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Information Memorandum19 March 2015
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PUSHPAY HOLDINGS LIMITED INFORMATION MEMORANDUM | 19 MARCH 2015
Notice and Disclaimer 1
Introduction 2
Glossary 3
Key Information 7
Investment Opportunity 8
Pushpay at a Glance 9
1. The Pushpay Story 10
2. Industry Overview 24
3. Competitor Analysis 29
4. Pushpay’s Board of Directors 34
5. Pushpay’s Management Team 41
6. Risks Relating to Pushpay 44
7. Description of the Securities 49
8. Financial Information 50
9. Further Details 51
Appendix A: Annual Report 2014 56
Appendix B: Interim Report 2015 82
Directory 104
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You must read and understand this “Notice and Disclaimer” before making any use of this document or any information contained in this document. By accepting receipt of this document, you agree to the following terms and conditions.
This document has been prepared by Pushpay Holdings Limited (“Pushpay”) in relation to the potential opportunity to become a new equity investor in Pushpay (the “Potential Transaction”).
This document is strictly confidential and is being supplied to parties who have entered into a Confidentiality Agreement with Pushpay prior to, and as a condition of, the provision of this document. In receiving this document, you confirm your acknowledgement and agreement that this document, and all of the information contained in it, is “Confidential Information” supplied under the Confidentiality Agreement executed by you, and that you will observe and perform all the covenants and agreements required from you under the Confidentiality Agreement. This “Notice and Disclaimer” is in addition to, and does not limit, any provision in the Confidentiality Agreement.
This document, and investment opportunity described herein, are only made available to, and may only be received and accepted by, persons who are “Wholesale Investors” for the purposes of the Financial Markets Conduct Act 2013 (“FMCA”) . No recipient of this document or offeree of the investment opportunity relating to the Potential Transaction may, directly or indirectly, offer, sell, or deliver the investment opportunity or distribute this document, or any other material relating to the Potential Transaction, to any person who is not a Wholesale Investor for the purposes of the FMCA, or who is a member of the public in New Zealand for the purposes of the Securities Act 1978 (“SA”) . If you are a person who may not be a Wholesale Investor for the purposes of the FMCA or who may be a member of the public in New Zealand for the purposes of the SA, you must return or destroy this document without reading it.
The distribution or possession of this document, in or from certain jurisdictions, may be restricted by law. Persons into whose possession this document comes are required to inform themselves about, and to observe, any such restrictions. Pushpay does not accept any liability to any person in relation to the distribution or possession of this document, in or from any jurisdiction. If the distribution of this document to you may result in you, Pushpay, or any other person
contravening any law in any jurisdiction, you must immediately notify Pushpay of the fact and return this document to Pushpay.
The provision of this document does not constitute, and must not be taken as, any form of offer or commitment by Pushpay, that Pushpay will undertake the Potential Transaction or any offer of financial products. Pushpay has not made any decision as to whether to proceed with the Potential Transaction and, if so, on what terms. Neither this document nor anything contained in it form the basis of any contract or commitment, and it is not intended to induce any person to engage in, or refrain from engaging in, any transaction.
This document has been compiled solely to assist interested parties in deciding whether they wish to participate in the Potential Transaction, if it were to proceed. However, it does not purport to contain all of the information that a prospective investor may require, or which may be material to an investment in Pushpay. You should conduct your own analysis of the investment opportunity described in this document.
No representation or warranty (express or implied) is made by Pushpay or any other person as to the accuracy, materiality, content, reasonableness, completeness, value or otherwise of any information contained in this document. Any transaction documentation relating to the Potential Transaction will include an acknowledgement from the investor that, except for those warranties and representations expressly included in the relevant transaction documentation, there has been no reliance on information, warranties or representations which may have been made by Pushpay, or any other person, in relation to the Potential Transaction, and that the investor has relied solely upon its own independent enquiry and investigations in entering into the relevant transaction documentation.
Neither Pushpay, nor its shareholders or advisers (or any of their respective partners, directors, officers, employees or advisers), accept any liability whatsoever for any loss or other consequence arising from the use of this document or its contents, or otherwise arising in connection therewith. No information may be relied on as having been provided or authorised by or on behalf of Pushpay, unless it is either contained in this document, or in a subsequent document containing express details of such authorisation.
It is strongly recommended that you seek independent professional advice before investing in Pushpay.
NOTICE AND DISCLAIMER
Pushpay is an early stage business. An investment in Pushpay is speculative and inherently risky, and may not be suitable for all investors.
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This Information Memorandum contains important information about Pushpay, its business and the market in which it operates.
References to “Pushpay” in this Information Memorandum
For the purposes of this Information Memorandum, references to “Pushpay” refer to Pushpay Holdings Limited. Pushpay Holdings Limited is a New Zealand incorporated company that owns wholly-owned subsidiaries in New Zealand (Run The Red Limited (formerly Pushpay Limited), Pushpay Limited, Pushpay IP Limited and Pushpay Trustees Limited), Australia (Pushpay Pty Limited), and the United States of America (USA) (Pushpay Incorporated, eChurch Incorporated and ZipZap Processing Incorporated).
No Guarantee
No person (including any Director, agent, employee or advisor to Pushpay, or the NZX) guarantees the performance of Pushpay and/or its shares.
Enquiries
Enquiries about Pushpay or this Information Memorandum should be directed to:
The Board of Directors Ground Floor, Microsoft House 22 Viaduct Harbour Avenue Auckland 1010 New Zealand
+64 9 377 7720
INTRODUCTION
Pushpay’s Corporate Structure Chart
New Zealand Subsidiary
Australia Subsidiary
USA Subsidiary
New Zealand Parent
Source: Pushpay (2015, March)
Pushpay Holdings Limited
ZipZap Processing
Incorporated
Pushpay Incorporated
Pushpay Pty Limited
eChurch Incorporated
Pushpay Trustees Limited
Pushpay IP Limited
Pushpay Limited
Run The Red Limited (formerly Pushpay Limited)
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GLOSSARY
ACH Payments An arrangement made with a bank that allows a third party to transfer money
from a person's account on agreed dates, typically in order to pay bills (similar to
Direct Debits in New Zealand)
Alternate Director A person who is appointed to attend a board meeting on behalf of the director of
a company where the principal director would be otherwise unable to attend
Android Operating system (developed by Google) used on a range of (non-Apple) Smart
Mobile Devices
API Application Programming Interface
App Software application for Smart Mobile Devices
ARPC Average Revenue Per Client
ARPM Average Revenue Per Merchant
Bhatnagar Family Interests
(a) Alliance Equities 2 Limited;
(b) Aaron Richard Bhatnagar, Alexander Ernest Houghton and Bryan Arch Coyte;
(c) Anita Devi Wolfgram, Blair Daniel Wolfgram and Alexander Ernest Houghton;
(d) Hilary Dianne Bhatnagar; and
(e) Mara Ermina Bhatnagar.
Cash Flow The difference between the available cash at the beginning of an accounting
period and that at the end of the period
CEO Chief Executive Officer
CFO Chief Financial Officer
Client A business or organisation that utilises RTR’s SMS Gateway to integrate text
messaging with core business applications
Cloud Computing The practice of using a network of remote servers hosted on the internet to store,
manage and process data, rather than a local server or a personal computer
Compliance Listing The listing of Pushpay shares on the NZAX
Consumer A person that acquires goods or services for direct use or ownership rather than
for resale or use in production or manufacturing
COO Chief Operating Officer
Corporate Organisations An organisation with typically 500 or more employees
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Direct Debit An arrangement made with a bank that allows a third party to transfer money
from a person's account on agreed dates, typically in order to pay bills (similar to
ACH Payments in the USA)
Directors or Board of Directors
The directors of Pushpay from time to time, being as at the date of this
Information Memorandum, Bruce Gordon, Graham Shaw, Christopher Huljich,
Douglas Kemsley, Christopher Heaslip, and Eliot Crowther. Peter Huljich is an
Alternate Director for Christopher Huljich
Enterprises SMEs and Corporate Organisations
Executive Directors Christopher Heaslip and Eliot Crowther
Faith Sector Churches or other religious organisations
Hosted Payments Transactions facilitated through Pushpay’s hosted web-based payment application
Huljich Family Interests (a) Christopher & Banks Private Equity V Limited;
(b) Christopher Peter Huljich and Colin Gordon Powell;
(c) Christopher Peter Huljich, Connie Maria Francis Huljich, Elizabeth Anne
Ferguson, Colin Gordon Powell and Peter Karl Christopher Huljich; and
(d) Huljich Family Trust Nominees Limited.
