of payroll services may be
simplified, and PaySauce's services may be less attractive to
customers. Any such change may impact revenue growth and
customer acquisition.
Simplification of payroll legislation may also lower barriers to entry in
the payroll market and increase competition, as it becomes easier for
competitors to develop payroll software products. Increased
competition may have an adverse impact on revenue growth and
customer acquisition.
Assessment of the
likelihood, nature and
potential magnitude
Changes to payroll legislation, including the Holidays Act 2003, will
occur at some point in the future. The Proposed Directors are
confident in PaySauce's ability to deliver value and attract customers
under changes to the legislative environment.
Additionally, as PaySauce's offerings move beyond payroll and
PaySauce increases service lines available to customers, the potential
impact of any simplification of legislation will be reduced.
PaySauce is an early stage company
What is it? PaySauce is an early stage technology business, and is a high risk
investment. It has engaged in limited trading as at the date of this
Profile. As a "start up" business, PaySauce has employed, and is
likely to continue to employ, a growth strategy where spending
exceeds revenues, a situation commonly referred to as "cash burn".
Operations to date have been financed by capital raised from investors
alongside a growing revenue base.
Why is it significant? PaySauce's ongoing viability relies on continued growth in revenues
driven by customer acquisition. If, for any reason, PaySauce
experienced a decreased rate of customer acquisition and revenue
growth, PaySauce may need to find additional funding to finance
operations until revenues exceed expenses.
Assessment of the
likelihood, nature and
potential magnitude
On the basis of its current trading trajectory, and the PaySauce
Funding Initiatives, the Proposed Directors are comfortable that the
Company (through PaySauce) will have sufficient capital following
completion of the Acquisition to fund the transaction costs associated
with the Transactions (including the obligations to fund the payment of
outstanding creditors of the Company and its subsidiaries following
completion), as well as PaySauce's ongoing funding needs without
undertaking any further capital raising before the end of financial year
35
31 March 2019.
36
6. TAXATION
Tax can have significant consequences for investments. If you have queries relating to the tax
consequences of holding shares in the Company, you should obtain professional advice on those
consequences.
37
7. WHERE YOU CAN FIND MORE INFORMATION
Further information relating to PaySauce is available on PaySauce's website at
www.paysauce.com, as well as on the public register at the Companies Office at the Ministry of
Business, Information and Employment. This information can be accessed on the Companies
Office website at www.business.govt.nz/companies under company number 5551925.
The Company is required to make half yearly and annual announcements to NZX and such other
announcements as required by the NZX Listing Rules from time to time. You will be able to
obtain this information free of charge by searching under the Company's ticker code "PYS" on
NZX's website www.nzx.com.
The following information relating to PaySauce is available on request free of charge to
PaySauce:
- The Proposed Constitution;
- Full GAAP-compliant financial statements for FY16, FY17 and FY18 for the PaySauce
Group.
If you would like to make a request for this information, contact PaySauce by email to
investor@paysauce.com or by post or telephone using the contact details in Section 8: "Contact
Information" below.
38
8. CONTACT INFORMATION
Energy Mad Limited Grant Thornton New Zealand Ltd
L3, 134 Oxford Terrace
Christchurch 8011
New Zealand
Phone: 0800 432 677
PaySauce Limited PO Box 30433
Lower Hutt 5040
Wellington
New Zealand
Phone: +64 (4) 555 0754
Securities Registrar Link Market Services Limited
PO Box 91976
Auckland 1142
New Zealand
Phone: +64 (9) 375 5998
Energy Mad Limited's Legal
Advisers
Bell Gully
Level 21 ANZ Centre
171 Featherston Street
PO Box 1291
Wellington 6140
New Zealand
DX SX11164
Phone: +64 (4) 915 6800
PaySauce Limited's Legal
Advisers
Russell McVeagh
48 Shortland Street
PO Box 8
Auckland 1140
New Zealand
DX CX10085
Phone: +64 (9) 367 8000
Energy Mad Limited's Current
Auditors
PricewaterhouseCoopers
60 Cashel Street
Christchurch 8013
New Zealand
Phone: +64 3 374 3000
Auditors Post-Transaction Grant Thornton
L4, Grant Thornton House
152 Fanshawe Street
PO Box 1961
Auckland 1140
New Zealand
Phone: +64 9 308 2570
39
9. GLOSSARY
"Acquisition" The acquisition by the Company of 100% of the ordinary
shares in PaySauce from PaySauce Shareholders under the
Acquisition Agreement.
"Acquisition Agreement" The agreement entered into between the Company, the
PaySauce Shareholders and others dated 9 August 2018
under which the Company has agreed to undertake the
Acquisition.
"Android" The mobile operating system developed by Google primarily
for touchscreen devices, cell phones, and tablets.
"ASB Sponsorship
Payment"
The one-off, non-recurring sponsorship payment from ASB
Bank of $300,000, which ASB agreed to provided to
PaySauce in FY16.
"Board" The board of directors of the Company.
"Company" or "EML" Energy Mad Limited (to be renamed PaySauce Limited
following the Acquisition).
"Companies Act" Companies Act 1993.
"Director" Means the directors of PaySauce as at the date of this Profile.
"EML Shareholder Meeting" The special meeting of the Company's shareholders to be
held to consider, amongst other matters, the approval of the
Acquisition.
"Ecobulb Asset Sale" The sale of all of the existing assets of the Company and its
subsidiaries to Ecobulb Limited as described in the Notice of
Meeting.
"EML Shareholders" The shareholders of the Company as at the date of the
Special Meeting of Shareholders.
"EML Subco" Energy Mad NZ Limited.
"EML Subco Distribution" The Company making an in-specie distribution of all of the
shares in EML Subco to the shareholders of the Company as
at the Record Date on a pro rata basis for zero consideration.
"Escrowed Persons" Coulthard Barnes (PaySauce) Limited, Gibson Sheat Trustees
Limited (as trustee of the Gondolin Trust), Troy Tarrant (as
trustee and sole beneficiary of the Gondolin Trust),
Wijeyeratne & Co Limited and Cloud Investments Limited.
"Estimated EML Debt" Certain outstanding debt of the Company and its subsidiaries
to be funded by PaySauce following completion of the
Acquisition.
"FMCA" Financial Markets Conduct Act 2013.
"FY [Year]" A financial year ended 31 March.
"GAAP" Generally Accepted Accounting Principles.
"iOS" The mobile operating system created and developed by Apple
Inc. exclusively for its hardware.
"Listing Rules" The listing rules of the NZX Main Board, in force from time to
time.
"Loan Facility" The loan facility to be entered into prior to completion of the
Acquisition between PaySauce and Coulthard Barnes
(PaySauce) Limited ("CBPL"), an entity related to Andrew
Barnes, whereby CBPL agrees to make available up to
40
$500,000 to PaySauce on an interest free basis.
"Minority Buy-out Rights" An EML Shareholder's right to require the Company to
purchase that shareholder's shares in accordance with section
110 of the Companies Act, as discussed in Appendix One of
the Notice of Meeting.
"New Shares" The 5,667,706,766 ordinary shares in the Company to be
issued to PaySauce Shareholders in satisfaction of the $10
million consideration under the Acquisition.
"Notice of Meeting" The notice of the EML Shareholder Meeting.
"NZX" NZX Limited.
"NZX Main Board" The main board equity security market operated by NZX.
"PaySauce"
PaySauce Limited, a company incorporated in New Zealand
with company number 5551925.
"PaySauce Capital Raising" The capital raising undertaken by PaySauce prior to
completion of the Acquisition, whereby $1.145 million will be
raised from the issue of 550,481 ordinary shares in PaySauce
to certain PaySauce Shareholders and new investors.
"PaySauce Funding
Initiatives"
The PaySauce Capital Raising and the Loan Facility.
"PaySauce Group" PaySauce and Right Remuneration Limited, a company
incorporated in New Zealand with company number 5572047.
"PaySauce Shareholders" Shareholders of PaySauce.
"Profile" This profile document, prepared in accordance with the Listing
Rules.
"Proposed Constitution" The proposed new constitution for EML to be put to EML
Shareholders for approval at the EML Shareholder Meeting.
"Proposed Directors" Those persons proposed to be directors of the Company with
effect from completion of the Acquisition as set out in Section
2: "PaySauce and what it does".
"Proposed Senior
Managers"
Those persons proposed to be senior managers of the
Company with effect from completion of the Acquisition as set
out in Section 2: "PaySauce and what it does".
"Record Date" 5:00pm on 7 December 2018.
"SaaS" Software as a Service.
"Transactions" Means the EML Subco Distribution, the Ecobulb Asset Sale,
the Acquisition and the issue of New Shares.
---
www.simmonscf.co.nz
Energy Mad Limited
Appraisal Report
In Respect of the Sale of Certain
Assets to Ecobulb Limited
Independent Adviser’s Report
In Respect of the Proposed
Allotment of Fully Paid Ordinary
Shares to the Shareholders of
PaySauce Limited
Independent Report
In Respect of the Proposed
Backdoor Listing of PaySauce
Limited
November 2018
Statement of Independence
Simmons Corporate Finance Limited confirms that it:
has no conflict of interest that could affect its ability to provide an unbiased report; and
has no direct or indirect pecuniary or other interest in the proposed transactions considered in the report,
including any success or contingency fee or remuneration, other than to receive the cash fee for providing
this report.
Simmons Corporate Finance Limited has satisfied the Takeovers Panel, on the basis of the material provided to the
Panel, that it is independent under the Takeovers Code for the purposes of preparing this report.
Appraisal Report, Independent Adviser’s Report
Energy Mad Limited and Independent Report
Index
Section Page
1. Introduction ................................................................................................................. 1
2. Evaluation of the Fairness of the Ecobulb Transaction .............................................. 9
3. Evaluation of the Merits of the PaySauce Allotment ................................................. 13
4. Evaluation of the Fairness of the PaySauce Transactions ....................................... 29
5. Profile of Energy Mad ............................................................................................... 31
6. Profile of PaySauce .................................................................................................. 36
7. Reasonableness of the Purchase Price .................................................................... 40
8. Reasonableness of the PaySauce Allotment Issue Price ......................................... 46
9. Sources of Information, Reliance on Information, Disclaimer and Indemnity ........... 49
10. Qualifications and Expertise, Independence, Declarations and Consents ............... 51
Appendix
I Software / SaaS Companies’ Trading Multiples ....................................................... 52
Appraisal Report, Independent Adviser’s Report
Energy Mad Limited Page 1 and Independent Report
1. Introduction
1.1 Background
Energy Mad Limited (Energy Mad or the Company) announced on 9 May 2017 that
it would undertake an orderly wind down of its business, which focused on sourcing
and developing energy saving compact fluorescent light bulbs (CFL) and
light-emitting diode (LED) bulbs.
Energy Mad’s shares are listed on the main equities security market (the NZX Main
Board) operated by NZX Limited (NZX) with a market capitalisation of $2.8 million
as at 16 November 2018 and unaudited total equity of negative $4.4 million as at
30 September 2018.
A profile of Energy Mad is set out in section 5.
1.2 Ecobulb Transaction
To facilitate the wind down of the business, Energy Mad, Energy Mad NZ Limited
(EML Subco), Intellectual Property Energy Mad Limited (IPEM) and Energy Mad
Build Limited (EMB) (together the EM Vendors) entered into the Agreement relating
to the sale and purchase of assets of Energy Mad Limited, Energy Mad NZ Limited,
Intellectual Property Energy Mad Limited and Energy Mad Build Limited with Ecobulb
Limited (Ecobulb) dated 5 May 2017 (the Ecobulb Agreement) whereby:
the EM Vendors appointed Ecobulb as their agent to facilitate the orderly sale
of the EM Vendors’ inventory
the EM Vendors agreed to sell to Ecobulb the assets owned and used by the
EM Vendors’ business, being primarily stock and intellectual property but
excluding cash on hand, trade debtors and rights under any contract of
insurance
Ecobulb agreed to assume specific liabilities of the EM Vendors, being
obligations under the agreement between Energy Mad and My Eco Limited (My
Eco) and all customer service obligations.
We refer to the arrangements as the Ecobulb Transaction.
Ecobulb is owned by interests associated with Chris Mardon. Dr Mardon is the
Company’s co-founder and its former managing director.
Mardon Family Holdings Limited (Mardon), a company wholly owned by Chris
Mardon and Vernon Mardon, is Energy Mad’s second largest shareholder, holding
7.67% of the Company’s shares.
Appraisal Report, Independent Adviser’s Report
Energy Mad Limited Page 2 and Independent Report
1.3 PaySauce Transactions
Restructure Proposal
Energy Mad’s board of directors (the Board) now proposes to restructure the
Company and focus on an entirely new area of business by backdoor listing
PaySauce through Energy Mad.
The restructure proposal involves Energy Mad:
forgiving any intercompany loan balances owing between the Company and
EML Subco, IPEM, EMB, EcoSmartHome Limited (ESH) or Energy Mad US
LLC (EMUS) (the EML Loan Forgiveness)
transferring its shareholdings in IPEM, EMB, ESH and EMUS to its wholly
owned subsidiary EML Subco and making an in specie distribution of the
shares in EML Subco to the Company’s current shareholders on a pro rata
basis for nil consideration (the EML Subco Transfer)
acquiring 100% of the shares in PaySauce Limited (PaySauce) for
consideration of $10.0 million (the PaySauce Acquisition)
issuing 5,667,706,766 new fully paid ordinary shares (the Consideration
Shares) as consideration for the PaySauce Acquisition (the PaySauce
Allotment).
We refer to the transactions collectively as the PaySauce Transactions.
PaySauce Limited
PaySauce is a provider of cloud-based software-as-a-service (SaaS) payroll
solutions.
PaySauce enables small and medium enterprise (SME) owners to pay staff using
web, iOS and Android applications.
The services provided by the PaySauce platform include:
mobile timesheets
payroll calculations
integrated banking
PAYE payment and filing
labour costing
automated general ledger entries
digital employment contracts.
A profile of PaySauce is set out in section 6.
Transaction Management Agreement
Energy Mad and EML Subco entered into the Transaction Management Agreement
with the 21 shareholders of PaySauce (the PaySauce Shareholders), Asantha
Wijeyeratne and Troy Tarrant (as the founders of PaySauce (the Founders)) and
Coulthard Barnes Capital Limited (as the PaySauce Shareholders’ representative
(the Vendors’ Representative)) dated 9 August 2018 (the PaySauce TMA) in
respect of the PaySauce Transactions.
Appraisal Report, Independent Adviser’s Report
Energy Mad Limited Page 3 and Independent Report
PaySauce Transactions Components
The effect of the PaySauce Transactions on Energy Mad’s current shareholders (the
Existing Shareholders) is that:
Energy Mad’s shareholdings in IPEM, EMB, ESH and EMUS will be transferred
to EML Subco under the EML Subco Transfer, all intercompany loans will be
forgiven under the EML Loan Forgiveness and the Existing Shareholders will
receive shares in EML Subco pro rata for nil consideration, thereby retaining
their existing interest in Energy Mad’s assets (the Energy Mad Restructure).
At this point in time, the Existing Shareholders will also own 100% of the shares
in Energy Mad
at some point in the future in due course, following the completion of the
collection of outstanding receivables and the disposition of inventory under the
Ecobulb Transaction, EML Subco will be liquidated and the proceeds (less
costs) will be distributed to the Existing Shareholders (the EML Subco
Distribution). However, it is not expected that there will be a surplus of funds
to distribute to the Existing Shareholders
the acquisition of PaySauce will transform the nature of the Company’s
business to that of a provider of cloud-based SaaS payroll solutions. The
Existing Shareholders will retain their current shares in Energy Mad, which will
represent 3.01% of the Company’s issued capital following the PaySauce
Allotment.
Energy Mad
Existing
Shareholders
EML Subco
100%100%
EML Subco
Trans f er
IP E M
EMB
ESHEMUS
100%100%
100%100%
EML Loan
Forgiveness
Existing
Shareholders
EML Subco
(liquidated)
EML Subco
Distribution
Energy Mad
Existing
Shareholders
PaySauce
Shareholders
PaySauce
3.01%96.99%
PaySauce Allotment
PaySauce Acquisition
100%
Appraisal Report, Independent Adviser’s Report
Energy Mad Limited Page 4 and Independent Report
The PaySauce Acquisition and the PaySauce Allotment are effectively a scrip merger
of Energy Mad and PaySauce and represents a backdoor listing of PaySauce through
Energy Mad.
Following the completion of the PaySauce Transactions, the Existing Shareholders
will retain their existing interest in Energy Mad’s assets (through their shareholding
in EML Subco) and hold a 3.01% interest in Energy Mad, which will own PaySauce.