Independent Directors Bruce Gordon and Graham Shaw
Information Memorandum This document, dated 19 March 2015
Interchange Fees Fees paid between banks for the acceptance of card-based transactions, which
are collected by our wholly-owned USA-based processing subsidiary ZipZap
Processing, Incorporated through revenue invoiced to the Merchant
iOS Apple Incorporated's mobile operating system
IPO Initial Public Offering
ISO Independent Sales Organisation
IT Information Technology
Medium Term A period of one to three years
Merchant A business or organisation that utilises Pushpay’s Payment Platform to process
electronic transactions
Messaging Platform RTR’s Enterprise messaging gateway, managed messaging solution, and
supporting infrastructure to deliver SMS gateway and campaign related messaging
services
Negative Cash Flow Where the available cash at the end of an accounting period is lower than that at
the start of the period
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NGO Non Governmental Organisation
Non-Executive Directors Bruce Gordon, Graham Shaw, Christopher Huljich and Douglas Kemsley. Peter
Huljich is an Alternate Director for Christopher Huljich
Non-POS Non Point of Sale, being any point of sale other than a traditional fixed physical
point of sale such as at a cash register at the front counter of a shop
Non-Profit Organisation (NPO)
An organisation that uses surplus revenues to achieve its goals rather than
distributing them as profits or dividends
NZAX The Alternative Market operated by NZX
NZX NZX Limited
ODFI Originating Depository Financial Institution
Payment Kiosk A Tablet used to facilitate Hosted Payments
Payment Platform Software used to transfer payment information from the Merchant to the acquiring
bank
PCI DSS Payment Card Industry Data Security Standard (PCI DSS), a proprietary
information security standard for organisations that handle cardholder information
for major debit, credit, prepaid, e-purse, ATM, and POS cards. Level 1 compliance is
the highest standard of PCI DSS compliance requested by major card companies
for organisations managing card information
Pushpay or the Company Pushpay Holdings Limited
R&D Research and development
Retention The percentage of recurring revenue retained over the period excluding upsells
into the existing Merchant base (see page 23 for more information)
Revenue Income received from normal business activities
RTR The business and assets of "Run The Red" which were acquired by Pushpay in May
2014 from the then-named Run The Red Limited (subsequently renamed Papillon
Technology Limited)
SaaS Software as a Service
Share Split On 28 May 2014, Pushpay split its shares to create 40,500,000 shares on issue
prior to raising a further $9 million at $1.00 per share and issuing 500,000 shares
as part payment for the acquisition of RTR
SIS The Pushpay Share Incentive Scheme
Smart Mobile Device Smartphone, Tablet or other mobile device that is able to connect to the internet
using mobile broadband and/or Wi-Fi
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Smartphone A mobile phone utilising a mobile operating system, with more advanced
computing capability and connectivity than a feature phone, that is able to
connect to the internet by using mobile broadband and Wi-Fi
SME Small/Medium Enterprise typically with less than 500 employees
SMS Short Message Service commonly referred to as text messaging
SMS Gateway A telecommunications network facility for sending or receiving SMS transmissions
to or from a telecommunications network
Software as a Service (SaaS)
A software licensing and delivery model where software and associated data is
hosted in the cloud and delivered over a network or the internet as a service
SSL Secure Socket Layer (SSL), a common protocol used to secure digital
communication on the internet
Tablet A mobile computer that is able to connect to the internet using mobile broadband
and/or Wi-Fi
Tier 1 Service Provider Status
Preferred partner to major mobile network operators with direct SMSC (Short
Messaging Service Centre) connections
Upsells The increase in revenue derived from a Merchant from current and/or additional
products (excluding increases in volume fees)
Utility Any organisation that provides services to the general public including electric,
gas, telephone, water, television cable and transport companies
VPN Virtual Private Network
Wi-Fi Wireless technology that uses radio waves to provide wireless, high speed internet
and network connections
$ All figures are in New Zealand dollars, unless otherwise stated
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KEY INFORMATION
31 March and 30 SeptemberFinancial year end and financial half year end
50,102,766Total number of shares on issue
Over $15.6 millionTotal capital raised by Pushpay to date
AugustAnnual Shareholders’ Meeting to be held each year
14 August 2014NZAX – listing date1
$4.6 millionCash and available funding lines2
19 March 2015Information Memorandum date
1 Pushpay intends to apply to the NZX, within one month following the completion of the possible Entitlement Offer, for permission to cease quotation of its ordinary shares on the NZX Alternative Market (NZAX) and to contemporaneously commence quotation of those shares on the NZX Main Board. This would be at NZX’s sole discretion and would be subject to Pushpay satisfying any pre-conditions set by NZX for an NZX Main Board Listing. 2 This includes the standby funding facility of up to $4.0 million provided on 16 March 2015 to the Company by Christopher & Banks.
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INVESTMENT OPPORTUNITY
Possible Capital Raising
Pushpay is considering undertaking an equity capital raising, commencing in April 2015, to be structured as a pro-rata non-renounceable entitlement offer of new ordinary shares to raise up to (approximately) $17 million at an offer price to be determined (“Entitlement Offer”).
The Opportunity
The Huljich Family Interests and the Bhatnagar Family Interests, which will together hold 17,441,994 Pushpay Shares (representing approximately 34.81% of the total number of Pushpay Shares) on the record date for the Entitlement Offer, have indicated to Pushpay that if it was to proceed with an Entitlement Offer on the basis set out above, they would take up their full entitlements. However, it is possible that other existing Pushpay shareholders will not take up their full entitlements under the Entitlement Offer.
Pushpay is inviting potential investors to offer to commit to purchase some or all of the anticipated Entitlement Offer shortfall by signing and delivering to Pushpay a Subscription Agreement in the form to be provided to potential investors by Pushpay.
Under the Subscription Agreement:
• The investor must commit to subscribe for a specified dollar value of Pushpay shares (as selected by the potential investor). However, Pushpay has the absolute discretion as to the number of shares to allocate and issue to the potential investor.
• The subscription price determined under the Subscription Agreement will be the same as the offer price under the Entitlement Offer, which will be determined by reference to the 20 trading day volume weighted average price prior to the date of Board approval of the Entitlement Offer. However, the offer price (and therefore the subscription price) will not be less that NZ$3.50 per share and will not exceed NZ$3.85 per share.
Shares issued under the Subscription Agreement (if any) will be fully paid ordinary shares that will rank equally with all other ordinary shares then on issue.
Investors who sign a Subscription Agreement must commit not to sell, transfer or otherwise dispose of any interest in any Pushpay shares issued to them until Pushpay releases its operating update for the six month period ended September 2015.
Indicative Timetable
Subscription Agreement signed by potential investors Early/mid April 2015
Capital raising announced to NZX Early/mid April 2015
Capital raising completed May 2015
This timetable is indicative only and is subject to change at Pushpay’s discretion.
Legal Matters
The provision of a Subscription Agreement to a potential investor is not an offer or a binding contract. Rather, by signing a Subscription Agreement and returning it to Pushpay, a potential investor makes an offer to Pushpay on the terms set out in the Subscription Agreement. That offer must remain open for acceptance by Pushpay for the period specified in the Subscription Agreement. A Subscription Agreement will apply, in accordance with its terms, only when it has been signed by both a potential investor and Pushpay.
Pushpay is under no obligation to accept a potential investor’s offer or to enter into a Subscription Agreement with any potential investor, nor is Pushpay under any obligation to proceed with the capital raising. Pushpay may change the nature, structure, pricing and timing of, or withdraw, the capital raising at its discretion.
The capital raising is, and will remain, an incomplete proposal until the Board of Pushpay resolves to proceed with the capital raising. If the Board does not pass the required resolution, neither the Entitlement Offer nor any Subscription Agreement will be of any effect.
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PUSHPAY AT A GLANCE
Our Mission: To become the global mobile platform of choice for merchants and Consumers in Non-POS mobile commerce.
• Mobile commerce tools that facilitate fast, secure, and easy non-point of sale (Non-POS) payments between Consumers and merchants
• SMS Gateway that integrates Consumer messaging with core business applications
• Intuitive and easy to use interface
• Facilitating over 150 million text message interactions and utilising Cloud Computing to process more than $148 million in payments annually
• Merchants in New Zealand, Australia and the USA
Key Market Drivers
• Increasing use of Smart Mobile Devices
• Expanding mobile commerce
• Increased data connectivity
• Scalability of SaaS business model
Product Features
• Mobile App payment platform
• Hosted Payments
• Mobile Payment Kiosks
• SMS payments
• Mobile messaging service platform
Additional Features
• Vertical integration of payment functions
• Consumer messaging
• Payment intelligence tools
• Personal data security
• Integration with other products
Our Target Markets
• Faith Sector
• Non-Profit Organisations (NPOs)
• Enterprises (both SMEs and Corporate Organisations)
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1. THE PUSHPAY STORY
Founded in Auckland, New Zealand
2012
2011
iOS App released
Android App released
Seed funding
Source: Pushpay (2015, March)
2013
Douglas Kemsley angel investment
Opened office in LA, CA, USA
The Pushpay Story
Pushpay’s History
Pushpay provides mobile commerce tools that facilitate fast, secure and easy Non-POS payments between Consumers and merchants. Pushpay targets merchants who are looking to offer convenient, personalised and intuitive payment solutions to their Consumers. Pushpay services three target markets: the Faith Sector; Non-Profit Organisations (NPOs) and Enterprises (both SMEs and Corporate Organisations).
Pushpay was incorporated in 2011 by Christopher Heaslip and Eliot Crowther, technology entrepreneurs focused on integrated Consumer friendly cloud-based mobile commerce solutions. Since inception they have assembled a highly experienced executive team comprising distribution, marketing and software development professionals to build a scalable platform.
In December 2013, the Huljich Family became cornerstone shareholders through an initial investment of $2.0 million through Christopher & Banks Private Equity V Limited (Christopher & Banks). Since this time they have further invested over $5.8 million through various investment entities under their control. In addition, in March 2015 Christopher & Banks provided a standby funding facility to the Company of up to $4.0 million. The Huljich Family have significant international business experience including the sole pre-IPO funding and ongoing support for Diligent Board Member Services, Incorporated. Christopher Huljich, the Managing Partner of Christopher & Banks, has joined the Pushpay Board of Directors to provide expertise and support. In addition, Peter Huljich, a Partner of Christopher & Banks, participates in the Pushpay Board as an Alternate Director for Christopher Huljich.
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3 Pushpay acquired RTR in May 2014, with economic recognition from June 2014.
2014
2015
Receives government R&D grant from Callaghan Innovation
Huljich Family and Bhatnagar Family investment
Relocated LA, CA, USA office to Seattle, WA, USA
New Board of Directors established
Listed on the NZAX under the ticker code ‘PAY’
Graham Shaw and Peter Huljich join the Board
31 December 2014 targets achieved
Touch ID and card scanning introduced to App
Renewed Vision partnership commences
New Zealand Post Group agreement announced
Run The Red acquisition
Formed ZipZap Processing
Over $35m per annum through platform
Channel Partner Program commences
In May 2014, Pushpay purchased the business and assets of “Run The Red” (RTR)3 from a company then-named Run The Red Limited (subsequently renamed Papillon Technology Limited). RTR integrates text messaging with core business applications using an SMS Gateway, and facilitates personalised communication that can lead to payments and other mobile commerce experiences. Clients include, New Zealand Post Group, Westpac, Sky TV, Vodafone, Z Energy and The Department of Internal Affairs. RTR is a profitable business, which Pushpay believes adds significant value to the Pushpay opportunity in terms of complementary products and additional access to enterprises that are not currently Merchants, as well as revenue. The purchase of RTR allows Pushpay to position itself beyond simply effecting mobile commerce payments through the incorporation of an enterprise channel that allows merchants to communicate with Consumers via Smart Mobile Devices, supplementing and enhancing the overall mobile commerce experience.
Pushpay has offices in New Zealand (Auckland and Wellington) and the USA (Seattle, WA), and a staff presence in Australia (Sydney), with a total of 67 staff. In the short term, Pushpay plans to add more staff to accelerate growth in its key target territory – the USA. In the Medium Term Pushpay is likely to continue expanding its services to Canada and open an office in the United Kingdom, and plans to grow headcount to around 178 staff.
To date, the Company has raised over $19.6 million of funding, including a $4.0 million standby funding facility provided by Christopher & Banks in March 2015. Pushpay has used the new funding in part to pay a portion of the purchase price relating to the acquisition of RTR, to further develop its technology stack and as working capital to accelerate growth in international markets, focusing on its key target territory – the USA, increasing sales via its direct sales, a referrals strategy and strategic channel partnerships.
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Our Products
Pushpay has a number of mobile commerce solutions including a mobile App payment platform, Hosted Payments, mobile Payment Kiosks, SMS payments and a mobile messaging service platform. All payment experiences encourage Consumers to adopt the mobile App payment platform as illustrated below.
How Pushpay Works - Mobile Donations
The Merchant prompts the Consumer to text a short code to instantly receive a link to an internet payments page.
1.
Source: Pushpay (2015, March)
The link opens an internet payments page where the Consumer can make either a One Time Gift or Recurring Gift through the Consumer’s preferred payment method such as credit or debit card.
2. While completing the gift the Consumer is prompted to register and once complete, to download the Pushpay App for free so they can make 10 second payments from their preferred payment method using a 4 digit Passcode or Touch ID on iOS.
3.
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Pushpay has focused on making the user experience quick, intuitive and simple – key drivers in the mobile and App markets for strong uptake among both merchants and Consumers.
Pushpay considers that the following features and benefits of its products make Pushpay a compelling proposition for merchants wishing to offer convenient, personalised and intuitive mobile commerce solutions to their Consumers:
• Pushpay offers an intuitive and easy to use interface and Consumer payment experience that has been designed for mobile – merchants can deploy it with minimal training and, once registered, Consumers can make payments in just 10 seconds from their preferred payment method using a 4 digit Passcode or Touch ID on Smart Mobile Devices with Touch ID capability and version 3.7 or later of the Puhspay App;
• It provides easy payment pathways for Consumers – through Hosted Payments, Payment Kiosks, SMS messaging and SMS payments, further enabling mobile engagement opportunities and removing barriers to making and receiving payments;
• It can be easily integrated with merchants’ CRM (Customer Relationship Management) and IT systems for easier administration and reconciliation of payments – saving time and cost;
• Pushpay makes the most of mobile connectivity – allowing real time, fast, secure and easy connections between Consumers and merchants on any Smart Mobile Device with an internet connection;
• Intelligent products – providing insights to allow merchants to better serve their Consumers;
• Pushpay is dynamic and adaptable – regional payment system integration for each new country market typically requires 4-6 weeks of software development, and user feedback can be incorporated into the product development path and regular update schedule;
• Pushpay is expected to be able to be integrated with other applications through an API (currently being developed), offering additional functionality and access to a wider pool of merchants;
• Pushpay is cost effective – merchants pay ongoing monthly subscription fees instead of one-off investment costs;
• Pushpay offers a return on investment – by providing a platform for increasing sales and revenue, while simplifying business processes and reducing costs; and
• There are no costs to Consumers – the Pushpay App is free.
The Technology We Use
Pushpay’s products have been built as a ‘mobile-first’ solution, rather than being adapted from a desktop environment, meaning that its iOS and Android Apps are native to those operating systems and Smart Mobile Devices. Pushpay believes that this translates into a smoother, more intuitive user experience.
Pushpay uses SaaS platforms and products for its development and hosting environments, internal infrastructure, business processes and support systems. SaaS solutions are generally regarded as easily scalable while offering reduced infrastructure costs, and Pushpay’s use of Cloud Computing gives it the capacity to cater for thousands of merchants – and associated increases in Consumer data and transaction volume – in the Medium Term with minimal additional cost. As well as being cost effective, this enables Pushpay’s development team to focus on its core product.
A recent release of the Pushpay App, version 3.7, delivered Touch ID payments on iOS and the ability to enter credit or debit card details by using a mobile phone camera on both iOS and Android. Touch ID lets users make payments securely on the Pushpay App with the perfect password: their fingerprint. Adding the capability of Touch ID make payments on the Pushpay App easier and more secure. Adding a credit or debit card to a Pushpay account is fast and easy. Users simply scan their credit or debit card with a mobile phone camera on iOS or Android and their card information will be automatically captured. Pushpay continues to drive innovation, with Touch ID payments and credit or debit card details scanning both a first in the Faith Sector.