PaySauce will be renamed PaySauce Operations Limited and the Company will be
renamed PaySauce Limited.
1.4 Impact on Shareholding Levels
The Existing Shareholders currently collectively hold 100% of the Company’s
ordinary shares on issue.
Following the PaySauce Transactions, the PaySauce Shareholders will collectively
hold 96.99% of the Company’s shares and the Existing Shareholders will collectively
hold 3.01% of the Company’s shares.
Shareholding Levels After the PaySauce Transactions
Current
PaySauce
Allotment
Post PaySauce
Transactions
No. of
Shares
%
No. of
Shares
No. of
Shares
%
Existing Shareholders 175,836,635 100.00% - 175,836,635 3.01%
PaySauce Shareholders - - 5,667,706,766 5,667,706,766 96.99%
Total
175,836,635 100.00% 5,667,706,766 5,843,543,401 100.00%
The current PaySauce Shareholders are set out in section 6.5.
Prior to the Completion of the PaySauce Transactions, PaySauce will issue 844,481
new PaySauce shares to the Founders and Coulthard Barnes (PaySauce) Limited
(CBPL) in consideration for advisory services provided, 110,577 new PaySauce
shares to various employees of PaySauce in consideration for employment services
and 550,481 new PaySauce shares to various new and existing shareholders to raise
approximately $1.15 million of fresh equity (the PaySauce Restructure).
Cloud Investments Limited and Wijeyeratne & Co Limited are associates / associated
parties. We refer to them as the Wijeyeratne Associates. The Wijeyeratne
Associates will collectively hold 35.74% of the shares in the Company following the
PaySauce Transactions.
CBPL, Cloud Investments Two Limited, Hibernian Capital No. 2 Limited, Perrow
Capital No. 2 Limited and Anusha Fernando-Barnes are associates / associated
parties. We refer to them as the Barnes Associates. The Barnes Associates will
collectively hold 24.01% of the shares in the Company following the PaySauce
Transactions.
Energy Mad
(to b e renamed
PaySauce Limited)
Existing
Shareholders
PaySauce
Shareholders
PaySauce
(to be renamed PaySauce
Operations Limited)
100%
3.01%
96.99%
PaySauce Allotment
PaySauce Acquisition
100%
EML Subco
(liquidated)
EML Subco
Distribution
EML Subco
Transfer
EML Loan
Forgiveness
Appraisal Report, Independent Adviser’s Report
Energy Mad Limited Page 5 and Independent Report
1.5 Summary of Opinions
NZX Main Board Listing Rules
Our evaluation of the fairness of the Ecobulb Transaction as required under the NZX
Main Board Listing Rules (the Listing Rules) is set out in section 2.
In our opinion, after having regard to all relevant factors, the consideration and the
terms and conditions of the Ecobulb Transaction are fair to the Company’s
shareholders not associated with Ecobulb and Dr Mardon (the Non-associated
Shareholders).
Takeovers Code
Our evaluation of the merits of the PaySauce Allotment as required under the
Takeovers Code (the Code) is set out in section 3.
In our opinion, after having regard to all relevant factors, the positive aspects of the
PaySauce Transactions (including the PaySauce Allotment) significantly outweigh
the negative aspects from the perspective of the Existing Shareholders.
NZX Guidance Note
Our evaluation of the fairness of the PaySauce Transactions as required under the
NZX Guidance Note Backdoor and Reverse Listing Transactions dated August 2008
(the NZX Guidance Note) is set out in section 4.
In our opinion, after having regard to all relevant factors, the terms of the PaySauce
Transactions are fair and reasonable to the Existing Shareholders and are in the best
interests of Energy Mad given the options reasonably available to the Company at
the current time.
1.6 Special Meeting
The Non-associated Shareholders will vote on a special resolution in respect of the
Ecobulb Transaction at the Company’s special meeting of shareholders on
6 December 2018 (resolution 1 – the Ecobulb Resolution).
Ecobulb and its associated persons are not permitted to vote on the Ecobulb
Resolution.
The Existing Shareholders will also vote on 6 special resolutions in respect of the
PaySauce Transactions at the Company’s special meeting of shareholders on
6 December 2018:
the EML Loan Forgiveness (resolution 2)
the EML Subco Distribution (resolution 3)
the PaySauce Acquisition (resolution 4)
the PaySauce Allotment (resolution 5)
the adoption of a new constitution (resolution 6)
the appointment of Asantha Wijeyeratne, Andrew Barnes, Gavin Thompson,
Mandy Simpson and Nick Lewis as directors of the Company (resolution 7).
We refer to the 6 resolutions collectively as the PaySauce Resolutions.
Appraisal Report, Independent Adviser’s Report
Energy Mad Limited Page 6 and Independent Report
No PaySauce Shareholder is currently a shareholder in Energy Mad. Any associate
of a PaySauce Shareholder who is also a shareholder in Energy Mad is not permitted
to vote on the PaySauce Resolutions.
The Ecobulb Resolution and the PaySauce Resolutions are all special resolutions
(which are passed by a majority of not less than 75% of the votes cast).
The Ecobulb Resolution is not interdependent with any of the PaySauce Resolutions.
The 6 PaySauce Resolutions are interdependent with each other and the Ecobulb
Resolution. All 6 PaySauce Resolutions and the Ecobulb Resolution must be passed
in order for any one of the 6 PaySauce Resolutions to be effective.
1.7 Profile
In addition to the notice of special meeting that this report accompanies, Energy Mad
has prepared an NZX Listing Profile in respect of the PaySauce Transactions (the
Profile) in accordance with Listing Rule 7.1.1. The Profile provides detailed
information in respect of PaySauce and the PaySauce Transactions.
1.8 Regulatory Requirements
NZX Main Board Listing Rules
Listing Rule 9.2.1 stipulates that an Issuer shall not enter into a Material Transaction
if a Related Party is a party to the Material Transaction or to one of a related series
of transactions of which the Material Transaction forms part without first obtaining
approval of the transaction by way of an ordinary resolution from shareholders not
associated with the Related Party.
Section 129 of the Companies Act 1993 (the Act) requires a major transaction to be
approved by a special resolution.
The Ecobulb Transaction is a Material Transaction and Ecobulb is a Related Party of
the Company.
Accordingly, the Non-associated Shareholders will vote at the Company’s special
meeting on the Ecobulb Resolution in accordance with the Listing Rules and the Act.
Listing Rule 9.2.5 (b) requires an Appraisal Report to be prepared where a meeting
will consider a resolution required by Listing Rule 9.2.1.
Takeovers Code
Energy Mad is a code company as defined by the Code and is subject to the
provisions of the Code.
Rule 6 of the Code prohibits a person who holds or controls:
no voting rights, or less than 20% of the voting rights, in a code company from
becoming the holder or controller of an increased percentage of the voting
rights in the code company unless, after that event, that person and that
person’s associates hold or control in total not more than 20% of the voting
rights in the code company
20% or more of the voting rights in a code company from becoming the holder
or controller of an increased percentage of the voting rights in the code
company
unless the person and that person’s associates comply with exceptions to this
fundamental rule.
Appraisal Report, Independent Adviser’s Report
Energy Mad Limited Page 7 and Independent Report
One of the exceptions, set out in Rule 7(d) of the Code, enables a person and its
associates to increase their holding or control of voting rights by an allotment of
shares if the allotment is approved by an ordinary resolution of the code company.
The PaySauce Allotment will result in the Wijeyeratne Associates and the Barnes
Associates controlling 35.74% and 24.01% of the voting rights in Energy Mad
respectively.
Accordingly, the Existing Shareholders will vote at the Company’s special meeting
on resolution 5 in respect of the PaySauce Allotment in accordance with the Code.
Rule 18 of the Code requires the directors of a code company to obtain an
Independent Adviser’s Report on the merits of an allotment under Rule 7(d).
This Independent Adviser’s Report is to be included in, or accompany, the notice of
meeting pursuant to Rule 16(h).
NZX Guidance Note
As the PaySauce Transactions represent a backdoor listing of PaySauce into Energy
Mad, an Independent Report on the PaySauce Transactions is required under the
NZX Guidance Note.
The NZX Guidance Note requires that the Independent Report complies with the
requirements of an Appraisal Report under Listing Rule 1.7.2.
1.9 Purpose of the Report
The Company’s board of directors (the Board) has engaged Simmons Corporate
Finance Limited (Simmons Corporate Finance) to prepare an Appraisal Report on
the fairness of the Ecobulb Transaction in accordance with Listing Rule 9.2.5 (b).
Simmons Corporate Finance was approved by the Special Division of the
New Zealand Markets Disciplinary Tribunal (the Special Division) on 20 June 2018
to prepare this Appraisal Report.
Simmons Corporate Finance issues this Appraisal Report to the Board for the benefit
of the Non-associated Shareholders to assist them in forming their own opinion on
whether to vote for or against the Ecobulb Resolution.
We note that each shareholder’s circumstances and objectives are unique.
Accordingly, it is not possible to report on the fairness of the Ecobulb Transaction in
relation to each shareholder. This report on the fairness of the Ecobulb Transaction
is therefore necessarily general in nature.
The Board has also engaged Simmons Corporate Finance to prepare an
Independent Adviser’s Report on the merits of the PaySauce Allotment in accordance
with Rule 18 of the Code and an Independent Report on the fairness of the PaySauce
Transactions in accordance with the NZX Guidance Note.
Simmons Corporate Finance was approved by the Takeovers Panel on 20 June 2018
to prepare this Independent Adviser’s Report.
Simmons Corporate Finance was approved by the Special Division on 20 June 2018
to prepare this Independent Report.
Simmons Corporate Finance issues this Independent Adviser’s Report and
Independent Report to the Board for the benefit of the Existing Shareholders to assist
them in forming their own opinion on whether to vote for or against the PaySauce
Resolutions.
Appraisal Report, Independent Adviser’s Report
Energy Mad Limited Page 8 and Independent Report
We note that each shareholder’s circumstances and objectives are unique.
Accordingly, it is not possible to report on the merits and fairness of the PaySauce
Transactions in relation to each shareholder. This report on the merits and fairness
of the PaySauce Transactions is therefore necessarily general in nature.
This Appraisal Report, Independent Adviser’s Report and Independent Report is not
to be used for any other purpose without our prior written consent.
Appraisal Report, Independent Adviser’s Report
Energy Mad Limited Page 9 and Independent Report
2. Evaluation of the Fairness of the Ecobulb Transaction
2.1 Basis of Evaluation
Listing Rule 1.7.2 requires an Appraisal Report to consider whether the consideration
and the terms and conditions of the Ecobulb Transaction are fair to the
Non-associated Shareholders.
There is no legal definition of the term fair in either the Listing Rules or in any statute
dealing with securities or commercial law in New Zealand.
In our opinion, the Ecobulb Transaction will be fair to the Non-associated
Shareholders if:
they are likely to be at least no worse off if the Ecobulb Transaction proceeds
than if it does not. In other words, we consider that the Ecobulb Transaction
will be fair if there is no value transfer from the Non-associated Shareholders
to Ecobulb, and
the terms and conditions of the Ecobulb Transaction are in line with market
terms and conditions.
We have evaluated the fairness of the Ecobulb Transaction by reference to:
the rationale for the Ecobulb Transaction
the terms and conditions of the Ecobulb Transaction
the benefits and disadvantages to the Non-associated Shareholders of the
Ecobulb Transaction
the benefits and disadvantages to Ecobulb of the Ecobulb Transaction
the implications if the Ecobulb Resolution is not approved.
Our opinion should be considered as a whole. Selecting portions of the evaluation
without considering all the factors and analyses together could create a misleading
view of the process underlying the opinion.
2.2 Evaluation of the Fairness of the Ecobulb Transaction for the Purposes of
Listing Rule 1.7.2
In our opinion, after having regard to all relevant factors, the consideration and
the terms and conditions of the Ecobulb Transaction are fair to the
Non-associated Shareholders.
The basis for our opinion is set out in detail in sections 2.3 to 2.5. In summary, the
key factors leading to our opinion are:
the rationale for the Ecobulb Transaction is sound. It is an effective means of
executing the Board’s decision to wind down the Energy Mad business and sell
the Company’s residual assets
the terms of the Ecobulb Transaction are reasonable
the implications of the Ecobulb Resolution not being approved by the
Non-associated Shareholders are that the Ecobulb Transaction cannot
proceed. The Company’s inventory would need to be sold by someone other
than Ecobulb. The Board is of the view that this would likely result in lower sale
proceeds than that expected under the Ecobulb Transaction.
Appraisal Report, Independent Adviser’s Report
Energy Mad Limited Page 10 and Independent Report
2.3 Rationale for the Ecobulb Transaction
Energy Mad had incurred accumulated losses of $25 million by 31 March 2017. The
Company operated with the ongoing support of its lenders in expectation of a
recovery in financial performance.
By May 2017, the Board was no longer of the view that a recovery in performance in
the near term was possible. After considering various options for the business, the
Board determined that an orderly wind down of the business and the sale of Energy
Mad’s residual assets was the best option available to the Company.
Consequently, Energy Mad entered into the Ecobulb Agreement with Ecobulb on
5 May 2017 for the sale and purchase of the Company’s assets.
The Board is of the view that the Ecobulb Transaction is of significant benefit to the
Non-associated Shareholders:
it enables the Company to recover amounts spent on projects in New Zealand
from Ecobulb that have no value to any other party
it maximises the value recovered for the remaining inventory (which is largely
obsolete and of limited value to any other party)
Ecobulb takes on the responsibility for all ongoing warranty claims for product
sold in New Zealand and Australia, thereby relieving the Company of this
potential liability.
2.4 Terms of the Ecobulb Transaction
The Ecobulb Transaction constitutes an agency arrangement for the orderly sale of
Energy Mad’s inventory and the sale of specified assets of the EM Vendors and the
assumption of specific liabilities.
The EM Vendors appointed Ecobulb as their exclusive agent to facilitate the sale of
the EM Vendors’ inventory.
Energy Mad’s employees, Chris Mardon and Alireza Milani, were offered
employment with Ecobulb and are undertaking the agency arrangements for
Ecobulb.
Ecobulb is paid an agency fee of the lower of $34,000 per month or monthly sales
revenue (excluding sales to My Eco).
The Energy Mad assets to be sold to Ecobulb (the Sale Assets) are:
all remaining inventory at settlement date
intellectual property (such as brands, trademarks, domain names, product
accreditations, customer lists and manufacturing supply agreements)
fixed assets (such as laboratory test equipment and computer equipment).
The Sale Assets exclude cash on hand, trade debtors and rights under any contract
of insurance which will be retained by Energy Mad and then transferred to EML
Subco under the EML Subco Transfer.
The purchase price for the Sale Assets is $34,614 (based on the inventory position
as at 31 October 2018). The purchase price will further reduce to reflect any further
inventory sales taking place prior to the settlement date.
Appraisal Report, Independent Adviser’s Report
Energy Mad Limited Page 11 and Independent Report
Ecobulb has assumed $97,354 of accrued employee entitlements (in respect of Chris
Mardon and Alireza Milani).
Settlement is conditional upon the Non-associated Shareholders approving the
Ecobulb Resolution.
Energy Mad has received $409,000 from Ecobulb under the agency arrangement up
to 31 October 2018. This represents gross revenue of $674,000 less agency fees of
$265,000.
In our view, the terms of the Ecobulb Transaction are fair to the Non-associated
Shareholders:
the realisation of the Company’s inventory is outsourced to Ecobulb under the
agency arrangement. Energy Mad is alleviated of the need to retain personnel
to manage the sale of the inventory and instead pays an agency fee to Ecobulb
the Company is able to realise some value for its intellectual property and fixed
assets that it may otherwise not be able to achieve
Ecobulb has assumed the Company’s obligations in respect of certain accrued
employee entitlements and takes on responsibility for all ongoing warranty
claims for product sold in New Zealand and Australia.
2.5 Implications of the Ecobulb Resolution not Being Approved
If the Ecobulb Resolution is not approved, then the Ecobulb Transaction and the
PaySauce Transactions cannot proceed.
Energy Mad will likely need to offer its New Zealand inventory to another party to sell
and its Australian inventory would likely be sold through a clearing house. In both
cases, the Board is of the view that the Company would likely receive a fraction of
the value that it would receive under the Ecobulb Transaction as the other parties
would not be as familiar with the products or have the developed relationships with
the potential purchasers of the products as Ecobulb has. Furthermore, the Company
is unlikely to receive any value of substance for the sale of its intellectual property
and fixed assets.
2.6 Options for Non-associated Shareholders who do not Wish to Retain Their
Investment in Energy Mad
Sell On-market
Those Non-associated Shareholders who do not wish to remain shareholders in the
Company after the Ecobulb Transaction is completed could possibly sell their shares
on-market. However, given that the Company’s shares are infrequently traded on
the NZX Main Board, that option may not be readily available.