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Pushpay’s payment solutions are PCI DSS Level 1 compliant and regularly undergo penetration testing and external security audits by an approved independent Qualified Security Assessor.
RTR’s Enterprise Messaging Platform has been built using industry best practice security measures, including SSL encrypted connectivity, server environments with highly restricted access, and non-disruptive product releases of operating systems.
The Messaging Platform delivers high availability hosting, achieving a minimum 99.8% uptime, excluding telecommunication companies. RTR’s Messaging Platform is maintained and backed up for local and international messaging 24/7, 365 days per year.
RTR employs multi-layered firewalls and all connectivity with Mobile Network Operators is via an encrypted VPN. Client communication is secured using SSL or VPN connections.
Our Mission
Pushpay’s mission is to become the global mobile platform of choice for merchants and Consumers in Non-POS mobile commerce.
Merchants have historically been faced with a limited choice of mobile commerce solutions that intuitively engage with Consumers and integrate with their core IT systems. The increasing uptake of Smart Mobile Devices and mobile connectivity mean that merchants can more easily and effectively access and connect with their Consumers, using the Smart Mobile Devices that many Consumers carry with them every day. Pushpay offers the channel through which Consumer payments can be made and received,
and merchants can more effectively engage with their Consumers.
Pushpay targets three markets:
• Faith Sector;
• Non-Profit Organisations (NPOs); and
• Enterprises (both SMEs and Corporate Organisations).
Pushpay also seeks to target App, web and software developers as a channel to market, by providing an API (currently being developed) so they can integrate their applications with Pushpay’s products.
At the time of the Compliance Listing (14 August 2014) Pushpay’s aim in the Medium Term was to grow its customer base to over 2,000 Merchants, which – based on volumes at the time – meant transaction volume of over $600 million per annum and to grow text message interactions to 200 million per annum.
Section 2 of this Information Memorandum talks more about Pushpay’s strategy for achieving this mission, including the opportunities presented in its target markets.
The recent acquisition of RTR’s technology, as part of the purchase of RTR, has added to the previously existing Pushpay technology stack through the introduction of the two complementary products: SMS messaging and SMS Payments. By incorporating RTR products in Pushpay’s technology stack, Pushpay expects this to increase Merchant loyalty and raise barriers to entry for competitors. Please see pages 11, 17 and 18 for more information about Pushpay’s acquisition of RTR.
Pushpay’s mission is to become the global mobile platform of choice for merchants and Consumers in Non-POS mobile commerce.
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A Sample of Pushpay’s Vertical Target Markets and Current Technology Stack
Technology Stack
Hosted Payments
App payments
SMS payments
Direct Debits
Merchant processing
SMS
API for database integrations
API for developers (currently being developed)
Faith Sector
Greater than 1,000 attendees
500-999 attendees
100-499 attendees
<100 attendees
Non-Profit
Organisations (NPOs)
International NGOs and charities
National charities
Charitable events
Enterprises (both
SMEs and Corporate
Organisations)
Utilities
Financial organisations
Service based organisations
Developers
App developers
Web developers
Software platforms
Source: Pushpay (2015, March)
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Our Customers
Customers of the overall business operated by Pushpay are broadly categorised in one of two groups: Merchants, which are businesses or organisations that utilise Pushpay’s Payment Platform to process electronic transactions, and Clients, which are businesses or organisations that utilise RTR’s SMS Gateway to integrate text messaging with core business applications.
Pushpay currently has over 602 Merchants4 across New Zealand, Australia and the USA. As
at 31 December 2014, around 89% of Pushpay’s Merchants were located in countries outside of New Zealand. The Company expects its customer base to grow by 50% from 602 to 903 merchants in the three months to 31 March 2015.
In addition, over 80% of Merchants were located in Pushpay’s key target territory – the USA. The map below illustrates Pushpay’s ability to attract Merchants from all over the USA, suggesting the business model is not location specific.
4 Includes Merchants that have entered into an agreement to become a Pushpay Merchant customer that are currently in the process of being on-boarded, which typically takes one week to complete.
Geographic Location of Pushpay’s Merchants Source: Pushpay (2014, December)
Note: Numbers rounded
Australia
USA New Zealand
81% 11%8%
Over 80% of Merchants were located in Pushpay’s key target territory – the USA.
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Run the Red (RTR)
Through RTR, Pushpay also services a number of Clients in New Zealand and the South Pacific. These include, New Zealand Post Group, Westpac, Vodafone, Sky TV, Z Energy and The Department of Internal Affairs. RTR currently has significant market share as an Enterprise messaging provider in New Zealand.
RTR integrates text messaging with core business applications using an SMS Gateway and delivers, based on volumes through the quarter ended December 2014, over 150 million targeted text messages per year on an annualised basis.
Aside from its central service of providing Enterprise SMS Gateway delivery, RTR also offers a range of additional messaging products that add further value to the business and to Clients, such as competitions, broadcasts and text donations which are configured and managed for Clients.
RTR has received numerous awards6 for its market leading Enterprise SMS Gateway.
Through RTR, Pushpay believes there is an opportunity to introduce Pushpay’s other product offerings to existing RTR Clients that fall within Pushpay’s target markets. RTR’s main Clients are Enterprises such as health care providers,
5 Includes locations in the USA of all Merchants which have been added to the Pushpay platform since inception through to 27 January 2015. 6 Refer to http://runthered.com/about/#awards for a complete list of awards.
Canada
Continental USA
Alaska
Mexico
LOCATION OF PUSHPAY’S USA MERCHANTS
Source: Pushpay (2015, March)
Seattle, WA, USA Office
Merchant
Location of Pushpay’s USA Merchants5
Source: Pushpay (2015, January)
Merchant
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telecommunication companies and banks which are involved in activities and which have business operations that, in Pushpay’s view, would benefit from those further product offerings.
RTR also provides Pushpay access to significant relationships with RTR Clients and suppliers in the New Zealand market, which may help promote Pushpay’s core offering. These include the three major telecommunication companies in New Zealand (Spark, Vodafone and 2degrees), New Zealand Post Group, CLX Networks which is a messaging aggregator to telecommunication companies and banks and Vensa Health which is a messaging aggregator to healthcare providers.
Our Business Model
Pushpay uses a Software as a Service (SaaS) business model, generating recurring monthly revenue in exchange for services provided.
Merchant Revenue
Pushpay calculates Average Revenue Per Merchant (ARPM)7 using a combination of subscription fees and volume fees.
• Subscription fees based on the size of the Merchant (in the case of the Faith Sector, this is calculated as a multiple of total church attendees or total number of donations processed); and
• Volume fees based on payment transaction volume (in the case of the Faith Sector, this is calculated as a percentage of total donations).
Volume fees include interchange fees, which are collected by Pushpay on behalf of third parties, such as Visa or MasterCard. Pushpay did not collect interchange fees previously, as it did not offer internal merchant facilities. Given Pushpay now offers merchant facilities through ZipZap Processing, Incorporated (ZipZap Processing), which is a 100% wholly owned USA-based subsidiary, Pushpay now collects interchange fees including those collected on behalf of third parties. Pushpay will continue to report ARPM as one consolidated number, including interchange fees.
On this basis, ARPM increased to $446 per month in December 2014 and Pushpay expects ARPM to increase to over $550 per month over the Medium Term. For comparison purposes, ARPM excluding Interchange Fees, increased to $258 per month in December 2014 from $235 per month in June 2014.
ZipZap Processing is maturing rapidly with more than 30% of Pushpay’s total payment transaction volume being processed through it. We expect payment transaction volume to increase significantly as Pushpay continues to transfer existing Merchants to ZipZap Processing. In addition, ARPM will continue to increase as Pushpay secures a larger percentage of Merchant payment transaction volumes in addition to donations, such as bookshop and cafe purchases in the case of the Faith Sector.
Some of Pushpay’s first Merchants (mainly in New Zealand and Australia) are on historic pricing plans that do not reflect refinements that
Pushpay uses a Software as a Service (SaaS) business model, generating recurring monthly revenue in exchange for services provided.
7 Average Revenue Per Merchant (ARPM) is calculated by dividing the total monthly revenue received by the total number of Merchants.
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Pushpay has made to its standard pricing plans over time. Pushpay intends to transition those Merchants to new pricing plans over time, so that there is consistency across its Merchant base.
Pushpay measures Retention as recurring revenue retained from Merchants (for example, in the case of Merchants in the Faith Sector, this is measured by the amount of recurring revenue at the end of the period excluding Upsells into the existing Merchant base, over the amount of recurring revenue from the beginning of the period). Pushpay considers this to be the most meaningful measure as changes to the actual number of Merchants may not reveal the underlying value (in both subscription and volume fees) of each Merchant. Retention does not take account of movements in revenue attributable to RTR. To date Pushpay’s annual Retention (excluding Upsells into the existing Merchant base) continued to exceed 95% and the Company expects Retention to remain high as the business scales.
Pushpay believes it offers an attractive solution that can simultaneously provide a platform for increasing sales and revenue, while simplifying business processes and reducing costs. Additionally, Pushpay’s solution is able to integrate with churches’ IT systems potentially saving hours of administration time.
SaaS
Pushpay has adopted a SaaS model for delivery of its products and services to its customers, under which the Pushpay application software and associated data are hosted centrally in the cloud, and delivered to customers via the internet. Customers access Pushpay’s products via their end user devices (desktop computer, laptop or Smart Mobile Device) and avoid the need to have any software installed locally on their systems.
This model has benefits for both Pushpay and its customers:
• Pushpay can manage and update, and (if needed) resolve issues in its software centrally, meaning that customers always
have access to the most up-to-date version with minimal downtime;
• Because there is no need for local installation on systems or desktops at customers’ locations, sales and implementation of SaaS solutions can be quicker and require less support from the SaaS provider;
• Access to the software requires only an internet connection and a suitable end user device, allowing for greater geographic reach;
• Customer support requirements are generally lower than for on-premise software, as performance of the software is not affected by the customer’s own IT environment (aside from their internet connection and browser software);
• Customers using SaaS solutions can reduce their investment in IT infrastructure (and associated support and maintenance costs), which can lead to potential savings of 20-30% across the entire IT budget;8
• SaaS solutions are highly scalable, allowing for the additional transaction and processing volume that comes with a growing customer base with only minimal incremental cost. This means that, as the number of Pushpay’s Merchants grow (and associated increases in recurring revenue occur), there should be potential for high margins provided Pushpay can maintain high Retention and keep fixed costs reasonably stable; and
• A SaaS model works for Pushpay as organisations in its target markets typically have the same platform requirements, meaning that Pushpay’s product can be provided to new Merchants with minimal customisation or new functionality.
Pushpay’s own use of third party SaaS products (for internal infrastructure, business processes and support systems) means that Pushpay’s development team can focus on development of Pushpay products rather than ongoing maintenance of back-office systems.
8 McKinsey on Government (2011). Getting ahead in the cloud
.
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9 Includes Merchants that have entered into an agreement to become a Pushpay merchant customer that are currently in the process of being on-boarded, which typically takes one week to complete.
Run The Red (RTR)
RTR integrates text messaging with core business applications using an SMS Gateway, and facilitates personalised communication that can lead to payments and other mobile commerce experiences. As an enterprise gateway partner, RTR earns revenue from providing ongoing regular SMS Gateway services (representing approximately 69% of revenue) and providing SMS Gateway services focused on a particular Client campaign (representing approximately 31% of revenue). RTR is achieving growth by working with health care providers, telecommunication companies, banks, public sector agencies, and leading Consumer brands to integrate Consumer messaging services into their core business
applications to transact, extend customer reach, improve compliance, and generate engagement and loyalty.
RTR is a Cash Flow positive business and continues to benefit from industry-wide growth. As at April 2014, RTR had revenue for the 12 month period ended 31 March 2014 of $3.3 million with gross margins of 56%. These revenue and gross margin calculations now exclude amounts of charitable donations processed by RTR which are paid across to the relevant charities.
There are two main sources of monthly Client revenue for RTR:
• Enterprise gateway fees based on a monthly fixed licence fee and variable support fees; and
Sales and Distribution Channels
To reach new Merchants, Pushpay primarily uses direct sales, a referrals strategy and strategic channel partnerships such as Church Community Builder (CCB) and Renewed Vision in the USA. The relationship with CCB made Pushpay a preferred service provider for the giving component of the CCB Church Management
System, which is available to new and existing clients of CCB. In addition, the Renewed Vision partnership gave thousands of churches across the USA the opportunity to begin using Pushpay.
Pushpay hopes to secure a number of further strategic channel partnerships over the next year, which it expects will result in a significant increase in the number of Merchants.
Direct Sales Model Channel Enablement
Country Number of
Merchants9
Online/
Direct
Marketing
Product
Integrations
In Market
Presence
Sales Team Marketing
Partners
Distribution
Partnerships
New Zealand 68
Australia 49
USA 485
Total 602
Pushpay’s Progress To Date
Source: Pushpay (2014, December)
*
* (2015, March)
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10 Average Revenue Per Client (ARPC) is calculated by dividing the total monthly revenue received (excluding amounts of charitable donations processed) by the total number of Clients. RTR revenue and ARPC figures now exclude charitable income, which was previously included.
• Campaign fees based on a one-off set up fee, monthly fixed licence fee, variable support fees and amounts of charitable donations processed.
Payment terms for enterprise gateway fees and campaign fees are mainly 20th of the month following. As at 31 December 2014, Average Revenue Per Client (ARPC)10 was over $3,400 per month excluding charity income.
RTR is a recent addition to the Pushpay business. RTR was acquired by Pushpay in May 2014 for a total purchase price of up to a maximum of $5,000,000 (based on several variables) payable in cash and shares in Pushpay. The purchase price was and is payable in several stages, with some amounts subject to movement, as follows:
• On 30 May 2014: $1,000,000;
• On 4 July 2014: in conjunction with settlement of the capital raising round, issue of 500,000 ordinary shares to Papillon Technology Limited (formerly Run the Red Limited) (with an attributed value of $500,000);
• On 31 July 2014: $3,100,000 less an earn-out adjustment of up to $500,000 and a key contract assignment retention of up to $1,000,000;
• On or before 30 May 2015: up to $1,000,000 subject to certain key contracts being assigned; and
• On or after 30 May 2015: up to $400,000 based on the extent of any warranty claims.
Although the final purchase price will not be known until 30 May 2015, as at the date of this document, Pushpay:
• has determined that the maximum purchase price will now be no more than $4,500,000, based on the earn-out adjustment mechanism;
• has paid $3,600,000 in cash to Papillon Technology Limited;
• has issued 500,000 shares to Papillon Technology Limited; and
• expects to pay an additional amount of up to $400,000 in cash to Papillon Technology Limited.
Pushpay’s Goals
Pushpay has set itself a number of key milestones to achieve by 30 September 2015:
• GROW Merchant/Client base, payment transaction volume and SMS messaging;
• BUILD mobile Consumer base;
• ESTABLISH additional distribution channels and partnerships in Australia, and the USA;
• ENHANCE the Pushpay product through delivery of the product road map and further integrations;
• EMPLOY new staff in New Zealand, Australia, and the USA; and
• ACHIEVE recognition of our brands and the quality of the Pushpay product.
Pushpay’s mission is to become the global mobile platform of choice for merchants and Consumers in Non-POS mobile commerce and at the time of the Compliance Listing (14 August 2014) Pushpay’s aim in the Medium Term was to grow its customer base to over 2,000 Merchants, which – based on volumes at the time – meant transaction volume of over $600 million per annum and to grow text message interactions to 200 million per annum.
More specifically, Pushpay is working towards targets in the following operational metrics:
Merchant Numbers and Transaction Volume
The Company expects its customer base to grow by 50% from 602 to 903 merchants in the three months to 31 March 2015. Pushpay expects to reach this target based on continued growth and further development of its direct sales, referrals strategy and through targeting merchants that have existing relationships with Pushpay’s strategic channel partners and other distribution partners. The Company will continue to primarily focus on the Faith Sector in the USA, which consists of over 314,000 churches with an average size of over 500 attendees. Recent and projected monthly Merchant numbers to March 2015 are set out on page 22.
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Merchant Revenue and ARPM
As at December 2014, Pushpay had an ARPM of approximately $446 per month. Pushpay expects ARPM to increase to over $550 per month over the Medium Term.