Minority Buy-out Rights Under the Act
If the Ecobulb Resolution is passed, those Non-associated Shareholders who voted
all of their shares against the special resolution will be entitled to require the
Company to buy their shares in accordance with the provisions of the Act.
A shareholder entitled to require the Company to purchase its shares by virtue of
section 110 of the Act may, within 10 working days of the passing of the special
resolution, give written notice to the Company requiring it to purchase the shares.
The Board is then required to give notice to the shareholder of a fair and reasonable
price for the shares. Shareholders who do not agree with the nominated price can
object to the price, in which case the price will be determined by arbitration.
Appraisal Report, Independent Adviser’s Report
Energy Mad Limited Page 12 and Independent Report
A detailed explanation of the minority buy-out rights is set out in Appendix One of the
notice of special meeting.
2.7 Voting For or Against the Ecobulb Resolution
Voting for or against the Ecobulb Resolution is a matter for individual shareholders
based on their own views as to value and future market conditions, risk profile and
other factors. Shareholders will need to consider these consequences and consult
their own professional adviser if appropriate.
Appraisal Report, Independent Adviser’s Report
Energy Mad Limited Page 13 and Independent Report
3. Evaluation of the Merits of the PaySauce Allotment
3.1 Basis of Evaluation
Rule 18 of the Code requires an evaluation of the merits of the allotment of ordinary
shares to the Wijeyeratne Associates and the Barnes Associates under the
PaySauce Allotment having regard to the interests of the Existing Shareholders.
There is no legal definition of the term merits in either the Code or in any statute
dealing with securities or commercial law in New Zealand.
In the absence of an explicit definition of merits, guidance can be taken from:
the Takeovers Panel Guidance Note on Independent Advisers and the
Takeovers Code dated 1 March 2018
definitions designed to address similar issues within New Zealand regulations
which are relevant to the proposed transaction
overseas precedents
the ordinary meaning of the term merits.
Given that the PaySauce Allotment is an integral component of the PaySauce
Transactions, we are of the view that an assessment of the merits of the PaySauce
Allotment cannot be undertaken in isolation and needs to be considered in
conjunction with the merits of the PaySauce Transactions. Accordingly, we are of
the view that an assessment of the merits of the PaySauce Allotment should focus
on:
the rationale for the PaySauce Transactions
the terms and conditions of the PaySauce Transactions
the alternatives to the PaySauce Transactions
the impact of the PaySauce Transactions on Energy Mad’s financial position
the impact of the PaySauce Transactions on the control of the Company
the impact of the PaySauce Transactions on Energy Mad’s share price
the benefits and disadvantages for the Existing Shareholders of the PaySauce
Transactions
other benefits and disadvantages for the Wijeyeratne Associates and the
Barnes Associates of the PaySauce Transactions
the implications if the PaySauce Resolutions are not approved.
Our opinion should be considered as a whole. Selecting portions of the evaluation
without considering all the factors and analyses together could create a misleading
view of the process underlying the opinion.
Appraisal Report, Independent Adviser’s Report
Energy Mad Limited Page 14 and Independent Report
3.2 Summary of the Evaluation of the Merits of the PaySauce Transactions
The Existing Shareholders currently hold shares in a company with total equity of
negative $4.4 million as at 30 September 2018, whose business is being wound down
and whose shares are thinly traded on the NZX Main Board. The Company had
$4.7 million of liabilities (including $3.7 million owing in respect of loans and
convertible notes) and assets of $0.3 million as at 30 September 2018.
The PaySauce Transactions are effectively a scrip merger of Energy Mad and
PaySauce. Energy Mad will acquire 100% of the shares in PaySauce and the
PaySauce Shareholders will be issued with the Consideration Shares which will
represent 96.99% of Energy Mad’s shares on issue. The Wijeyeratne Associates will
hold 35.74% of the Company’s ordinary shares and the Barnes Associates will hold
24.01%. The PaySauce Transactions will transform Energy Mad into a cloud-based
SaaS payroll solutions business. The Existing Shareholders will collectively retain a
3.01% shareholding in the transformed Company.
The Existing Shareholders are being asked to vote on 6 resolutions in respect of the
PaySauce Transactions. All 6 resolutions must be passed in order for the PaySauce
Transactions to proceed. Accordingly, the Existing Shareholders have 3 alternatives
with regard to their voting:
vote in favour of all 6 resolutions, in which case the PaySauce Transactions will
proceed, resulting in the Existing Shareholders holding a significantly smaller
shareholding in Energy Mad, which will focus on providing cloud-based SaaS
payroll solutions, or
vote against any of the resolutions. In the event that any one of the 6
resolutions is not passed, then the PaySauce Transactions will not proceed and
the Company will remain as a listed company which is winding down its
business, or
abstain from voting, in which case the voting of the other Existing Shareholders
will determine the outcome.
Our evaluation of the merits of the PaySauce Transactions (including the PaySauce
Allotment) is set out in detail in sections 3.3 to 3.16.
In our view, the key overriding factor in assessing the merits of the PaySauce
Transactions is that, in the absence of the proposed transactions, the Existing
Shareholders’ investments in the Company have negligible value at this point in time.
Therefore the Existing Shareholders are likely to be in a more advantageous financial
position post the PaySauce Transactions, where they will collectively hold a 3.01%
interest in PaySauce, which at that stage will be listed on the NZX Main Board. The
degree to which they are financially better off will depend on the value of PaySauce.
In summary, the key positive aspects of the PaySauce Transactions are:
the rationale for the PaySauce Transactions is sound. PaySauce will be
backdoor listed into Energy Mad, transforming the Company into a cloud-based
SaaS payroll solutions provider and the Existing Shareholders will retain their
current proportionate interests in the Company’s assets through the EML
Subco Transfer
we are of the view that in the absence of the PaySauce Transactions, Energy
Mad’s shares have negligible value at this point in time
Appraisal Report, Independent Adviser’s Report
Energy Mad Limited Page 15 and Independent Report
under the EML Subco Transfer, the Existing Shareholders will retain their
existing proportionate interests in Energy Mad’s assets. However, the EML
Subco Distribution is not expected to provide any return to the Existing
Shareholders following EML Subco’s liquidation in due course
the terms of the PaySauce Transactions are reasonable:
a purchase price of $10.0 million has been ascribed to PaySauce in the
PaySauce TMA (the Purchase Price). This represents the figure agreed
between the parties to the PaySauce TMA that is used as a reference point
to reflect the relative shareholding levels of the PaySauce Shareholders
(96.99%) and the Existing Shareholders (3.01%) in the Company following
the completion of the PaySauce Transactions
in the absence of any prospective financial information for PaySauce, it is
not possible to undertake an in-depth valuation analysis of PaySauce or
form any definitive conclusions as to the value of PaySauce at this point in
time. However, the Purchase Price could be viewed as being not
unreasonable based on the implied revenue multiple for PaySauce
compared with the observed revenue multiples for listed New Zealand and
Australian software and SaaS companies and the recent share
transactions involving the PaySauce Shareholders. Having said that, the
Purchase Price is likely to be viewed as being at the upper end of what
would be considered reasonable
the issue price of $0.0018 (rounded) per share for the Consideration
Shares under the PaySauce Allotment is fair to the Existing Shareholders.
We are of the view that the value of Energy Mad’s shares prior to the
PaySauce Transactions and in the absence of any alternative transaction
is negligible. The Consideration Shares will be issued at a price which is
higher than our assessment of the current value of Energy Mad’s shares
and therefore will not be value-dilutionary to the Existing Shareholders
the conditions and warranties set out in the PaySauce TMA are in line with
market practice for transactions of this nature and are not unreasonable
there is unlikely to be any transfer of value from the Existing Shareholders to
the PaySauce Shareholders under the PaySauce Transactions as the
consideration is in the form of scrip and the current value of the Company’s
shares, in the absence of an alternative transaction, is negligible. As the
PaySauce Shareholders will hold 96.99% of the Company’s shares post the
transactions, the current absolute value of PaySauce is of lesser importance to
the Existing Shareholders (as opposed to the situation if Energy Mad were to
be paying the Purchase Price in cash)
the Company’s shares may be re-rated by the market which may improve the
liquidity of the shares and may make the Company a more attractive takeover
target
PaySauce will fund the Company’s costs associated with the PaySauce
Transactions up to $250,000
PaySauce will fund the payment of outstanding creditors of Energy Mad and its
subsidiaries following the completion of the PaySauce Transactions.
Appraisal Report, Independent Adviser’s Report
Energy Mad Limited Page 16 and Independent Report
In summary, the key negative aspects of the PaySauce Transactions are:
the risk profile of Energy Mad will change significantly from the limited risks
associated with a company that is now effectively a listed shell company to the
wide range of risks associated with businesses operating in the SaaS payroll
solutions sector
the dilutionary impact of the PaySauce Allotment on the Existing Shareholders
is significant. Their current collective interests in the Company will reduce by
97% down to 3.01%. However, the Existing Shareholders will retain their
existing proportionate interests in Energy Mad’s assets through the EML Subco
Transfer
the Wijeyeratne Associates’ will hold 35.74% of the Company’s shares and the
Barnes Associates’ will hold 24.01% following the PaySauce Allotment and will
be able to influence the outcome of shareholding voting to a large degree and
exert shareholder control over the Board and the Company’s operations.
However, their level of control over shareholder voting will be lower than that
of the Company’s current largest shareholder Smartshares Limited
(Smartshares), who currently holds 75.95% of the Company’s shares
the issue price of the Consideration Shares of $0.0018 (rounded) is at a
significant discount to Energy Mad’s recent volume weighted average share
prices (VWAP). The Company’s one month VWAP to 16 November 2018 was
$0.0164 and its 3 month VWAP to that date was $0.0165. The Consideration
Shares issue price represents a discount of 89% to the VWAP. However, we
consider the current share price for Energy Mad reflects a heavy speculative
element and is not necessarily reflective of the fair market value of the shares.
Nevertheless, given that the issue price of the Consideration Shares is at a
significant discount to the Company’s current share price and the quantum of
Consideration Shares being issued is significant, there is a strong possibility
that this will result in a dilution in the Company’s share price unless the shares
are re-rated positively by the market.
There are a number of positive and negative features associated with the PaySauce
Allotment. In our view, when the Existing Shareholders are evaluating the merits of
the PaySauce Transactions, they need to carefully consider whether the negative
aspects of the PaySauce Allotment, including the level of control that the Wijeyeratne
Associates and the Barnes Associates will hold over Energy Mad and the dilutionary
impact, could justify voting against the PaySauce Resolutions with the outcome that
the Company will not acquire PaySauce and will remain as a listed company that is
winding down its operations. Energy Mad will need to seek alternative sources of
capital within a relatively short timeframe in order to fund its operations and evaluate
other backdoor listing opportunities. If it cannot do so, the Company may need to be
wound up, in which case there would be no return to Existing Shareholders as it had
negative total equity of $4.4 million as at 30 September 2018.
In our opinion, after having regard to all relevant factors, the positive aspects
of the PaySauce Transactions significantly outweigh the negative aspects from
the perspective of the Existing Shareholders.
3.3 The Rationale for the PaySauce Transactions
As discussed in section 2.3, the Board determined in May 2017 that an orderly wind
down of the business and sale of the Company’s residual assets was the best option
available to Energy Mad. The Ecobulb Transaction will achieve this.
Appraisal Report, Independent Adviser’s Report
Energy Mad Limited Page 17 and Independent Report
The PaySauce Transactions will transform Energy Mad from a company with total
equity of negative $4.4 million as at 30 September 2018 into a cloud-based SaaS
payroll solutions business. The Existing Shareholders will retain their proportionate
interests in the current Energy Mad assets through the EML Subco Transfer and will
collectively hold 3.01% of the shares in Energy Mad, which will be renamed
PaySauce Limited.
The Board is of the view that the PaySauce Transactions will be of significant benefit
to the Existing Shareholders:
new business operations with the potential for growth will be introduced into the
Company
they will hold a percentage shareholding in EML Subco equivalent to their
current percentage shareholding in the Company as well as an indirect
shareholding in PaySauce (albeit much smaller)
PaySauce will provide funding for the Company (and certain of its subsidiaries)
to satisfy the Energy Mad group’s major outstanding creditors.
3.4 Process Undertaken by Energy Mad
We are advised by the Board that it commenced discussions with PaySauce in 2017.
Negotiations on behalf of Energy Mad were led by directors Dr Wheeler and
Mr Johnstone.
On 7 February 2018, Energy Mad entered into a non-binding term sheet with
PaySauce (the Term Sheet).
Energy Mad’s due diligence review of PaySauce focused mainly on PaySauce’s
senior management and legal matters.
On 9 August 2018, Energy Mad entered into the PaySauce TMA.
3.5 Terms and Conditions of the PaySauce Transactions
Purchase Price
The Purchase Price is $10.0 million. This represents the price ascribed in the
PaySauce TMA for 100% of the shares in PaySauce on a debt free / cash free basis.
The Purchase Price represents the figure agreed between the parties to the
PaySauce TMA that is used as a reference point to reflect the relative shareholding
levels of the PaySauce Shareholders (96.99%) and the Existing Shareholders
(3.01%) in the Company following the completion of the PaySauce Transactions. It
does not necessarily reflect the amount that a third party would pay for PaySauce at
this point in time.
PaySauce is an early stage technology company with the potential for significant
growth. Such businesses are typically valued using the discounted cash flow (DCF)
valuation method. In order to undertake a meaningful DCF assessment, detailed
financial projections are required based on assumptions regarding the key value
drivers of the business.
Appraisal Report, Independent Adviser’s Report
Energy Mad Limited Page 18 and Independent Report
Unfortunately no prospective financial information has been made available by
PaySauce. Section 4 of the Profile entitled PaySauce’s Financial Information states:
“There is no prospective financial information in this Profile. The Proposed
Directors have, following careful consideration and after due enquiry,
concluded that the provision of prospective financial statements for the period
to 31 March 2019, and the subsequent accounting period to 31 March 2020,
may be misleading for potential investors with regard to particulars that are
material to the Acquisition. The Proposed Directors believe that it is not
practicable to formulate reasonable assumptions on which to base prospective
financial statements.”
On the basis that a meaningful DCF analysis cannot be undertaken due to the
absence of prospective financial information, we have reviewed the reasonableness
of the Purchase Price based on:
the implied revenue multiple for PaySauce compared with observed revenue
multiples for comparable companies
the implied value of PaySauce based on recent share transactions involving
the PaySauce Shareholders.
Our analysis is set out in section 7.
The implied revenue multiple for PaySauce based on its current annualised recurring
revenue (ARR) is 11.6x. We note that PaySauce’s revenue levels have not been
audited. We consider this implied revenue multiple to be not unreasonable when
compared with observed revenue multiples for listed New Zealand and Australian
software and SaaS companies.
The implied value of PaySauce based on the most recent share transactions
involving the PaySauce Shareholders under the PaySauce Restructure is in the
vicinity of $7.6 million.
Based on our analysis, we consider the Purchase Price to be not unreasonable, albeit
at the upper end of what would be considered reasonable.
We reiterate that given that no prospective financial information is available, it is not
possible to undertake an in-depth valuation of PaySauce and derive any definitive
conclusions as to the value of PaySauce at this point in time.
The absence of prospective financial information and any in-depth valuation analysis
is an issue that Existing Shareholders should consider if they are contemplating
buying or selling Energy Mad shares in the near term.
Consideration
Consideration will be in the form of the PaySauce Allotment, being the issue of
5,667,706,766 Consideration Shares to the PaySauce Shareholders at an issue price
of $0.0018 (rounded) per share.
Our analysis of the fairness of the issue price of $0.0018 (rounded) per Consideration
Share is set out in section 8.
We consider the issue price to be advantageous (and therefore fair) to the Existing
Shareholders as the Consideration Shares will be issued at a price that is above our
assessment of the fair market value of the Company’s shares and therefore will not
be value-dilutionary to the Existing Shareholders.
Appraisal Report, Independent Adviser’s Report
Energy Mad Limited Page 19 and Independent Report
We note that the issue price of the Consideration Shares is at a significant discount
to Energy Mad’s recent VWAP:
the one month VWAP to 16 November 2018 was $0.0164
the 3 month VWAP to 16 November 2018 was $0.0165.
The Consideration Shares issue price represents a discount of 89% to the recent
VWAP. However, we consider the current share price for Energy Mad reflects a
heavy speculative element and is not necessarily reflective of the fair market value
of the shares.