Total Merchant revenue for the month of December 2014 was around $240,000. Merchant revenue excludes revenue derived from RTR Clients. Merchant revenue includes interchange fees, which are collected by the Company on behalf of third parties, for the processing of card payments such as Visa or MasterCard. Pushpay did not collect interchange fees previously, as the Company did not offer internal merchant facilities. Given the Company now offers merchant facilities through ZipZap Processing, which is a
100% wholly owned USA-based subsidiary, the Company now incurs interchange fees including those collected on behalf of third parties.
RTR Revenue and ARPC
RTR generated Client revenue of around $297,000 for the month of December 201412. RTR currently (as at December 2014) has an ARPC of around $3,500 per Client per month.
Total Revenue
Pushpay’s total revenue (from both Pushpay Merchant revenue and RTR Client revenue) was approximately $549,000 for the month of December 2014.
11 Includes Merchants that have entered into an agreement to become a Pushpay merchant customer that are currently in the process of being on-boarded, which typically takes one week to complete. 12 Client revenue excludes amounts of charitable donations processed by RTR on behalf of charities. RTR is receiving donations on behalf of charities and pays across to the relevant charities the amount RTR receives. RTR revenue and ARPC figures now exclude charitable income, which was previously included. Pushpay acquired RTR in May 2014, with economic recognition from June 2014.
Australia
New Zealand
USA
30 Sep 1430 Jun 14
260
172 (66%)
59 (23%)
29 (11%)
277 (75%)
59 (16%)
32 (9%)
368
31 Dec 14 31 Mar 15
485 (81%)
68 (11%)
49 (8%)
602
903
Pushpay’s Merchant Numbers11
Source: Pushpay (2014, December)
Note: Numbers rounded
31 Dec 13
109
31 Mar 14
158
46 (42%)
51 (47%)
12 (11%)
90 (57%)
52 (33%)
16 (10%)
Forecast Number of Merchants
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Retention
Pushpay’s annual Retention (excluding Upsells into the existing Merchant base) continued to exceed 95%, which the Company believes places it among the best-in-class for SaaS companies. Pushpay expects Retention to remain high as the business scales.
Margin
If Pushpay is able to achieve scale by growing its Merchant base beyond 2,000 Merchants, and assuming that accompanying subscription and volume fees increase in line with current modelling, and costs remain relatively stable, Pushpay believes that its business is capable of generating a gross margin13 of between 50% and 60% of revenue.
Growth at that rate would be consistent with other leading SaaS business models, taking advantage of scalability in the business model and direct accessibility to customers in its target markets.
Pushpay considers that the use of strategic channel partnerships will also help to increase customer and revenue growth. However, it should be noted that as Pushpay enters into more strategic relationships with distribution and referral partners, it may be required to pay some of its margin to those channel partners in exchange for the introduction of new Merchants to Pushpay.
RTR has generated a gross margin of 56% of revenue over the 12 month period ended 31 March 2014. These revenue and gross margin calculations now exclude amounts of charitable donations processed by RTR which are paid across to the relevant charities. Assuming fees
and costs remain relatively stable, Pushpay expects to be able to at least maintain if not improve that margin.
Capital Requirements
To date, Pushpay has raised over $19.6 million, including a standby funding facility of up to $4.0 million provided on 16 March 2015 to the Company by Christopher & Banks to fund USA growth. Pushpay has used the new funding in part to pay a portion of the purchase price relating to the acquisition of RTR, to further develop its technology stack and as working capital to accelerate growth in international markets, focusing on its key target territory – the USA, increasing sales via its direct sales, referrals strategy and strategic channel partnerships.
As an early-stage company, Pushpay’s management believes that it is preferable to focus on and invest in growth as the best means to achieve overall value in its business. As such, Pushpay may raise additional capital in the future to pursue growth.
Our Leadership
Pushpay is led by a strong management team, complemented by an experienced group of Independent Directors, comprising Bruce Gordon and Graham Shaw and Non-Executive Directors, comprising Christopher Huljich and Douglas Kemsley. Peter Huljich also provides a significant contribution as a Non-Executive Alternate Director for Christopher Huljich.
Further information on the Board of Directors and management team are set out in Sections 4 and 5 of this Information Memorandum.
13 Gross margin includes the cost of hosting and infrastructure, third party direct services and Merchant, Client and Consumer care costs (excludes operating costs). Gross revenue includes interchange fees payable to third parties.
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14 ComScore (2012, February) 15 McKinsey & Company, Inc (2012, June). The mobile disruption: The next enterprise IT shake-up
Pushpay believes it is well-positioned to take advantage of opportunities in the global Non-POS mobile commerce market.
Consumer penetration of Smart Mobile Devices in Western Countries is estimated to be around 40%.14 Pushpay believes that this – coupled with falling costs in data connectivity and transmission, growing business uptake of Cloud Computing and increasing Consumer demand for convenience applications that take advantage of mobility (including mobile commerce tools) – will help grow the global mobile commerce market.
A Global Opportunity
Mobile commerce represents a significant global market opportunity with Consumer demand set to continue to drive adoption of mobile commerce tools and SMS Gateway services – the graph below shows that (as at October 2013) only 4% of total global credit and debit card transaction volume was made via mobile commerce.
2. INDUSTRY OVERVIEW
2013
$0
Global Credit and Debit Card Transaction Volume
Source: Business Insider (2013, October 15). There’s Virtually No Ceiling To Mobile’s Potential In The Larger Payments And E-Commerce Markets
Mobile Commerce/Payments
E-Commerce
All Other Credit and Debit Card Transaction Volume
The 96% opportunity
Mobile Commerce/Payments is currently only 4% of total Credit and Debit Card Transaction Volume
$1,000
$7,000
$6,000
$5,000
$4,000
$3,000
$2,000
Glo
bal
Cre
dit
and
Deb
it
Car
d T
rans
actio
n V
olum
e (B
illio
ns o
f USD
)
Going Mobile
Mobility is the latest in a long line of disruptive technologies in the historical IT landscape.15 In the same way that personal computing and
the internet each led to major realignments for Consumers and businesses, the proliferation, potential and power of Smart Mobile Devices mean that mobility is poised to be the next major disruption.
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McKinsey Finding Application to Pushpay
Enhanced communication and collaboration
Expanded opportunities for Merchants to interact more effectively with Consumers, strengthening Merchant/Consumer relationships
Mobile as a channel to the customer
By increasing the number and depth of touch points, mobility innovations allow Merchants to engage with Consumers in more meaningful ways, and leverage mobile commerce tools to enable targeted, convenient and integrated mobile Consumer payments
Administrative efficiency API integrations connect with Merchant databases reducing manual payment processing and reconciliations
Mobile Enterprise Uses/Applications
‘McKinsey Finding’ Column Source: McKinsey & Company, Inc (2012, June). The mobile disruption: The next enterprise IT shake-up
McKinsey & Company expects mobility adoption to grow based on the following trends:
• Consumerisation – Consumers are early adopters of mobility and use it extensively in their personal lives;
• Verticalisation – increasing availability of mobile applications to meet specific vertical business needs;
• New device categories – frequent and significant innovations to Smart Mobile Devices, with new categories and subcategories emerging every few months; and
• Cloud-based mobile applications – growing availability of cloud-based applications allowing users to access a wide range of products and services despite traditional limitations (such as device capacity or geographic location).
McKinsey further identifies mobile enterprise uses to which these forces give rise. Several of these apply to the mobile commerce market as described below and Pushpay has indicated in the table below the ways in which it believes those uses apply to its business and the basis on which Pushpay expects its products to appeal to merchants.
Pushpay believes it is well-positioned to take advantage of opportunities in the global Non-POS mobile commerce market.
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The general shift towards mobility acts as a key driver for business software applications, such as Pushpay’s mobile commerce tools and SMS Gateway services, complemented by a combination of other sector trends:
• Proliferation of Smart Mobile Devices – Ericsson estimates total global Smartphone subscriptions are expected to grow from 2.7 billion in 2014 to 6.1 billion in 2020 and mobile subscriptions for other Smart Mobile Devices are expected to grow from 300 million in 2014 to around 650 million in 2020;16
• Increased spending on R&D and new Smart Mobile Device features and functionality – expected to exceed overall IT industry growth by 2017;17
• Increasing availability of high demand Apps and mobile functionality – will help to further fuel growth, as Consumers purchase Smart Mobile Devices based on the Apps they can run on them; and
• Decreasing mobile data and connection costs18 – increasing prevalence of fixed mobile pricing plans.