Payment of Transaction Costs
PaySauce will pay the costs of the PaySauce Transactions. It will make advances
available to Energy Mad up to $250,000 (the Costs Loan) to fund the Company’s
costs. However, in the event that the Existing Shareholders do not approve the
PaySauce Resolutions or the Company terminates the PaySauce Transactions
without cause or the Company materially breaches the PaySauce TMA, the Company
will be liable to repay the Costs Loan within 3 years.
This is explained in more detail in section 3.12.
Funding of Energy Mad Creditors
Following completion of the PaySauce Transactions, PaySauce will fund the payment
of certain agreed outstanding debts of Energy Mad and it will guarantee the payment
of certain agreed outstanding debts of EML Subco and IPEM.
Conditions
The PaySauce Transactions are conditional on:
Energy Mad conducting a due diligence investigation of PaySauce
PaySauce conducting a due diligence investigation of Energy Mad
obtaining any necessary waivers from NZX that are required in order to proceed
with the transaction
the completion of the Energy Mad Restructure
the completion of the PaySauce Restructure
Energy Mad obtaining the Non-associated Shareholders’ approval of the
Ecobulb Transaction
Energy Mad obtaining the Existing Shareholders’ approval of the PaySauce
Transactions.
The proposed date for satisfaction of the above conditions has been varied to
31 December 2018. The due diligence conditions have been completed.
The Energy Mad Restructure consists of the EML Loan Forgiveness and the EML
Subco Transfer (among other things). Following the Energy Mad Restructure, the
Existing Shareholders will retain their existing proportionate interests in Energy Mad’s
assets as well as holding their current number of shares in Energy Mad.
Appraisal Report, Independent Adviser’s Report
Energy Mad Limited Page 20 and Independent Report
The Board then intends to wind up and liquidate EML Subco, resulting in the EML
Subco Distribution. Given that EML Subco’s liabilities will significantly exceed its
assets, the Board does not expect there to be any distribution available to Existing
Shareholders under the EML Subco Distribution.
We are of the view that the other conditions of the PaySauce Transactions are in line
with market practice for transactions of this nature and are not unreasonable.
Completion
Completion of the PaySauce Transactions is expected to take place on or before
5 business days after the satisfaction of the above conditions.
Warranties
Under the PaySauce TMA, the PaySauce Shareholders, the Founders and the
Vendors’ Representative have provided warranties in respect of PaySauce’s shares,
corporate structure, information and material circumstances, loans, business
operations, assets, litigation / claims, employment, intellectual property, accounts
and records.
Energy Mad has provided warranties in respect of Energy Mad’s corporate structure
and shares, assets, liabilities, contracts and employees and information and material
circumstances.
Each party’s liability under these warranties is limited to claims brought within
18 months of completion and to an aggregate amount limited to $310,243 (being the
implied value of Energy Mad before the PaySauce Transactions).
We are of the view that the warranties provided under the PaySauce Agreement are
in line with market practice for transactions of this nature and are not unreasonable.
3.6 Limited Likelihood of Alternative Transactions
We are advised by the Board that it is not evaluating any other transactions at this
point in time.
3.7 Impact on Control
Share Capital and Shareholders
Energy Mad currently has 175,836,635 fully paid ordinary shares on issue held by
735 shareholders. The names, number of shares and percentage holding of the
Company’s 10 largest shareholders as at 15 November 2018 are set out in
section 5.5.
Energy Mad currently has 2 substantial security holders:
BNP Paribas Nominees (NZ) Limited (BNP) – holding 75.95% of the ordinary
shares on issue
Mardon – 7.67%.
BNP holds the shares on behalf of Smartshares. Smartshares is owned by NZX. It
offers investors access to a comprehensive selection of global and domestic
exchange traded funds across the main investment classes of cash, bonds, shares
and property. Smartshares is the manager of the SuperLife Invest scheme
(SuperLife). SuperLife was acquired by NZX in January 2015.
Appraisal Report, Independent Adviser’s Report
Energy Mad Limited Page 21 and Independent Report
The 2 shareholders collectively hold 83.62% of the ordinary shares in the Company
at present.
Shareholding Levels Post the PaySauce Allotment
The PaySauce Allotment will result in the PaySauce Shareholders increasing their
control of voting rights in Energy Mad from nil to 96.99% without having to make a
formal offer to all shareholders in accordance with Rules 7(a) or 7(b) of the Code. To
do this under the Code requires the Existing Shareholders to have the opportunity to
vote for or against the PaySauce Resolutions.
Shareholding Voting
Smartshares’ current level of voting rights of 75.95% enables it to pass or block both
special resolutions (which require the approval of 75% of the votes cast by
shareholders) and ordinary resolutions (which require the approval of more than 50%
of the votes cast by shareholders). Accordingly, Smartshares currently has
significant control over shareholder voting as it can singlehandedly determine the
outcome of any resolution that it is permitted to vote on.
Following the PaySauce Allotment, the Wijeyeratne Associates’ and the Barnes
Associates’ respective ability to influence the outcome of shareholder voting will be
strong, but will be lower than Smartshares’ current level of control:
the Wijeyeratne Associates’ 35.74% will be able to block a special resolution
but will not be able to singlehandedly determine the outcome of any resolution
the Barnes Associates’ 24.01% will not be able to singlehandedly determine
the outcome of any resolution
if they vote in the same manner, the Wijeyeratne Associates and the Barnes
Associates will be able to collectively determine the outcome of an ordinary
resolution and block a special resolution. However, they will not be able to
collectively pass a special resolution.
The ability for any shareholder to influence the outcome of voting on the Company’s
ordinary resolutions or special resolutions may be reduced by external factors such
as the Company’s constitution, the Code, the Listing Rules and the Act.
We are of the view that the PaySauce Allotment will enable the Wijeyeratne
Associates and the Barnes Associates to exert a high level of shareholder control
over Energy Mad, but their level of control will be much lower than Smartshares is
currently able to exert.
Ability to Creep
Neither the Wijeyeratne Associates nor the Barnes Associates will be able to utilise
the creep provisions of Rule 7(e) of the Code. The creep provisions enable entities
that hold more than 50% and less than 90% of the voting securities in a code
company to acquire up to a further 5% of the code company’s shares per annum
without the need for shareholder approval. None of the Wijeyeratne Associates or
the Barnes Associates will hold more than 50% of the Company’s shares following
the PaySauce Allotment.
Appraisal Report, Independent Adviser’s Report
Energy Mad Limited Page 22 and Independent Report
Board Control
As set out in section 5.4, the Company currently has 3 directors, none of whom are
associates of the PaySauce Shareholders.
If the PaySauce Transactions proceed, the current 3 directors will resign from the
Board and Asantha Wijeyeratne, Andrew Barnes, Gavin Thompson, Mandy Simpson
and Nick Lewis will be appointed as directors of the Company.
A profile of the new directors is set out in section 2 of the Profile entitled PaySauce
and What It Does.
NZX Main Board listed companies must have a minimum of 2 independent directors.
We understand that Ms Simpson and Mr Lewis will meet the criteria defined in the
Listing Rules to be classed as an independent director.
Operations
Following the PaySauce Transactions, PaySauce’s management team will manage
the Company’s operations. A profile of the PaySauce management team is set out
in section 2 of the Profile entitled PaySauce and What It Does.
Protection for Minority Shareholders
While the Wijeyeratne Associates and the Barnes Associates will have significant
control over Energy Mad, they cannot act in an oppressive manner against minority
shareholders. The Act provides a level of protection to minority shareholders.
Furthermore, any transactions between the Company and any shareholder holding
10% or more of the Company’s shares will need to satisfy the requirements of the
Listing Rules with respect to transactions with related parties.
3.8 Dilutionary Impact
The PaySauce Allotment will result in the Existing Shareholders' current collective
shareholdings in the Company being significantly diluted by 97%.
Such a significant level of dilution is a common feature of backdoor listing
transactions. In our view, the issue of dilution is less relevant to Existing
Shareholders than the prospects for the Company following the PaySauce
Transactions compared with the implications if the PaySauce Transactions do not
proceed. This is especially the case given that the Existing Shareholders will retain
their proportionate interests in the assets that Energy Mad currently owns through
the EML Subco Transfer.
3.9 Impact on Share Price and Liquidity
Share Price
A summary of Energy Mad’s daily closing share price and monthly volume of shares
traded from 5 January 2016 is set out in section 5.9.
During the period, Energy Mad’s shares have traded between $0.0010 and $0.0700
at a VWAP of $0.0257. Energy Mad’s VWAP over the past month was $0.0164.
Given that the PaySauce Allotment subscription price of $0.0018 (rounded) is at a
89% discount to the one month VWAP, the Company’s share price could possibly
drop immediately after the PaySauce Allotment.
Appraisal Report, Independent Adviser’s Report
Energy Mad Limited Page 23 and Independent Report
Re-rating of Energy Mad Shares
Energy Mad is effectively now a listed shell company with negative equity and a small
volume of inventory which is gradually being sold. In the year up to the
announcement of the PaySauce Transactions on 2 March 2018, only 2.6% of the
Company’s shares traded at between $0.0010 and $0.0280 per share at a VWAP of
$0.0047.
Following the announcement of the PaySauce Transactions, 3.2% of the Company’s
shares have traded on the NZX Main Board up to 16 November 2018 at between
$0.0050 and $0.0200 per share at a VWAP of $0.0119. The post-announcement
VWAP is 155% higher than the pre-announcement one year VWAP. However, in
dollar terms, the post-announcement VWAP is only $0.0073 higher than the
pre-announcement one year VWAP.
In our view, the prices at which Energy Mad’s shares have traded since the
announcement of the PaySauce Transactions most likely reflect a heavy speculative
element that assumes that not only will the PaySauce Transactions proceed, but that
the value of PaySauce may exceed the $10 million ascribed to it.
Trading in Energy Mad’s shares since 2 March 2018 demonstrates that the PaySauce
Transactions may lead to a re-rating of the Company’s shares. The transformation
of the Company to a cloud-based SaaS payroll solutions provider may lead to greater
demand for the Company’s shares which in turn may lead to higher prices for the
shares. However, the Existing Shareholders should also bear in mind that any
re-rating of the Company’s shares may increase the variability in the share prices
and this may result in the Company’s share price either increasing or decreasing.
While we would expect increased demand for the Company’s shares post the
PaySauce Transactions, we note that the very small free float means that there will
be a limited number of shares available for sale and this may restrict the level of
trading in the Company’s shares.
Liquidity
Trading in the Company’s shares is extremely thin, reflecting that 83.62% of the
shares are currently held by Smartshares and Mardon and the top 10 shareholders
collectively hold 90.34% of the shares.
Existing Shareholders currently have very limited opportunities to sell their shares.
Only 3.9% of the Company’s shares have traded in the past year.
The PaySauce Allotment will not improve the liquidity of the Company’s shares as
the number of shares held by the Existing Shareholders will not change.
However, should the PaySauce Shareholders seek to dispose of some of their
Energy Mad shares, this may result in increased trading in the Company’s shares,
thereby improving liquidity.
Conversely, given that there are no restricted trading constraints on the
Consideration Shares, should one or more of the PaySauce Shareholders look to sell
a significant number of their Consideration Shares, this may depress the Company’s
share price.
Appraisal Report, Independent Adviser’s Report
Energy Mad Limited Page 24 and Independent Report
3.10 Main Advantage to the Existing Shareholders of the PaySauce Transactions
Following the PaySauce Transactions, the Existing Shareholders will collectively hold
3.01% of the shares in a company that provides cloud-based SaaS payroll solutions
as well as their current proportionate interests in the assets currently owned by
Energy Mad.
Currently they hold 100% of the shares in a listed company with total equity of
negative $4.4 million as at 30 September 2018 and whose shares are thinly traded
on the NZX Main Board.
3.11 Main Disadvantage to the Existing Shareholders of the PaySauce Transactions
The main disadvantage to the Existing Shareholders of the PaySauce Transactions
is that the issue of the Consideration Shares under PaySauce Allotment will
significantly dilute their interests in the Company. Their collective shareholding will
be diluted by 97% under PaySauce Allotment from their collective shareholding of
100% at present to 3.01%. However, the EML Subco Transfer will mean that they
still maintain their proportionate interests in the assets currently owned by Energy
Mad.
In our view, the positive aspects of the transformation of the Company significantly
outweighs the dilutionary impact of the PaySauce Transactions.
3.12 Other Issues for the Existing Shareholders to Consider
Change in Business Risk
A detailed analysis of the risks associated with an investment in Energy Mad post the
PaySauce Transactions is set out in section 5 of the Profile entitled Risks to
PaySauce’s Business and Plans and are summarised in section 6.7 of this report.
The analysis highlights the significant level of risk associated with an investment in
the Company post the PaySauce Transactions and the Existing Shareholders need
to be cognisant of the change in the risk profile of their investment in the Company.
Future Requirements for Capital
The PaySauce Transactions represent scrip transactions with no cash being raised.
PaySauce intends to raise approximately $1.15 million as part of the PaySauce
Restructure. This capital raising round will be completed at the time the PaySauce
Transactions are completed. PaySauce will also enter into a $0.5 million loan facility
with CBPL at that time.
The Profile does not discuss what PaySauce’s longer term additional equity capital
requirements are likely to be or how they may be sourced. Section 4 of the Profile
entitled PaySauce’s Financial Information states:
“On the basis of its current trading trajectory, and as a result of the PaySauce
Funding Initiatives, the Proposed Directors are comfortable that the Company
(through PaySauce) will have sufficient funds following Completion of the
Acquisition to fund the transaction costs associated with the Transactions
(including the obligations to fund the payment of outstanding creditors of the
Company and its subsidiaries following completion), as well as PaySauce’s
ongoing funding needs without undertaking any further capital raising before
the end of financial year 31 March 2019.
Appraisal Report, Independent Adviser’s Report
Energy Mad Limited Page 25 and Independent Report
Following completion of the Acquisition, the Company will not undertake a
capital raise which would require the production of a product disclosure
statement under the Financial Markets Conduct Act 2013, or which relies on
clause 19 of Schedule 1 of that Act, until audited financial statements for the
Company (for the financial year ended 31 March 2019) are available.”
Given the nature of early stage high growth technology companies, it is probable that
PaySauce will need to raise additional equity capital at some time beyond the 2019
financial year to fund its growth opportunities.
Existing Shareholders should be cognisant that any equity raisings in the future by
the Company in which they do not participate will lead to further dilution of their
proportionate interests in the Company.
Funding of PaySauce Transactions Costs
Energy Mad’s costs associated with the PaySauce Transactions are estimated to be
in the vicinity of $250,000. The costs include legal fees, Takeovers Panel fees,
Special Division fees, shareholder meeting costs and the cost of this report.
Under the terms of the PaySauce TMA, PaySauce will fund these costs (up to
$250,000) through the Costs Loan, which constitutes an unsecured interest free loan
by PaySauce to the Company.
If the PaySauce Transactions proceed, the Costs Loan will be repayable on demand
at any time following the completion of the transactions.
If the PaySauce Transactions do not proceed (but subject to the paragraph below),
the Company will provide to PaySauce the benefit of, and its title to, the reports and
work in progress on which the advanced funds have been expended in full and final
settlement of the Costs Loan.
If the PaySauce Transactions do not proceed because:
the Existing Shareholders vote against any of the PaySauce Resolutions or
the Company terminates the PaySauce Transactions without cause or
the Founders or the Vendors’ Representative terminates the PaySauce TMA in
accordance with its terms as a consequence of a material breach by the
Company of the PaySauce TMA
then in addition to PaySauce obtaining the benefit and title to the reports and work in
progress, the Costs Loan will convert to an unsecured interest free loan, repayable
by the Company over a 3 year term.
Funding of Energy Mad Creditors
PaySauce has agreed to fund the payment of outstanding creditors of Energy Mad
and its subsidiaries following the completion of the PaySauce Transactions.
Following completion, PaySauce will fund the payment of certain agreed outstanding
debts of Energy Mad and it will guarantee the payment of certain agreed outstanding
debts of EML Subco and IPEM.
Appraisal Report, Independent Adviser’s Report
Energy Mad Limited Page 26 and Independent Report
Benefits to Energy Mad of the Wijeyeratne Associates and the Barnes
Associates as Cornerstone Shareholders
The PaySauce Allotment will position the Wijeyeratne Associates and the Barnes
Associates as important cornerstone investors in the Company, signalling their
confidence in the future prospects of PaySauce.
Existing Shareholder Approval is Required
Pursuant to Rule 7(d) of the Code and Listing Rule 7.3.1, the Existing Shareholders
must approve by ordinary resolution the PaySauce Allotment. This will be effected
by the Existing Shareholders approving by special resolution the PaySauce
Resolutions.
The PaySauce Allotment will not proceed unless the Existing Shareholders approve
the PaySauce Resolutions.
May Increase the Attractiveness of the Company as a Takeover Target
Following the PaySauce Allotment, the Wijeyeratne Associates and the Barnes
Associates will not be able to increase their respective level of shareholdings in the
Company unless they comply with the provisions of the Code and the Listing Rules.
The Wijeyeratne Associates and the Barnes Associates will generally only be able to
acquire more shares in the Company if:
they make a full or partial takeover offer
the acquisition is approved by way of an ordinary resolution of the Company’s
shareholders excluding the Wijeyeratne Associates or the Barnes Associates
the Company makes an allotment of shares which is approved by way of an
ordinary resolution of the Company’s shareholders excluding the Wijeyeratne
Associates or the Barnes Associates
the Company undertakes a share buyback that is approved by the Company’s
shareholders and the Wijeyeratne Associates or the Barnes Associates do not
accept the offer of the buyback.
As discussed in section 3.7, neither the Wijeyeratne Associates nor the Barnes
Associates will be able to utilise the creep provisions of Rule 7(e) of the Code.
If the PaySauce Resolutions are approved and PaySauce is backdoor listed, we
consider it highly unlikely that either the Wijeyeratne Associates or the Barnes
Associates would make a takeover offer for the Company as this would result in
PaySauce being privatised, thereby reversing the backdoor listing transaction.
However, PaySauce, as a listed entity, will have a higher profile and may be more
visible and attractive to potential investors, which may increase the likelihood of a
takeover offer for the Company.
Appraisal Report, Independent Adviser’s Report
Energy Mad Limited Page 27 and Independent Report
3.13 Key Benefit to the PaySauce Shareholders (Including the Wijeyeratne
Associates and the Barnes Associates)
Enhanced Investment Liquidity
Energy Mad offers the PaySauce Shareholders an effective and efficient means to
achieve a listing of PaySauce on a recognised stock exchange.
Backdoor listing PaySauce on the NZX Main Board will provide a number of benefits
to PaySauce and the PaySauce Shareholders:
an enhancement of the PaySauce profile in the market place
the ability to raise equity capital more easily
the ability to use scrip for acquisitions
liquidity for the PaySauce Shareholders.
The Wijeyeratne Associates and the Barnes Associates will exchange their
respective 36.85% and 24.76% investments in a closely held non-listed company for
respective 35.47% and 24.01% shareholdings in a company listed on the NZX Main
Board, thereby enhancing the liquidity of their investments.
3.14 Disadvantages to the PaySauce Shareholders (Including the Wijeyeratne
Associates and the Barnes Associates)
Exposure to the Risks and Regulatory Requirements of Energy Mad
The key risks that are likely to impact upon the business operations of PaySauce are
summarised in section 6.7. The PaySauce Shareholders currently face these risks
through their investment in PaySauce and therefore their risk exposure does not
change to any significant extent.
However, following the PaySauce Transactions, PaySauce will be a subsidiary of the
Company and will be subject to the additional regulatory requirements of the Code
and the Listing Rules.
3.15 Likelihood of the PaySauce Resolutions Being Approved
The PaySauce Resolutions are special resolutions and are interdependent with each
other and the Ecobulb Resolution. All 6 PaySauce Resolutions and the Ecobulb
Resolution must be passed in order for any one resolution of the 6 PaySauce
Resolutions to be passed.
All of the Existing Shareholders are permitted to vote on the PaySauce Resolutions.
The Company’s largest shareholder is Smartshares, holding 75.95% of the
Company’s shares. The manner in which Smartshares votes on the PaySauce
Resolutions will determine the outcome of each resolution.
We understand from the Board that it has discussed the PaySauce Transactions with
Smartshares and Smartshares has offered conditional support of the PaySauce
Transactions.
If Smartshares votes in favour of the PaySauce Resolutions and the Ecobulb
Resolution, then the PaySauce Resolutions are certain to be approved. Conversely,
if Smartshares votes against the PaySauce Resolutions, then the PaySauce
Resolutions are certain not to be approved.
Appraisal Report, Independent Adviser’s Report
Energy Mad Limited Page 28 and Independent Report
In the event that Smartshares abstains from voting on the PaySauce Resolutions,
then the outcome will be determined by the votes of the remaining Existing
Shareholders who collectively hold 24.05% of the voting rights in the Company.
3.16 Implications of the PaySauce Resolutions not Being Approved
If the PaySauce Resolutions are not approved, then the PaySauce Transactions will
not proceed and the Costs Loan will be repayable to PaySauce within 3 years.
Energy Mad had cash of approximately $0.1 million as at 30 September 2018 and its
cash burn rate is currently approximately $20,000 per month.
The Board may continue to operate Energy Mad as a shell company listed on the
NZX Main Board and seek to undertake another backdoor listing transaction. If this
were to happen, there is no certainty as to if, or when, such a transaction could be
completed. In the meantime, Energy Mad would continue to incur operating costs
associated with remaining listed on the NZX Main Board (including directors’ fees,
listing fees, registry fees and audit fees). Accordingly, the Company would need to
raise additional capital from its existing shareholders and / or new shareholders within
a relatively short timeframe.
The non-approval of the PaySauce Transactions could possibly have negative
implications for future capital raising initiatives as potential investors may be hesitant
to invest in the Company – especially if shareholder approval is required.
In the event that the Company cannot raise sufficient capital in the required
timeframe, this may lead to the need to wind up the Company, in which case there
would be no return to the Existing Shareholders as Energy Mad had negative total
equity of $4.4 million as at 30 September 2018.
3.17 Options for Existing Shareholders who do not Wish to Retain Their Investment
in Energy Mad
Sell On-market
Those Existing Shareholders who do not wish to remain shareholders in the
Company after the PaySauce Transactions are completed could possibly sell their
shares on-market. However, given that the Company’s shares are infrequently
traded on the NZX Main Board, that option may not be readily available.
Minority Buy-out Rights Under the Act
If the PaySauce Resolutions are passed, those Existing Shareholders who voted all
of their shares against special resolutions 1, 2, 3 or 4 will be entitled to require the
Company to buy their shares in accordance with the provisions of the Act.
A detailed explanation of the minority buy-out rights is set out in Appendix One of the
notice of special meeting.
3.18 Voting For or Against the PaySauce Resolutions
Voting for or against the PaySauce Resolutions is a matter for individual shareholders
based on their own views as to value and future market conditions, risk profile and
other factors. Shareholders will need to consider these consequences and consult
their own professional adviser if appropriate.
Appraisal Report, Independent Adviser’s Report
Energy Mad Limited Page 29 and Independent Report
4. Evaluation of the Fairness of the PaySauce Transactions
4.1 Basis of Evaluation
The NZX Guidance Note requires the Independent Report to comply with the
requirements for an Appraisal Report.
The NZX Guidance Note also requires the Independent Report to include:
a statement whether there are any possible alternative courses for Energy Mad
other than the proposed transaction
a statement whether or not, in our opinion, the terms of the transaction are fair
and reasonable to shareholders and in the best interests of Energy Mad.
Listing Rule 1.7.2 requires an Appraisal Report to consider whether the consideration
and the terms and conditions of the PaySauce Transactions are fair to the Existing
Shareholders. In our opinion, the PaySauce Transactions will be fair to the Existing
Shareholders if:
the value of PaySauce is equal to or greater than the value of the Consideration
Shares
the Consideration Shares are issued at or above a fair value
the other terms and conditions of the PaySauce Transactions are fair.
We have evaluated the fairness of the PaySauce Transactions by reference to:
the rationale for the PaySauce Transactions
the fairness of the terms of the PaySauce Transactions
the likelihood of alternative transactions
the impact of the PaySauce Transactions on the control of Energy Mad
the impact of the PaySauce Transactions on Energy Mad's share price
other benefits and disadvantages to the Existing Shareholders of the PaySauce
Transactions
the benefits and disadvantages to the PaySauce Shareholders of the
PaySauce Transactions
the implications if the PaySauce Resolutions are not approved.
Our opinion should be considered as a whole. Selecting portions of the evaluation
without considering all the factors and analyses together could create a misleading
view of the process underlying the opinion.
4.2 Evaluation of the Fairness of the PaySauce Transactions
In our opinion, after having regard to all relevant factors, the terms of the
PaySauce Transactions are fair and reasonable to the Existing Shareholders
and are in the best interests of Energy Mad given the options reasonably
available to the Company at the current time.
Appraisal Report, Independent Adviser’s Report
Energy Mad Limited Page 30 and Independent Report
The basis for our opinion is set out in detail in sections 3.3 to 3.16. In summary, the
key factors leading to our opinion are:
the rationale for the PaySauce Transactions is sound
in the absence of the PaySauce Transactions, Energy Mad’s shares have
negligible value at this point in time
the Company is not evaluating any other transactions at this point in time
under the EML Subco Transfer, the Existing Shareholders will retain their
existing proportionate interests in Energy Mad’s assets. However, the EML
Subco Distribution is not expected to provide any return to the Existing
Shareholders following EML Subco’s liquidation in due course
the terms of the PaySauce Transactions are reasonable:
the Purchase Price is reasonable
the issue price of the Consideration Shares is fair to the Existing
Shareholders
the conditions and warranties set out in the PaySauce TMA are in line with
market practice for transactions of this nature and are not unreasonable
the Company’s shares may be re-rated by the market which may improve the
liquidity of the shares and may make the Company a more attractive takeover
target
PaySauce will fund the Company’s costs associated with the PaySauce
Transactions up to $250,000
PaySauce will fund the payment of outstanding creditors of Energy Mad and its
subsidiaries following the completion of the PaySauce Transactions
offsetting these positive aspects, the Existing Shareholders’ proportionate
interests in the Company will be significantly diluted by 97%, the PaySauce
Shareholders will hold 96.99% of the voting rights in the Company, they will
lead the management of the Company’s operations and the risk profile of
Energy Mad will change significantly.
4.3 Implications of the PaySauce Resolutions not being Approved
In the event that any one of the 6 PaySauce Resolutions is not approved, the
PaySauce Transactions will not proceed. The implications of this are set out in
section 3.16.
4.4 Options for Existing Shareholders who do not Wish to Retain Their Investment
in Energy Mad
The options for Existing Shareholders who do not wish to remain shareholders in the
Company after the PaySauce Transactions are completed are set out in section 3.17.
4.5 Voting For or Against the PaySauce Resolutions
Voting for or against the PaySauce Resolutions is a matter for individual shareholders
based on their own views as to value and future market conditions, risk profile and
other factors. Shareholders will need to consider these consequences and consult
their own professional adviser if appropriate.
Appraisal Report, Independent Adviser’s Report
Energy Mad Limited Page 31 and Independent Report
5. Profile of Energy Mad
5.1 Background
The Company was incorporated on 9 November 2005 as Energy Mad Holdings
Limited. It changed its name to Energy Mad Limited on 1 July 2011.
The Company’s key events are set out below.
5.2 Group Structure
The Energy Mad Group consists of the Company and its 5 wholly owned subsidiaries.
5.3 Nature of Operations
Following the Company entering into the Ecobulb Agreement on 5 May 2017, Energy
Mad has undertaken an orderly wind down of its business. The Company now has
no staff, with resources contracted on an as required basis and the Company’s offices
have been closed.
Prior to the wind down, Energy Mad sourced and developed energy saving CFL and
LED light bulbs under the Ecobulb and Ecospiral trademarks.
It sold CFL and LED Ecobulbs through State Government energy efficiency schemes
in Australia and Ecobulb LEDs through its direct to consumer sales channels in
New Zealand.
Energy Mad Limited
Intellectual Property
Energy Mad Limited
(IPEM)
100%
Intellectual property
100%
Investment
Energy Mad Build Limited
(EMB)
100%
Energy efficiency
EcoSmartHomes Limited
(ESH)
100%
Energy efficiency
Energy Mad US LLC
(EMUS)
100%
Energy efficiency
Energy Mad NZ Limited
(EML Subco)
Appraisal Report, Independent Adviser’s Report
Energy Mad Limited Page 32 and Independent Report
5.4 Directors and Senior Management
The directors of Energy Mad are:
David Jarman – independent director
Aidan Johnstone – executive director
Brent Wheeler – independent director, chair.
Aidan Johnstone was appointed general manager – finance and operations in
July 2016, a permanent position that was disestablished in May 2017. Mr Johnstone
continues to manage the orderly wind down of the Energy Mad business under a
casual employment agreement.
5.5 Capital Structure and Shareholders
Energy Mad currently has 175,836,635 fully paid ordinary shares on issue held by
735 shareholders.
The names, number of shares and percentage holding of the 10 largest shareholders
as at 15 November 2018 are set out below.
Energy Mad’s 10 Largest Shareholders
Shareholder No. of Shares Held %
BNP 133,549,530 75.95%
Mardon 13,481,000 7.67%
Mackers Family Holdings Limited (Mackers) 6,435,015 3.66%
Ravlich Trustee Limited (Ravlich TL) 975,000 0.55%
Raymond Larsen and Robyn Larsen 940,000 0.53%
Guixing Jian 800,000 0.45%
Sean Rowe 792,000 0.45%
B.L.M. Construction Limited (BLM) 670,659 0.38%
Robert McWhirter 610,000 0.35%
Roger Williams 590,000 0.34%
Subtotal
158,843,204 90.34%
Others (725 shareholders) 16,993,431 9.66%
Total
175,836,635 100.00%
Source: NZX Company Research
BNP holds the shares on behalf of Smartshares.
Mardon is owned by Chris Mardon and Vernon Mardon.
Mackers is owned by Tom Mackenzie and Donald Mackenzie. Tom Mackenzie is
the Company’s co-founder and a former executive director.
Ravlich TL is owned by Paul Ravlich, the Company’s former chief executive officer
and chief financial officer.
BLM is owned by Barry McEwen and Dinah McEwen.
Appraisal Report, Independent Adviser’s Report
Energy Mad Limited Page 33 and Independent Report
5.6 Financial Performance
A summary of Energy Mad’s recent financial performance is set out below.
Summary of Energy Mad Financial Performance
Year to
31 Mar 16
(Audited)
$000
Year to
31 Mar 17
(Audited)
$000
Year to
31 Mar 18
(Audited)
$000
6 Mths to
30 Sep 18
(Unaudited)
$000
Revenue 8,404 5,327 663 123
Gross profit / (loss) 2,824 1,866 (82) 69
Operating loss (895) (3,395) (522) (263)
Loss for the year (1,263) (3,999) (993) (483)
Source: Energy Mad audited financial statements and interim report 30 September 2018
Following the Company entering into the Ecobulb Agreement on 5 May 2017, Energy
Mad has undertaken an orderly wind down of its business.
The loss of $4.0 million in the 2017 financial year included a $1.7 million provision for
inventory obsolescence, a $0.3 million provision for exit costs associated with the
winding down of the Company’s operations and a $0.9 million impairment charge in
respect of all of the Company’s fixed assets and intangible assets.
The loss of $1.0 million in the 2018 financial year arose from the realisation of
inventory net of selling costs ($0.3 million), administration costs ($0.2 million) and
accrued but unpaid interest costs ($0.5 million).
5.7 Financial Position
A summary of Energy Mad’s recent financial position is set out below.
Summary of Energy Mad Financial Position
As at
31 Mar 16
(Audited)
$000
As at
31 Mar 17
(Audited)
$000
As at
31 Mar 18
(Audited)
$000
As at
30 Sep 18
(Unaudited)
$000
Current assets 5,042 1,748 391 267
Non current assets 974 - - -
Total assets 6,016 1,748 391 267
Current liabilities (4,515) (4,912) (4,555) (4,651)
Non current liabilities (2,885) - - -
Total liabilities (7,400) (4,912) (4,555) (4,651)
Total equity
(1,384) (3,164) (4,164) (4,384)
Source: Energy Mad audited financial statements and interim report 30 September 2018
Energy Mad’s financial position changed significantly following the orderly wind down
of its business. All of its fixed assets and intangible assets were written off in the
2017 financial year and its inventory, receivables and payables balances have
steadily reduced under the wind down.
Energy Mad’s main current assets as at 30 September 2018 were $86,000 of cash
and cash equivalents, a $75,000 NZX bond and $53,000 of trade receivables.
Appraisal Report, Independent Adviser’s Report
Energy Mad Limited Page 34 and Independent Report
Liabilities as at 30 September 2018 consisted mainly of trade payables of
$1.0 million, $3.3 million of loans from SuperLife and Smartshares (including accrued
interest of $0.8 million), $0.2 million from the Costs Loan and $0.1 million of accrued
interest on the convertible notes held by Smartshares.
The convertible notes were converted into 28,400,000 ordinary shares on 22 May
2018 at an issue price of $0.01 per share.