Global Smartphone and Other Smart Mobile Devices With Cellular Connection
Smartphone Subscriptions
Other Smart Mobile Device Subscriptions
e.g. Mobile PCs, Tablets and Mobile Routers
Source: Ericsson (2014, November). Ericsson Mobility Report
300 million Other Smart Mobile Device Subscriptions
2.7 billion Smartphone Subscriptions
2019 2020201820172016201520142013201220112010
650 million Other Smart Mobile Device Subscriptions
6.1 billion Smartphone Subscriptions by the end of 2020
0.5b 0.9b
5.6b
3.3b
4b4.6b
5.1b
500m
450m
400m
350m
600m
250m
250m
200m150m
1.3b1.9b
16 Ericsson (2014, November). Ericsson Mobility Report 17 McKinsey on Semiconductors (2012). The supercomputer in your pocket 18 Commerce Commission New Zealand (2014, May). Annual Telecommunications Monitoring Report 2013
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The SaaS Market
Section 1 discusses the benefits of SaaS delivery of information technology solutions to customers. The market for SaaS solutions is expected to continue to strengthen – Internal Data Corporation (IDC) forecasts that by 2018, 27.8% of the worldwide enterprise applications market will be SaaS-based, generating $50.8 billion in revenue, up from 16.6% of the market and $22.6 billion in revenue in 2013.19
Pushpay’s Positioning
Pushpay believes it offers a solution that is well-positioned to take advantage of the potential growth in the mobile commerce market and to take advantage of the emerging opportunities presented by the drivers described on page 26:
• Its mobile commerce tools are tailored for Consumers with an intuitive and easy to use interface, while meeting the needs of merchants;
• The Pushpay solution is easy for merchants to implement;
• Pushpay’s cost of sales is low;
• Pushpay’s SaaS model is attractive to merchants, as it requires minimal or no upfront infrastructure investment costs (keeping total cost of ownership low) and requires minimal ongoing support or maintenance on the part of the merchant;
• Pushpay’s product is scalable to keep up with customer demand and payment transaction volume; and
• As a mobile product, Pushpay can exploit the growth in Smart Mobile Device penetration to increase use and demand.
Pushpay’s Targets
Pushpay currently has customers in New Zealand, Australia and the USA – the largest consumer market in the world. In the Medium Term Pushpay is likely to offer its services in other international jurisdictions.
Pushpay is particularly excited about its prospects in the USA, where it targets three key markets:
The Faith Sector
The Faith Sector in the USA consists of over 314,000 churches, with an average size of over 500 attendees.20 Pushpay is initially targeting larger churches, with a full service product offering to quickly grow its Merchant and Consumer base. As Pushpay continues to automate its product offering, it plans to provide a self-service solution for small to medium-sized churches.
Non-Profit Organisations (NPOs)
The Non-Profit Organisation (NPOs) sector in the USA consists of 1.44 million Internal Revenue Service (IRS) registered organisations. These organisations contributed USD$887.3 billion to the USA economy in 2012, making up 5.4 percent of the country’s gross domestic product (GDP).21
Enterprises (Both SMEs and Corporate Organisations)
The USA commercial merchant market is the largest merchant market in the world, with over 5.6 million SMEs and 17,671 Corporate Organisations.22 Pushpay initially plans to develop mobile commerce solutions for Non-POS enterprises (such as Utilities) as Pushpay believes these enterprises would benefit most through better utilisation of mobile commerce tools.
19 IDC (2014). Worldwide SaaS and Cloud Software 2014-2018 Forecast 20 US Census Bureau (2012). Statistical Abstract of the United States: 2012 21 Urban Institute (2014). The Nonprofit Sector in Brief 2014: Public Charities, Giving, and Volunteering 22 US Census Bureau (2012). Statistical Abstract of the United States: 2012
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Pushpay is also excited about its opportunity to connect with RTR’s existing Client base operating within the equivalent key target markets in New Zealand.
In addition, Pushpay seeks to target developers as a channel to market, by providing an API so they can integrate their applications with Pushpay’s products.
USA Market Opportunity
314,000Faith Sector
5.6 million Enterprises (5.6 million
SMEs and 17,671 Corporate Organisations)
1.4 million
Non-Profit Organisations
(NPOs)
Sources: US Census Bureau. (2012). Statistical Abstract of the United States: 2012
Urban Institute (2014). The Nonprofit Sector in Brief 2014: Public Charities, Giving, and Volunteering
Note: Numbers rounded
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In the past, merchants in Pushpay’s target markets have had a limited choice of mobile commerce solutions that intuitively engage with Consumers and integrate with merchants’ core IT systems. In the case of the Faith Sector, merchants have traditionally relied on a collection of fragmented Consumer payment methods including cash, cheques, manual credit, debit card payments and hosted web payments. Pushpay complements merchants’ existing payment methods by providing mobile commerce tools that facilitate fast, secure and easy Non-POS payments between merchants and Consumers.
There are a number of companies in New Zealand, Australia, the USA and other jurisdictions operating in the mobile commerce market. However, mobile commerce tools via a SaaS solution is a relatively new competitive space, and – based on its competitive analysis – Pushpay believes that there are only limited competitors offering a directly competing product in its target markets.
How Pushpay Compares With Competitors
Pushpay monitors a number of providers of competing mobile commerce solutions in its target markets.
Some of these competitors include: Dwolla (USA), Google Wallet (USA), PayPal (USA) and Apple Pay (USA).
There are also competitors who specifically target the Faith Sector, including Bluefin (USA), Church Community Builder (USA), Fellowship One (USA), Kindrid (USA), EasyTithe (USA), Mobile Cause (USA) and SecureGive (USA).
The Pushpay Mobile Commerce Competitor Analysis below sets out where Pushpay considers that some competitors of whom Pushpay is aware in the markets in which it operates (New Zealand, Australia and the USA) sit in comparison to Pushpay’s offering. It is not an exhaustive list of all current (or future potential) competitors.
3. COMPETITOR ANALYSIS
Pushpay Mobile Commerce Competitor Analysis
Under-Served Market Segment
Mobile BasedWeb Based
Non-POS Based
POS Based
Pushpay
Amazon.com
Apple Pay
MasterCard PayPass
Visa PayWave
Google Wallet
PayPal
Square
DwollaStripeDPS Payment
Express
WePay
Braintree
LevelUp
FirstGivingServiceU
CrowdRise
Pay Fone
ISIS
SecureGive
Highly Competitive and Crowded
Vend
Source: Pushpay (2015, March)
EasyTithe
Kindrid
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Within the Non-POS mobile based sector in the figure on page 29, most competitors do not offer modular tools that support multiple payment pathways or integrate directly with merchants’ IT software. By offering non-aggregated credit card, debit card and bank payments, both merchants and Consumers have more choice and control over payments.
Competitor Partnerships
Pushpay believes that it has a unique strength in that it can add value to many competitor product offerings, providing a catalyst for possible partnership opportunities. Pushpay’s Potential Competitor Partnerships below includes a sample of competitors that may benefit from Pushpay’s mobile commerce tools.
Pushpay’s Potential Competitor Partnerships
Other Wallets
Google Wallet
Pushpay
Deal Sites
ISO’s Merchant Specific
Card/Bank Specific
Bank of America
V me by Visa
American Express
Hotel Tonight
Groupon
livingsocial
Amazon Delivers
Starbucks
Uber
ChipotlePayPal Paydiant
Venmo
BrainTree
Stripe
Dwolla
Source: Pushpay (2015, March)
Pushpay believes that it has a unique strength in that it can add value to many competitor product offerings...
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Run The Red (RTR)
RTR currently has significant market share as a Consumer messaging provider in New Zealand. RTR maintains its established position in the market through strong relationships with all three major telecommunications carriers in New Zealand (Spark, Vodafone and 2degrees) and has Tier 1 Service Provider Status with each of them, being one of only a few companies with such status. There are competitors who also target this market, including Bulletin.net (New Zealand), Fronde Systems Group (New Zealand) and Modica Group (New Zealand).
RTR stands apart from its competitors through a combination of robust technology (achieving a minimum 99.8% uptime, excluding telecommunication companies), over a decade of experience in global messaging and a focus and commitment to service delivery and supporting its customers. RTR provides the highest message throughput capacity in New Zealand across all three carriers, which Pushpay believes is of significance for Enterprises looking at high volume and mission critical services.
Indirect Competitors
There are a number of further companies whose products and services may be regarded as indirectly competing offerings to Pushpay, a number of which are monitored by Pushpay.