Total equity of negative $4.4 million as at 30 September 2018 consisted of:
share capital – $22.3 million
foreign exchange translation reserve – negative $0.2 million
accumulated losses and reserves – $26.5 million.
5.8 Cash Flows
A summary of Energy Mad’s recent cash flows is set out below.
Summary of Energy Mad Cash Flows
Year to
31 Mar 16
(Audited)
$000
Year to
31 Mar 17
(Audited)
$000
Year to
31 Mar 18
(Audited)
$000
6 Mths to
30 Sep 18
(Unaudited)
$000
Net cash inflow / (outflow) from operating activities (1,748) (1,352) 324 (112)
Net cash (outflow) from investing activities (368) (253) - -
Net cash inflow / (outflow) from financing activities
1,134 1,402 (253) 98
Net increase / (decrease) in cash held (982) (203) 71 (14)
Opening cash balance 1,338 291 57 121
Effect of exchange rate movements (65) (31) (7) (21)
Closing cash balance
291 57 121 86
Source: Energy Mad audited financial statements and interim report 30 September 2018
Prior to the orderly wind down of its business, Energy Mad generated negative cash
flow from its operations and was funded by the issue of shares to SuperLife and loans
from SuperLife and Smartshares.
Appraisal Report, Independent Adviser’s Report
Energy Mad Limited Page 35 and Independent Report
5.9 Share Price History
Set out below is a summary of Energy Mad’s daily closing share price and monthly
volumes of shares traded from 5 January 2016 to 16 November 2018.
Source: NZX Company Research
During the period, Energy Mad’s shares have traded between $0.0010 and $0.0700
at a VWAP of $0.0257.
Trading in the Company’s shares is extremely thin, reflecting that 83.62% of the
shares are currently held by Smartshares and Mardon and the top 10 shareholders
collectively hold 90.34% of the shares.
An analysis of VWAP, traded volumes and liquidity (measured as traded volumes as
a percentage of shares outstanding) is set out below.
Share Trading to 16 November 2018
Period Low
($)
High
($)
VWAP
($)
Volume
Traded
(000)
Liquidity
1 month 0.0160 0.0200 0.0164 330 0.2%
3 months 0.0160 0.0200 0.0165 489 0.3%
6 months 0.0050 0.0200 0.0128 2,991 1.7%
12 months 0.0030 0.0200 0.0107 6,898 3.9%
Source: NZX Company Research
3.9% of the Company’s shares traded on 51 days in the past year at a VWAP of
$0.0107.
Appraisal Report, Independent Adviser’s Report
Energy Mad Limited Page 36 and Independent Report
6. Profile of PaySauce
6.1 Background
PaySauce was founded in 2015 by Asantha Wijeyeratne and Troy Tarrant.
PaySauce was incorporated on 7 January 2015 as Payroll.Kiwi Limited. It changed
its name to PaySauce Limited on 21 November 2017.
6.2 Group Structure
The PaySauce Group consists of PaySauce and its wholly owned subsidiary Right
Remuneration Limited (RRL).
RRL is a registered PAYE intermediary with Inland Revenue and is responsible for
managing customer PAYE payment and filing.
PaySauce is responsible for all other group operations.
6.3 Nature of Operations
A detailed profile of PaySauce is set out in section 2 of the Profile entitled PaySauce
and What It Does. In order to avoid unnecessary repetition, this report does not
include a detailed profile of PaySauce. We recommend that Existing Shareholders
read the Profile in full.
PaySauce provides cloud-based SaaS software solutions. It enables SME owners
to pay staff accurately and efficiently using web, iOS and Android applications.
The services provided by the PaySauce platform include:
mobile timesheets
payroll calculations
integrated banking
PAYE payment and filing
labour costing
automated general ledger entries
digital employment contracts.
PaySauce is SaaS, accessible from any device with access to the internet thereby
allowing customers to pay staff from wherever they are.
Because PaySauce is delivered online, updates and improvements can be
developed and released more rapidly.
PaySauce Limited
Right Remuneration
Limited
100%
Appraisal Report, Independent Adviser’s Report
Energy Mad Limited Page 37 and Independent Report
PaySauce services customers from a broad range of industries including retail,
hospitality, construction, manufacturing and professional services. However, it
focuses primarily on developing its product for use in primary industry SMEs.
PaySauce has stated that as at July 2018, nearly 60% of its customers were primary
industry business owners, with the majority of these in the dairy sector.
PaySauce has stated that it currently services over 1,000 paying employees.
6.4 Directors and Senior Management
The directors of PaySauce are:
Andrew Barnes, chair
Gavin Thompson
Asantha Wijeyeratne.
PaySauce’s senior management team consists of:
Asantha Wijeyeratne – chief executive officer and co-founder
Troy Tarrant – chief technology officer and co-founder
Krishnakumar Guda – chief financial officer
Warren Choisy – head of development
Vicky Taylor – head of customer experience
Rachel Marsland – operations
Logan Tyson – head of growth and partnerships
Ben Colgate – head of design.
6.5 Capital Structure and Shareholders
PaySauce currently has 2,167,602 fully paid ordinary shares on issue held by the
21 PaySauce Shareholders. This is prior to the PaySauce Restructure.
PaySauce Shareholders
Shareholder No. of Shares Held %
Cloud Investments Limited 415,843 19.18%
Troy Tarrant and Gibson Sheat Trustees Limited 366,791 16.92%
CBPL 285,958 13.19%
Asantha Wijeyeratne 250,000 11.53%
Wijeyeratne & Co Limited 250,000 11.53%
Cloud Investments Two Limited 108,333 5.00%
Lisa Bentley and Kevin McDonald Trustee Limited 85,003 3.92%
Ian Frame 51,177 2.36%
Krishnakumar Guda 51,020 2.35%
McKay Nominees Limited 44,376 2.05%
Gavin Thompson 42,676 1.97%
Robert Woodward and Tracey Woodward 42,676 1.97%
Amanda Higgins, Patrick Higgins and Paul Philipson 34,176 1.58%
Cameron McKeown 34,176 1.58%
Bruce Gilmour, Lucy Robertshawe and Tim Aitken 34,014 1.57%
Pradeep Fernando 27,288 1.26%
Corey Marsland and Rachel Marsland 17,088 0.79%
Jennifer Fernando 10,204 0.47%
Hasitha Liyanaarachchi and Saranga Hitihamillage 7,500 0.35%
Andrew Bell 6,803 0.31%
Right Click Universal Limited 2,500 0.12%
Total
2,167,602 100.00%
Source: PaySauce
Appraisal Report, Independent Adviser’s Report
Energy Mad Limited Page 38 and Independent Report
The PaySauce Restructure consists of the issue of 844,481 new PaySauce shares
to the Founders and CBPL in consideration for advisory services provided, 110,577
new PaySauce shares to various employees of PaySauce in consideration for
employment services and 550,481 new PaySauce shares to various new and existing
shareholders to raise approximately $1.15 million of fresh equity.
PaySauce will have 3,673,141 shares on issue following the PaySauce Restructure.
6.6 Growth Opportunities
Section 2 of the Profile entitled PaySauce and What It Does describes the
opportunities for growth that PaySauce has identified. These include:
establishing subsidiaries and recruiting staff in-market to develop its business
in international locations which have similar primary industry SME
characteristics to those found in New Zealand
moving beyond simple payroll provision with a range of new features such as
a digital contract tool (built in partnership with Federated Farmers).
PaySauce announced on 12 September 2018 that it was launching a new service
allowing employees to access their earnings early. The new draw-down service gives
employees interest-free access to money directly from their payroll service provider.
Employees are charged a fixed fee of $3 for the service, regardless of the amount of
the advance.
6.7 Key Issues Affecting PaySauce
The main industry and specific business factors and risks that PaySauce faces are
set out in detail in section 5 of the Profile entitled Risks to PaySauce’s Business and
Plans. They include:
dependence on certain key individuals with specialised knowledge
security risks presented by malicious third parties given that PaySauce is
reliant on information technology systems to manage a large amount of client
funds and extensive personal data
a material failure to comply with statutory and regulatory requirements,
especially the interpretation of payroll legislation
changes in payroll legislation
risks associated with being an early stage technology business, including the
ability to adequately finance its operations.
6.8 Financial Performance
A summary of PaySauce’s recent financial performance is set out below.
Summary of PaySauce Financial Performance
Year to
31 Mar 16
(Unaudited)
$000
Year to
31 Mar 17
(Unaudited)
$000
Year to
31 Mar 18
(Unaudited)
$000
Revenue 10 130 512
Expenses
(311) (680) (1,369)
Loss before taxation (301) (550) (857)
Tax expense - - -
Loss for the year
(301) (550) (857)
Source: PaySauce unaudited financial statements
Appraisal Report, Independent Adviser’s Report
Energy Mad Limited Page 39 and Independent Report
Under its SaaS model, PaySauce derives revenue by charging its customers a
monthly subscription fee. PaySauce has stated that payroll service providers
typically display a “sticky” relationship with customers, meaning clients infrequently
change providers (known as customer churn). PaySauce has stated that its churn
rate is typically less than 0.5% each month.
Revenue in the 2017 and 2018 financial years included sponsorship payments from
ASB Bank of $70,500 and $150,000 respectively. Excluding these, PaySauce’s
revenue for the 2017 and 2018 financial years was $60,000 and $362,000
respectively.
The significant increase in PaySauce’s revenue in the 2018 financial year was due
to growth in its customer base, with the majority of these customers operating dairy
farms.
Further analysis of PaySauce’s financial performance is set out in section 4 of the
Profile entitled PaySauce’s Financial Information.
6.9 Financial Position
A summary of PaySauce’s recent financial position is set out below.
Summary of PaySauce Financial Position
As at
31 Mar 16
(Unaudited)
$000
As at
31 Mar 17
(Unaudited)
$000
As at
31 Mar 18
(Unaudited)
$000
Current assets 453 53 295
Non current assets 183 279 195
Total assets 636 332 490
Current liabilities (207) (273) (168)
Non current liabilities (238) (87) (37)
Total liabilities (445) (360) (205)
Total equity
191 (28) 285
Source: PaySauce unaudited financial statements
PaySauce’s main current assets consist of cash on hand, trade and other receivables
and prepayments. Current assets as at 31 March 2018 included cash on hand of
approximately $204,000.
PaySauce’s non current assets as at 31 March 2018 were fixed assets (mainly
vehicles), intangible assets (mainly software) and branding and establishment costs.
Current liabilities as at 31 March 2018 consisted mainly of sponsorship revenue in
advance, trade payables and leave provisions.
Non current liabilities as at 31 March 2018 consisted of a loan from ASB Bank.
Appraisal Report, Independent Adviser’s Report
Energy Mad Limited Page 40 and Independent Report
7. Reasonableness of the Purchase Price
7.1 Warning About What Purchase Price Means for the Purpose of the PaySauce
Transactions
Existing Shareholders should bear in mind that no cash is being paid by Energy Mad
to the PaySauce Shareholders to effect the PaySauce Transactions. Instead, the
Purchase Price is being satisfied by the issue of the Consideration Shares.
In evaluating the merits of the PaySauce Allotment and the fairness of the PaySauce
Transactions, our primary focus is on the relative shareholdings of the Existing
Shareholders and the PaySauce Shareholders in the Company post the PaySauce
Transactions.
The ascribed Purchase Price of $10.0 million discussed in this section is the figure
agreed between the parties to the PaySauce TMA that is used as a reference point
to reflect the relative shareholdings of the Existing Shareholders (3.01%) and the
PaySauce Shareholders (96.99%) in the Company post the PaySauce Transactions.
It is not intended to represent the amount that a third party would necessarily pay for
PaySauce at this point in time.
7.2 Inability to Undertake a Comprehensive Valuation
It is widely acknowledged that it is extremely difficult to assess the value of emerging
high growth businesses as such businesses lack an operating history and have
minimal asset backing yet exhibit potential for rapid growth and usually have an
inherent instability in their capital structure because of a frequent need for equity
and / or debt financing.
Such businesses are generally valued using the DCF method, with the key inputs
into the DCF analysis being financial projections for the business based on underlying
assumptions regarding key value drivers such as market penetration, pricing for
services, cost structures and capital expenditure.
The Profile does not contain any prospective financial information for PaySauce.
Section 4 entitled PaySauce’s Financial Information states:
“There is no prospective financial information in this Profile. The Proposed
Directors have, following careful consideration and after due enquiry,
concluded that the provision of prospective financial statements for the period
to 31 March 2019, and the subsequent accounting period to 31 March 2020,
may be misleading for potential investors with regard to particulars that are
material to the Acquisition. The Proposed Directors believe that it is not
practicable to formulate reasonable assumptions on which to base prospective
financial statements.
The Proposed Director's reasons for this opinion are as follows:
The Company’s growth to date has been extremely rapid. Although the
Proposed Directors believe that there is no reason that growth may not
continue at similar rates, or possibly even accelerate, it would be
imprudent to forecast growth continuing at historic rates. Equally, given
there is no evidence of PaySauce’s growth slowing, it may be misleading
to produce a forecast which assumed growth at anything less than
historic levels;
Appraisal Report, Independent Adviser’s Report
Energy Mad Limited Page 41 and Independent Report
There are a number of significant growth opportunities available to
PaySauce, both domestically and abroad. These include new markets,
new products, and new clients within existing markets. Several of these
opportunities have the potential to materially positively affect the growth,
profitability, and prospects for PaySauce. However, the effect of these
opportunities on PaySauce’s accounts is not yet certain enough to be
accurately forecast.
Given the inability to reliably determine reasonable assumptions for the periods
that would be covered by prospective financial information, the Proposed
Directors are of the view that any prospective financial statements may be
misleading for potential investors in a material manner because actual
operating revenue or expenditure for that period could be materially different
from that forecast.”
We note that such an approach is not uncommon. A number of early stage
technology companies (such as Snakk Media Limited, Geo Limited (Geo) and
Pushpay Holdings Limited) chose not to disclose any prospective financial
information in their disclosure documents when they undertook compliance listings
on the NZX Alternative Market (the NZAX). In all 3 instances, the companies
acknowledged that the businesses were early stage businesses with limited track
records and therefore their future financial performance could not be forecast with
any degree of precision.
In the absence of any prospective financial information for PaySauce, it is not
possible to undertake an in-depth valuation analysis of PaySauce or form any
definitive conclusions as to the value of PaySauce at this point in time.
7.3 Assessment of the Reasonableness of the Purchase Price
Given that it is not possible to undertake an in-depth assessment of the value of
PaySauce, we have reviewed the reasonableness of the Purchase Price by way of
reference to:
the implied revenue multiples based on the Purchase Price
the prices at which PaySauce has recently issued shares.
7.4 Implied Revenue Multiples
Overview
In the absence of suitable cash flow forecasts, we have assessed the
reasonableness of the Purchase Price by reviewing the implied revenue multiple and
comparing this with observed revenue multiples for comparable companies.
Early stage SaaS businesses are frequently loss making. As a result, investors and
analysts have tended to default to valuing these businesses on a revenue multiple
basis. Commonly, the enterprise value of the SaaS business is derived by applying
a prospective revenue multiple to the business’ ARR.
Annualised Recurring Revenue
PaySauce has not provided any prospective financial information in the Profile and
has not provided any prospective financial information to Energy Mad.
PaySauce’s unaudited monthly revenue and ARR (calculated by annualising the last
quarter’s revenue and the last month’s revenue (and excluding any sponsorship
revenue)) from April 2015 to October 2018 is set out in the graph below.
Appraisal Report, Independent Adviser’s Report
Energy Mad Limited Page 42 and Independent Report
Source: PaySauce
PaySauce’s ARR (calculated on a quarterly basis so as to reduce the impact of
cyclicality in monthly revenue) was approximately $861,000 as at 31 October 2018
and approximately $367,000 as at 31 October 2017. This equates to an annual
growth rate of 135%. We note that this figure has not been verified by an audit or
due diligence procedures.
We have adopted PaySauce’s ARR (on a quarterly basis) of approximately $861,000
as at 31 October 2018 for the purposes of our reasonableness assessment.
Key Factors Driving Revenue Multiples
In our view, the following criteria are key factors for assessing an appropriate revenue
multiple for a SaaS business:
forecast revenue growth – the higher the level of forecast growth, the higher
the multiple
return on investment (ROI) on sales and marketing spend – the higher the ROI,
the higher the multiple
earnings margin – the higher the margin, the higher the multiple
the size of the business – the larger the business, the higher the multiple.
In order to assess an appropriate revenue multiple for PaySauce, we have reviewed:
observed multiples for publicly traded companies that are generally comparable
with PaySauce
observed multiples from transactions involving entities that are generally
comparable with PaySauce.
Implied Revenue Multiple
Based on the Purchase Price, the implied enterprise value of PaySauce is
$10.0 million as the PaySauce Acquisition is to be transacted on a debt free / cash
free basis.
An enterprise value of $10.0 million and ARR (on a quarterly basis) of $861,000
implies a revenue multiple of 11.6x for PaySauce.
-
100
200
300
400
500
600
700
800
900
1,000
Apr 15 Jun 15 Aug 15 Oct 15 Dec 15 Feb 16 Apr 16 Jun 16 Aug 16 Oct 16 Dec 16 Feb 17 Apr 17 Jun 17 Aug 17 Oct 17 Dec 17 Feb 18 Apr 18 Jun 18 Aug 18 Oct 18
Revenue ($000)
PaySauce ARR
Monthly revenueARR (based on last quarter)ARR (based on last month)
Appraisal Report, Independent Adviser’s Report
Energy Mad Limited Page 43 and Independent Report
Comparable Companies’ Revenue Multiples
We are unable to identify any listed companies on the NZX Main Board, NZAX or
overseas securities exchanges that are fully comparable with PaySauce.
In the absence of truly comparable companies, we have reviewed the historic and
prospective revenue multiples for New Zealand listed software companies and an
ASX-listed talent management SaaS company (the Software / SaaS Companies).
Trading Multiples
Set out at Appendix I is an analysis of historic and prospective revenue multiples and
revenue growth rates for 8 NZX Main Board and NZAX software companies as well
as Xero Limited (Xero), which recently migrated its primary listing from the NZX Main
Board to the ASX. Also set out at Appendix I is an analysis of the historic and
prospective revenue multiples and revenue growth rates for Elmo Software Limited
(Elmo). Elmo is listed on the ASX and provides SaaS, cloud-based human resource
and payroll solutions for organisations in Australia, New Zealand and Singapore.
The historic revenue multiples (based on the companies’ last 12 months’ revenue)
range from 0.9x to 14.2x and the prospective revenue multiples (based on the
companies’ next financial year’s revenue) range from 0.9x to 11.6x.
The graphs that follow plot historic and prospective revenue multiples, historic and
forward revenue growth rates and enterprise values for the Software / SaaS
Companies and the historic revenue multiple and historic revenue growth rate for
PaySauce.
Source: S&P Capital IQ, data as at 16 November 2018
Appraisal Report, Independent Adviser’s Report
Energy Mad Limited Page 44 and Independent Report
Source: S&P Capital IQ, data as at 16 November 2018
The analysis shows a relatively strong correlation between revenue multiples and
revenue growth rates. Companies with lower growth rates tend to have lower
revenue multiples and vice versa.
The observed revenue multiples are based on trading prices for minority parcels and
as such do not include any premium for control. PaySauce is a private company with
significantly less liquidity than the Software / SaaS Companies. We would expect
any control premium for PaySauce to be largely offset by a private company illiquidity
discount.
Transaction Multiples
There is negligible publicly available data in respect of transactions that involve target
companies that are directly comparable with PaySauce.
Summarised below is data in respect of 2 transactions which provide some
assistance in the evaluation of the reasonableness of the implied revenue multiple
for PaySauce:
Geo acquired InterfaceIT Pty Limited (Interface) on 1 June 2016. Interface
provides door-to-door sales and sales tracking software for managing
face-to-face sales. The transaction implied an enterprise value of $10 million
at a historic revenue multiple of 4.2x and a prospective revenue multiple of 4.0x.
Interface’s historic revenue growth rate was 10% and its prospective revenue
growth rate was 5%
Insight Venture Partners acquired Diligent Corporation (Diligent) on 14 April
2016. Diligent develops and commercialises Diligent Boards, an online
software application that allows board members, management and
administrative staff to produce, deliver, review and vote on board materials.
The transaction implied an enterprise value of US$582 million at a historic
revenue multiple of 5.9x and a prospective revenue multiple of 4.6x. Diligent’s
historic revenue growth rate was 20% and its prospective revenue growth rate
was 23%.
Appraisal Report, Independent Adviser’s Report
Energy Mad Limited Page 45 and Independent Report
Conclusion
PaySauce’s annual growth in ARR as at 31 October 2018 was 135%, which is well
above the average growth rates for the Software / SaaS Companies and largely
reflects the early stage nature of the PaySauce business. Accordingly, we would
expect that an appropriate revenue multiple for PaySauce would be well above the
average revenue multiples observed for the Software / SaaS Companies.
Based on our analysis of the Software / SaaS Companies’ trading multiples and
transaction multiples, we consider the implied revenue multiple for PaySauce of
11.6x to be not unreasonable, albeit at the upper end of what would be considered
reasonable.
7.5 Recent Capital Raisings
PaySauce has undertaken 2 rounds of capital raising since its incorporation in 2015
and will undertake a third round as part of the PaySauce Restructure:
the first round took place between 27 February 2015 and 15 March 2016, where
341,760 shares were issued at $1.46 per share, raising approximately
$0.5 million
the second round took place between 31 January 2017 and 21 March 2018,
where 510,053 shares were issued at $2.94 per share, raising approximately
$1.5 million
the third round will take place as part of the PaySauce Restructure, where
550,481 shares will be issued at $2.08 per share, raising approximately
$1.15 million. This capital raising round will be completed at the time the
PaySauce Transactions are completed.
The third capital raising round implies an after-the-money valuation of PaySauce in
the vicinity of $7.6 million, based on there being 3,673,141 shares on issue and a
share price of $2.08.
Implied Value of PaySauce from Capital Raising Rounds
Round
Dates No. of Shares
Issued
Issue Price
($)
Capital Raised
($000)
After-the-Money
Value ($000)
1 Feb 15 – Mar 16 341,760 $1.46 499 2,420
2 Jan 17 – Mar 18 510,053 $2.94 1,500 6,373
3 Current 550,481 $2.08 1,145 7,640
The Purchase Price of $10.0 million is 31% higher than the implied value of
PaySauce based on the most recent capital raising round.
We note that it is not uncommon for subsequent capital raising rounds for early stage
high growth technology companies to be at higher valuations than the previous
capital raising round.
7.6 Conclusion
Based on the comparison of the implied PaySauce revenue multiple with the
observed revenue multiples for the Software / SaaS Companies and the most recent
capital raising round, we are of the view that the Purchase Price of $10.0 million is
not unreasonable, albeit at the upper end of what would be considered reasonable.
We stress that we have not undertaken an in-depth valuation assessment of
PaySauce and, in the absence of detailed financial projections, it is not possible to
do so at this point in time. Accordingly, we are not in a position to provide an opinion
on the value of PaySauce at the present date.
Appraisal Report, Independent Adviser’s Report
Energy Mad Limited Page 46 and Independent Report
8. Reasonableness of the PaySauce Allotment Issue Price
8.1 Basis of Setting the Issue Price
The PaySauce Allotment involves the issue of 5,667,706,766 ordinary shares at
$0.0018 (rounded) per share for a total consideration of $10.0 million.
We are advised by the Board that the issue price of $0.0018 (rounded) was based
on a negotiated value of $310,243 for the Company’s 175,836,635 shares currently
on issue. The value of $310,243 was set by reference to Energy Mad’s average
market capitalisation prior to when the Term Sheet was negotiated.
8.2 Assessment of the Reasonableness of the Issue Price
We have assessed the reasonableness of the issue price of $0.0018 (rounded) per
share by reference to:
the prices at which the Company’s shares have recently traded on the NZX
Main Board prior to the announcement of the PaySauce Transactions
the prices at which the Company has recently issued shares
the asset backing of the shares.
8.3 Share Price History
A summary of Energy Mad’s daily closing share price and monthly volumes of shares
traded since 5 January 2016 is set out in section 5.9.
The Consideration Shares issue price of $0.0018 (rounded) per share is significantly
lower than the trading prices for Energy Mad’s shares over the past 12 months up to
the announcement of the PaySauce Transactions on 2 March 2018.
The issue price of $0.0018 (rounded) share represents:
a discount of 41% to the Company’s share price immediately prior to the
announcement of the PaySauce Transactions of $0.0030
a discount of 41% to the 1 month VWAP of $0.0030
a discount of 73% to the 3 months VWAP of $0.0065
Appraisal Report, Independent Adviser’s Report
Energy Mad Limited Page 47 and Independent Report
a 51% discount to the 6 months VWAP of $0.0036
a 62% discount to the 12 months VWAP of $0.0047.
In our view, little reliance can be placed on the observed share prices as an indication
of the fair value of the Energy Mad shares given the very thin trading. We are of the
view that the observed trading prices are based largely on speculation by the
purchasers of the shares that following the announcement by the Company on 9 May
2017 that it was winding down its operations, Energy Mad would undertake a
backdoor listing that may be value enhancing.
8.4 Share Issues
Energy Mad’s last 2 share issues arose from the conversion of convertible notes held
by Smartshares:
the issue of 28,400,000 ordinary shares on 22 May 2018 at $0.01 per new
ordinary share following the conversion of $284,000 of convertible notes.
Smartshares and Energy Mad agreed a conversion price of $0.01 per share
the issue of 69,875,776 ordinary shares on 20 February 2017 at $0.0322 per
new ordinary share following the conversion of $2,250,000 of convertible notes.
The conversion price was based on the 5 day VWAP prior to conversion.
8.5 Net Assets per Share
Energy Mad's total equity amounted to negative $4.4 million as at 30 September
2018, equating to net assets of negative $0.0249 per share.
The nature of the Company’s assets (cash, trade receivables and a NZX bond) is
such that their carrying values represent reasonable proxies of their market values.
As a listed shell company, Energy Mad’s only material intangible asset is likely to be
its NZX Main Board listing. In general terms, the value ascribed to a NZX Main Board
/ NZAX listing is a function of the costs saved by a company undertaking a backdoor
listing or reverse listing rather than undergoing an initial public offering (IPO) or
compliance listing.
The costs of an IPO (when a company seeks to raise capital at the time of its listing)
can be significant due to brokerage fees as well as other expenses such as share
registry expenses, legal fees, accounting fees, advertising costs, printing costs and
postage costs associated with preparing a product disclosure statement. However,
the costs associated with a compliance listing, where a company’s shares are listed
but no new capital is raised, are considerably lower.
Recent backdoor listings and reverse listings on the NZX Main Board / NZAX have
ascribed values in the range of $200,000 to $450,000 to the NZX Main Board / NZAX
listings.
We consider a reasonable value for Energy Mad’s NZX Main Board listing to be in
the range of $200,000 to $450,000.
Appraisal Report, Independent Adviser’s Report
Energy Mad Limited Page 48 and Independent Report
Based on the above, we are of view that the value of Energy Mad shares prior to the
PaySauce Transactions, and in the absence of any alternative transaction, is
negligible.
Value of Energy Mad Shares Prior to the PaySauce Transactions
Total Per Share
Low
$000
High
$000
Low
$
High
$
Net assets as at 30 September 2018 (4,384) (4,384) (0.0249) (0.0249)
Value of NZX Main Board listing 200 450 0.0011 0.0026
Value of Energy Mad shares
(4,184) (3,934) (0.0238) (0.0224)
A value of $0.0018 (rounded) per Energy Mad share implies a value of approximately
$4.5 million for Energy Mad’s NZX Main Board listing. We consider this implied value
to be significantly higher than the market value of a NZX Main Board listing and
therefore is extremely favourable to the Existing Shareholders.
8.6 Conclusion
The Company has been totally reliant on the funding in the form of loans provided by
SuperLife and Smartshares over a number of years. Even after allowing for the value
of the Company’s NZX Main Board listing, we are of view that the value of Energy
Mad’s shares prior to the PaySauce Transactions, and in the absence of any
alternative transaction, is negligible.
We consider the issue price of $0.0018 (rounded) per share under the PaySauce
Allotment to be reasonable from the perspective of the Existing Shareholders as it
significantly exceeds the asset backing of the shares, even allowing for the value of
the Company’s NZX Main Board listing.
The Consideration Shares issue price represents a discount of 89% to the recent
VWAP. However, we consider the current share price for Energy Mad reflects a
heavy speculative element and is not necessarily reflective of the fair market value
of the shares.
Appraisal Report, Independent Adviser’s Report
Energy Mad Limited Page 49 and Independent Report
9. Sources of Information, Reliance on Information, Disclaimer
and Indemnity
9.1 Sources of Information
The statements and opinions expressed in this report are based on the following main
sources of information:
the draft notice of special meeting
the draft Profile
the Ecobulb Agreement
the Term Sheet
the PaySauce TMA
the Energy Mad annual reports for the years ended 31 March, 2016 to 2018
the Energy Mad interim report for the 6 months ended 30 September 2018
data in respect of Energy Mad from NZX Company Research and S&P Capital
IQ
data in respect of PaySauce from PaySauce, including the PaySauce
consolidated financial statements for the years ended 31 March, 2016 to 2018
data in respect of comparable companies from NZX Company Research and
S&P Capital IQ.
During the course of preparing this report, we have had discussions with and / or
received information from the Board and executive management of Energy Mad and
Energy Mad’s legal advisers.
The Board has confirmed that we have been provided for the purpose of this
Appraisal Report, Independent Adviser’s Report and Independent Report with all
information relevant to the Ecobulb Transaction and the PaySauce Transactions that
is known to them and that all the information is true and accurate in all material
aspects and is not misleading by reason of omission or otherwise.
Including this confirmation, we have obtained all the information that we believe is
desirable for the purpose of preparing this Appraisal Report, Independent Adviser’s
Report and Independent Report.
In our opinion, the information to be provided by Energy Mad to the Non-associated
Shareholders is sufficient to enable the Board and the Non-associated Shareholders
to understand all the relevant factors and to make an informed decision in respect of
the Ecobulb Transaction.
In our opinion, the information to be provided by Energy Mad to the Existing
Shareholders is sufficient to enable the Board and the Existing Shareholders to
understand all the relevant factors and to make an informed decision in respect of
the PaySauce Transactions.
Appraisal Report, Independent Adviser’s Report
Energy Mad Limited Page 50 and Independent Report
9.2 Reliance on Information
In preparing this report we have relied upon and assumed, without independent
verification, the accuracy and completeness of all information that was available from
public sources and all information that was furnished to us by Energy Mad and its
advisers.
We have evaluated that information through analysis, enquiry and examination for
the purposes of preparing this report but we have not verified the accuracy or
completeness of any such information or conducted an appraisal of any assets. We
have not carried out any form of due diligence or audit on the accounting or other
records of Energy Mad or PaySauce. We do not warrant that our enquiries would
reveal any matter which an audit, due diligence review or extensive examination
might disclose.
9.3 Disclaimer
We have prepared this report with care and diligence and the statements in the report
are given in good faith and in the belief, on reasonable grounds, that such statements
are not false or misleading. However, in no way do we guarantee or otherwise
warrant that any forecasts of future profits, cash flows or financial position of Energy
Mad or PaySauce will be achieved. Forecasts are inherently uncertain. They are
predictions of future events that cannot be assured. They are based upon
assumptions, many of which are beyond the control of Energy Mad or PaySauce and
their respective directors and management teams. Actual results will vary from the
forecasts and these variations may be significantly more or less favourable.
We assume no responsibility arising in any way whatsoever for errors or omissions
(including responsibility to any person for negligence) for the preparation of the report
to the extent that such errors or omissions result from our reasonable reliance on
information provided by others or assumptions disclosed in the report or assumptions
reasonably taken as implicit, provided that this shall not absolve Simmons Corporate
Finance from liability arising from an opinion expressed recklessly or in bad faith or
which cannot be disclaimed by law.
Our evaluation has been arrived at based on economic, exchange rate, market and
other conditions prevailing at the date of this report. Such conditions may change
significantly over relatively short periods of time. We have no obligation or
undertaking to advise any person of any change in circumstances which comes to
our attention after the date of this report or to review, revise or update our report.
We have had no involvement in the preparation of the notice of special meeting or
the Profile issued by Energy Mad and have not verified or approved the contents of
the notice of special meeting or the Profile. We do not accept any responsibility for
the contents of the notice of special meeting or the Profile except for this report.
9.4 Indemnity
Energy Mad has agreed that, to the extent permitted by law, it will indemnify Simmons
Corporate Finance and its directors and employees in respect of any liability suffered
or incurred as a result of or in connection with the preparation of the report. This
indemnity does not apply in respect of any negligence, wilful misconduct or breach
of law. Energy Mad has also agreed to indemnify Simmons Corporate Finance and
its directors and employees for time incurred and any costs in relation to any inquiry
or proceeding initiated by any person. Where Simmons Corporate Finance or its
directors and employees are found liable for or guilty of negligence, wilful misconduct
or breach of law or term of reference, Simmons Corporate Finance shall reimburse
such costs.
Appraisal Report, Independent Adviser’s Report
Energy Mad Limited Page 51 and Independent Report
10. Qualifications and Expertise, Independence, Declarations and
Consents
10.1 Qualifications and Expertise
Simmons Corporate Finance is a New Zealand owned specialist corporate finance
advisory practice. It advises on mergers and acquisitions, prepares independent
expert's reports and provides valuation advice.
The person in the company responsible for issuing this report is Peter Simmons,
B.Com, DipBus (Finance), INFINZ (Cert).
Simmons Corporate Finance and Mr Simmons have significant experience in the
independent investigation of transactions and issuing opinions on the merits and
fairness of the terms and financial conditions of the transactions.
10.2 Independence
Simmons Corporate Finance does not have at the date of this report, and has not
had, any shareholding in or other relationship with Energy Mad, Ecobulb or PaySauce
or any conflicts of interest that could affect our ability to provide an unbiased opinion
in relation to these transactions.
Simmons Corporate Finance has not had any part in the formulation of the Ecobulb
Transaction or the PaySauce Transactions or any aspects thereof. Our sole
involvement has been the preparation of this report.
Simmons Corporate Finance will receive a fixed fee for the preparation of this report.
This fee is not contingent on the conclusions of this report or the outcome of the
voting in respect of the Ecobulb Resolution or the PaySauce Resolutions. We will
receive no other benefit from the preparation of this report.
10.3 Declarations
An advance draft of this report was provided to the Board for its comments as to the
factual accuracy of the contents of the report. Changes made to the report as a result
of the circulation of the draft have not changed the methodology or our conclusions.
Our terms of reference for this engagement did not contain any term which materially
restricted the scope of the report.
10.4 Consents
We consent to the issuing of this report in the form and context in which it is to be
included in the notice of special meeting to be sent to Energy Mad’s shareholders.
Neither the whole nor any part of this report, nor any reference thereto may be
included in any other document without our prior written consent as to the form and
context in which it appears.
Peter Simmons
Director
Simmons Corporate Finance Limited
19 November 2018
Appraisal Report, Independent Adviser’s Report
Energy Mad Limited Page 52 and Independent Report
Appendix I
Software / SaaS Companies’ Trading Multiples
Trading Multiples
Company
Market
Capitalisation
($m)
Enterprise
Value
($m)
Revenue Multiple Revenue Revenue Growth
Historic Prospective
LTM
($m)
CY+1
($m)
LTM CY+1
NZX Main Board Software Companies
EROAD $195 $200 3.9x 3.1x $52 $64 57% 25%
Gentrack $670 $708 7.2x 6.6x $98 $108 45% 10%
Geo $13 $14 7.5x n/a $2 n/a 3% n/a
Orion Health $228 $232 1.4x 1.3x $170 $179 (15%) 5%
Pushpay $896 $883 12.6x 6.6x $70 $136 105% 94%
Serko $264 $260 14.2x 11.3x $18 $23 28% 26%
SLI Systems $39 $30 0.9x 0.9x $34 $34 7% 0%
Vista
$625 $623 5.3x 4.9x $117 $127 20% 19%
Minimum $13 $14 0.9x 0.9x $2 $23 (15%) 0%
Median $246 $246 6.3x 4.9x $61 $108 24% 19%
Average $366 $369 6.6x 5.0x $70 $96 31% 26%
Maximum $896 $883 14.2x 11.3x $170 $179 105% 94%
ASX Relevant SaaS Companies
Elmo A$390 A$348 13.1x 10.2x A$27 A$34 60% 29%
Xero A$5,660 A$6,027 13.8x 11.6x A$475 A$518 38% 27%
LTM: Last 12 months
CY+1: Next financial year
n/a: Not available
n/m: Not meaningful
Source: S&P Capital IQ, data as at 16 November 2018
EROAD Limited is a transport technology and services company that provides electronic
on-board units and SaaS to the heavy vehicle industry in New Zealand and internationally.
Gentrack Limited develops, implements and supports enterprise billing and customer
management software solutions for electricity, gas and water utilities and airports.
Geo Limited develops and deploys cloud based mobile workforce productivity technologies
in New Zealand and internationally.
Orion Health Group Limited provides health information exchange and healthcare
integration solutions worldwide.
Pushpay Holdings Limited provides mobile commerce and payment solutions to the faith
sector, not-for-profit organisations and education providers in New Zealand, the USA,
Canada and Australia.
Serko Limited provides computer software solutions for the management and
administration of corporate travel bookings in New Zealand, Australia, India, Singapore, the
USA and internationally.
Appraisal Report, Independent Adviser’s Report
Energy Mad Limited Page 53 and Independent Report
SLI Systems Limited provides site search and navigation technologies to connect site
visitors with products on e-commerce websites in New Zealand, the USA, Australia, the
United Kingdom and Japan. The company received a takeover offer on 13 November 2018
from ESW Holdings Inc.
Vista Group International Limited provides cinema management, film distribution and
customer analytics software solutions to companies across the global film industry.
Elmo Software Limited provides SaaS cloud-based human resource and payroll solutions
for organisations in Australia, New Zealand and Singapore.
Xero Limited provides a platform for online accounting and business services to small
businesses and their advisers in New Zealand, Australia, the United Kingdom and North
America.
---
LODGE YOUR PROXY
Online:
https://investorcentre.linkmarketservices.co.nz/voting/MAD
Scan & email:
meetings@linkmarketservices.co.nz Mail:
Fax: +64 9 375 5990 Use the enclosed reply paid
Deliver: envelope or address to :
Link Market Services Limited Link Market Services Limited
Level 11, Deloitte Centre, PO Box 91976
80 Queen Street, Auckland 1010 Auckland 1142
Scan this QR code with your smartphone and vote online
General Enquiries
+64 9 375 5998 | enquiries@linkmarketservices.com
PROXY FORM/ADMISSION CARD FOR ENERGY MAD LIMITED’S 2018 SPECIAL MEETING
A Special Meeting of Shareholders of Energy Mad Limited ("Company") will be held on Thursday, 6 December 2018 at [10:00am at Link Market
Services, Level 11, Deloitte Centre, 80 Queen Street, Auckland, New Zealand. If you will attend the Meeting, please bring this form to assist
with your registration. If you will not attend the Meeting but wish to be represented by proxy, please complete and return this form (in
accordance with the lodgement instructions above) to Energy Mad’s share registry, Link Market Services, by no later than 10:00am, Tuesday, 4
December 2018. You can also appoint your proxy and vote on the resolutions on the reverse of this form online by going to
https://investorcentre.linkmarketservices.co.nz/voting/MAD or by scanning the QR code above with your smartphone.
Appointment of proxy
A proxy need not be a shareholder of the Company. The Chairman of the Meeting and the Directors are prepared to act as proxy, and a
shareholder who wishes to do so may appoint the Chairman of the Meeting or a Director to act as proxy. A proxy will vote as directed in the
proxy form or, if voting is left to the proxy’s discretion, then the proxy will decide how to vote on the resolutions. If the Chairman or a Director is
appointed as proxy and the voting is left to his discretion, the Chairman or Director (as applicable) intends to vote in favour of all resolutions. If
you do not appoint a proxy your Proxy Form will be invalid.
Voting of your holding
If you appoint a proxy you must either direct the proxy how to vote by ticking the “For”, “Against” or “Abstain” box in respect of each resolution
OR by ticking the “Proxy Discretion” box in respect of each resolution. A shareholder can direct the proxy holder in respect of one or more
resolutions and give the proxy holder discretion in respect of other resolutions. If you tick the “Proxy Discretion” box for a particular resolution,
your proxy will decide how to vote that resolution. If you do not tick any box for a particular resolution, then your instruction will be to abstain. If
you make more than one election in respect of a resolution your vote will be invalid on that resolution.
Attending the meeting
The persons who will be entitled to vote on the resolutions at the Special Meeting are those persons who will be the shareholders of the
Company at 5:00pm on Tuesday, 4 December 2018. If you wish to vote in person, you should attend the Meeting. Please bring this form with
you to the Meeting to assist with your registration. A corporation may appoint a person to attend and vote at the Meeting as its representative
in the same manner as that in which it could appoint a proxy. That person need not also be a shareholder.
Signing instructions for proxy forms
Individual
Where the holding is in one name, the shareholder must sign the Proxy Form.
Joint Holding
If you are joint holders of shares, each of you must sign this Proxy Form. If any of the shareholders is a company, this Proxy Form must be signed
on behalf of the company by a person acting under the company’s express or implied authority.
Power of Attorney
If this Proxy Form has been signed under a power of attorney (“POA”), a copy of the POA (unless already noted by the Company or its registry)
and a signed certificate of non-revocation of the POA must be produced to Energy Mad with this Proxy Form.
Corporate Shareholder
Any corporation that is a shareholder of Energy Mad may appoint a person as its representative to attend the meeting and vote on its behalf,
in the same manner as that in which it could appoint a proxy.
To insert QR
code
Resolution 1 – Ecobulb Asset Sale***
1. That, in accordance with Listing Rules 9.1.1 and 9.2.1 of the NZX Main Board
Listing Rules ("Listing Rules") and section 129 of the Companies Act 1993
("Companies Act"), and pursuant to the agreement for the sale and purchase of
assets entered into between the Company, Energy Mad NZ Limited ("EML
SubCo"), Intellectual Property Energy Mad Limited, Energy Mad Build Limited
(together, the "Ecobulb Vendors") and Ecobulb Limited ("Ecobulb
Agreement"), the Ecobulb Vendors sell to Ecobulb Limited all of the assets set
out in the Ecobulb Agreement, and the transactions described in the Ecobulb
Agreement are approved, and the Directors of the Company be authorised to
take all actions, do all things and execute all documents and agreements as
necessary or considered by them to be expedient to give effect to such
transactions.***
Resolution 2 – EML Intercompany Loan Forgiveness
2. That, in accordance with Listing Rule 9.1.1 and section 129 of the Companies
Act, the forgiveness of any intercompany loan balances owing between the
Company on the one hand and EML Subco, Intellectual Property Energy Mad
Limited, Energy Mad Build Limited, EcoSmartHome Limited or Energy Mad US
LLC on the other hand (the “EML Intercompany Loan Forgiveness”) is
approved, and the Directors of the Company be authorised to take all actions, do
all things and execute all documents and agreements as necessary or
considered by them to be expedient to give effect to the EML Intercompany Loan
Forgiveness.
Resolution 3 – EML Subco Dsibtribution
3. That, in accordance with Listing Rule 9.1.1 and section 129 of the Companies
Act, the Company distribute in-specie all of the fully paid ordinary shares in EML
Subco to the existing shareholders of the Company as at 5:00pm on 7 December
2018 ("Record Date") on a pro rata basis for no cash consideration ("EML
Subco Distribution") and that the Directors be authorised to take all actions, do
all things and execute all documents and agreements as necessary or
considered by them to be expedient to give effect to the EML Subco Distribution.
PROXY/CORPORATE REPRESENTATIVE FORM
STEP 1: APPOINT A PROXY TO VOTE ON YOUR BEHALF
I/We being a shareholder/s of Energy Mad Limited hereby appoint:
of
(Full Name) (Full Address)
Or of
(Full Name) (Full Address)
as my/our proxy to vote for me/us on my/our behalf at the Special Meeting of Shareholders to be held on Thursday, 6 December 2018 at
10:00am at Link Market Services, Level 11, Deloitte Centre, 80 Queen Street, Auckland, New Zealand, and at any adjournment of that meeting,
and to vote as my/our proxy thinks fit on any resolutions to amend any of the resolutions, or any resolution so amended and on any other
resolution proposed at the Special Meeting (or any adjournment thereof) so as to give effect to my/our intention as set out below where
possible.
STEP 2: ITEMS OF BUSINESS – PROXY VOTING INSTRUCTIONS
Complete this part if you have appointed a proxy above and you want to direct the proxy as to how the proxy should vote.
Please note: For each resolution you must tick one box.
ITEMS OF BUSINESS
To consider and, if thought fit, pass the following special resolutions:
For Against Abstain* Discretion**
For Against Abstain* Discretion**
For Against Abstain* Discretion**
Resolution 4 – Acquisition
4. That, in accordance with Listing Rule 9.1.1 and section 129 of the Companies
Act, and pursuant to the Transaction Management Agreement dated 9 August
2018 entered into between the Company, EML Subco, the shareholders of
PaySauce Limited ("Vendors"), Asantha Wijeyeratne and Troy Tarrant (as the
founders of PaySauce) and Coulthard Barnes Capital Limited ("Acquisition
Agreement"), the Company acquire the business and assets of PaySauce
Limited ("PaySauce") through the acquisition of 100% of the shares on issue in
PaySauce ("Acquisition"), and that the Directors be authorised to take all
actions, do all things and execute all documents and agreements as necessary
or considered by them to be expedient to give effect to the Acquisition.
Resolution 5 – Issue of Consideration Shares
5. That, in accordance with Listing Rules 7.3.1 and 9.1.1 and rule 7(d) of the
Takeovers Code (as set out at Schedule 1 of the Takeovers Regulations 2000)
("Takeovers Code"), the Company issue 5,667,706,766 fully paid ordinary
shares ("Consideration Shares") to the Vendors (or their nominees), at an
issue price of 0.18 cents per share (rounded, being the Company value of
$310,243 divided by the current number of shares in the Company of
175,836,635), in satisfaction of the consideration for the Acquisition under the
Acquisition Agreement, and such Consideration Shares when issued, shall
rank pari passu (equally) with all existing ordinary shares of the Company, and
that the Directors be authorised to take all actions, do all things and execute all
documents and agreements as necessary or considered by them to be
expedient to give effect to the issue of Consideration Shares.
Resolution 6 – Adoption of New Constitution
6. That, in accordance with section 32(2) of the Companies Act, the constitution
of the Company be revoked and the Company adopt the new constitution
described in the Notice of Meeting ("New Constitution"), with effect from
completion of the Acquisition.
Resolution 7 – Appointment of New Directors
7. That, in accordance with the Company's existing constitution, Asantha
Wijeyeratne, Andrew Barnes, Gavin Thompson, Mandy Simpson and Nick
Lewis each be appointed director of the Company with effect from completion
of the Acquisition.
*If you mark the ‘Abstain’ box for a particular resolution, you are directing your proxy NOT to vote on that resolution. If a proxy does not vote on your
behalf on a resolution, your votes will not be counted when calculating the majority of that resolution.
**If you tick the ‘Proxy Discretion’ box for a particular resolution, you are directing your proxy to decide how to vote on that resolution on your behalf.
Discretionary proxies may be provided to any Director or the Chairman, each of whom are not disqualified from voting on any of the Resolutions.
*** Under NZX Listing Rule 9.3.1, a person who is a party or beneficiary to or of the transactions which are the subject of a resolution under NZX Listing
Rule 9.2.1 will be prohibited from voting on any such resolution.
In relation to Resolution 1 (Ecobulb Asset Sale) and pursuant to NZX Listing Rule 9.3.1, the Company's shareholders who are Associated Persons of
Ecobulb Limited are prohibited from voting any shares that they hold.
Under the NZX Listing Rules, a person (first person) is an Associated Person of another person (second person) if the first person is associated with
the second person, which includes where:
(a) in making a decision or exercising a power affecting an issuer, the first person could be influenced as a consequence of an arrangement or
relationship existing between, or involving, the first and the second person; or
(b) the first person and second person are acting jointly or in concert; or
(c) the first person is a company, and the second person is a Director, or a Related Company, or a Director of a Related Company, of that
company.
The Company will disregard any votes cast on Resolution 1 by any persons to whom the foregoing applies. Any discretionary proxies given to persons
disqualified from voting under the requirements set out above will not be valid. Those persons who are prohibited from voting on a resolution may not
act as a discretionary proxy in respect of a resolution, but may vote in accordance with express instructions.
For Against Abstain* Discretion**
For Against Abstain* Discretion**
For Against Abstain* Discretion**
For Against Abstain* Discretion**
STEP 3: SIGNATURE OF SECURITY HOLDER(S) This section must be completed
Security Holder 1 Security Holder 2 Security Holder 3
or duly authorised officer or attorney or duly authorised officer or attorney or duly authorised officer or attorney
Contact Name ____________________________________________Contact Daytime Telephone _______________________ Date
Electronic Investor Communications: If you received the Notice of Meeting and Proxy Form by mail and wish to receive your future investor
communications by email please provide your email address below.
Data sourced from publicly available filings. Our datasets may not be complete. Automated analysis can produce errors. If you believe any data on this page is incorrect, please contact us at hello@nzxplorer.co.nz. For informational purposes only. Not investment advice.