Pushpay considers that its offering is distinguishable from those companies’ solutions, because currently:
• They do not use SaaS delivery models;
• They target different markets to Pushpay;
• They are point of sale-based; and/or
• They are web-based (as opposed to mobile).
Those companies include, but are not limited to Apple (USA), Blackbaud (UK), Breadcrumb (USA), DPS (New Zealand and Australia), EWay (Australia), Fetch (New Zealand), Fiserve (USA), Frendo (USA), Google (USA), Intuit GoPayment (USA), IP Payments (Australia), Lemon Wallet (USA), Masterpass (USA), Microsoft (USA), MYOB
(Australia), Paystation (New Zealand), Paywave (USA), Pingit (UK), Smartpay (New Zealand), Square (USA), Verifone (USA), Xero (New Zealand) and YQ (New Zealand).
There are some well funded companies such as Apple (USA), Google (USA) and Microsoft (USA) which could in the future become direct competitors to Pushpay.
Recent Activity in the Mobile Commerce Sector
The technology sector – and SaaS and mobile commerce in particular – is dynamic and fast-moving, and there have been a number of recent mergers and acquisitions involving businesses which may be, or may become, competitors to Pushpay. It is likely that further transactions of this type will take place in the future, which could impact on Pushpay’s competitive landscape.
Recent transactions include:
• Active Network Expands into Faith Market with Acquisition of Leading Church Management Software Provider Fellowship Technologies (8 February 2011) – Active Network, a technology and media company, announced that it had acquired online church management software provider (ChMS) Fellowship Technologies. As a result of the acquisition of the SaaS company, Active Network expanded its technology offerings within the Faith Sector.23
• Google Acquires TxVia To Fuel Google Wallet Ambitions (4 April 2012) – NASDAQ listed Google acquired TxVia, a mobile payments technology company, to compliment the Google Wallet mobile payment system core offering by adding features and the ability to upscale rapidly.24
• LevelUp Now Has $21M To Take On The Squares Of The Mobile Payment World (2 August 2012) – Mobile payment service company LevelUp raised USD$9 million from T-Venture, the venture capital arm of Deutsche Telekom. Total raised as at August 2012 was just over USD$21 million.25
23 Active Network (2011, February 8). Active Network Expands into Faith Market with Acquisition of Leading Church Management Software Provider Fellowship Technologies24 Forbes (2012, April 4). Google Acquires TxVia To Fuel Google Wallet Ambitions25 Tech Crunch (2012, August 2). LevelUp Now Has $21M To Take On The Squares Of The Mobile Payment World
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• Payments Company Stripe Makes First Acquisition, Buys Team Task Management And Collaboration App Kickoff (11 March 2013) – The online payments system company Stripe acquired Kickoff, a chat and task-management app for teams.26
• Payments Network Dwolla Raises $16.5 Million Series C From Andreessen Horowitz & Others, Expands To San Francisco (30 April 2013) – Dwolla are building a new payments network and have secured USD$16.5 million in Series C funding from Andreessen Horowitz, Village Ventures, Thrive Capital, and Union Square Ventures.27
• PayPal Buys Braintree For $800 Million For Mobile Payments (26 September 2013) – PayPal acquired Braintree for USD$800 million to bring traction to their mobile payments offering.28
• Payfone Raises $10 Million, Valued at $500 Million (28 October 2013) – Payfone a mobile secure payments company raised USD$10 million from Early Warning Services LLC, a provider of fraud-detection tools for banks and financial-services companies increasing its reported value to USD$500 million.29
• Amazon may be ‘closing the loop’ with GoPago purchase (17 December 2013) – Amazon.com acquired GoPago, a company that offers mobile ordering and payment Apps for Consumers and in-store point-of-sale payment services for merchants through mobile devices that run on Google’s Android operating system.30
• After A Pivot, WePay Raises $15M To Focus On Payments API For Marketplaces, Crowdfunding Sites And Others (16 January 2014) – WePay announced USD$15 million
in Series C funding, increasing total funding to USD$35 million. WePay is backed by Continental Investors, Max Levchin, Maynard Webb and Raymond Tonsing.31
• Stripe valued at $1.75bn after funding round (23 January 2014) – Stripe an online payments company received USD$80 million in its latest funding round, bringing its reported value to USD$1.75 billion. Stripe has been backed by Y Combinator, Sequoia Capital and Peter Thiel and Elon Musk, Co-Founders of PayPal.32
• MasterCard To Buy Mobile Transactions Technology Provider C-SAM - Quick Facts (24 February 2014) – Mastercard signed an agreement to acquire C-SAM, a provider of mobile wallet and on-device software and services. As a result of this acquisition, MasterCard would speed the development and deployment of mobile wallets and payment solutions globally, including the rollout of its MasterPass digital service.33
• Closes $US20m in Series B Funding Led By Valar Ventures (26 March 2014) – Vend a cloud-based, iPad point of sale software provider raised USD$20 million in Series B funding. Vend previously raised NZD$3 million in 2011 and 2012 and NZD$8 million in May 2013. Investors include Peter Thiel, Valar Ventures and Square Peg Capital.34
• Intuit Moves Deeper Into Personal Finance - Acquires Mobile Bill Payment Vendor Check (28 May 2014) – Intuit acquired mobile payments start-up Check for USD$360 million. Check launched in 2007 has USD$49 million in funding to date. The company has a mobile application that allows customers to both track all their bills and pay for them, from their phone.35
26 Tech Crunch (2013, March 11). Payments Company Stripe Makes First Acquisition, Buys Team Task Management And Collaboration App Kickoff 27 Tech Crunch (2013, April 30). Payments Network Dwolla Raises $16.5 Million Series C From Andreessen Horowitz & Others, Expands To San Francisco 28 Forbes (2013, September 26). PayPal Buys Braintree For $800 Million For Mobile Payments29 Bloomberg (2013, October 28). Payfone Raises $10 Million, Valued at $500 Million30 USA Today (2013, December 17). Amazon may be ‘closing the loop’ with GoPago purchase 31 Tech Crunch (2014, January 16). After A Pivot, WePay Raises $15M To Focus On Payments API For Marketplaces, Crowdfunding Sites And Others32 Financial Times (2014, January 23). Stripe valued at $1.75bn after funding round33 NASDAQ (2014, February 24). MasterCard To Buy Mobile Transactions Technology Provider C-SAM - Quick Facts34 Vend (2014, March 26). Vend Closes $US20m in Series B Funding Led By Valar Ventures35 Forbes (2014, May 28). Intuit Moves Deeper Into Personal Finance - Acquires Mobile Bill Payment Vendor Check
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• Square confirms purchase of food-delivery startup Caviar (4 August 2014) – Square, the mobile payments startup, confirmed it’s making a move into the food-delivery market by announcing the acquisition of startup Caviar. The deal for a ‘premium delivery’ service was worth roughly $90 million, report says.36
• Apple Pay launches today: Here’s how to use it (20 October 2014) – Apple unveils its Apple Pay program to an audience of over 10 million iPhone 6 and 6 Plus owners. The iconic firm has more than 220,000 retail locations that will accept payment on the new iPhones. Major payment networks Visa, MasterCard and American Express and more than 500
banks are on board. Retailers include such biggies as McDonald’s, Macy’s, Chevron gas stations, Walgreens and Panera Bread.37
• Google Is in Talks to Buy Mobile-Payments Service Softcard (16 January 2015) – Google entered into exclusive negotiations with the mobile payments company through an offer to acquire Softcard for an amount of at least $50 million, said one of the sources. If the deal pushes through, Google will be paired with the biggest carriers in the United States in its bid to challenge the Apple Pay service in the burgeoning mobile payments industry.38
36 Fortune (2014, August 4). Square confirms purchase of food-delivery startup Caviar37 USA Today (2014, October 20) Apple Pay launches today: Here’s how to use it38 The Wall Street Journal (2015, January 16). Google Is in Talks to Buy Mobile-Payments Service Softcard
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4. PUSHPAY’S BOARD OF DIRECTORS
Bruce Gordon | Independent Chairman
Bruce Gordon has over 23 years’ of governance and commercial experience in senior positions with both SMEs and Corporate Organisations across Asia Pacific, the UK and the USA.
He currently serves as CEO of Cristal Air International
(trading as HRV) and has expertise in retail, banking, finance and electronic payments.
A pioneer of many of the electronic banking services that Consumers now enjoy, Bruce was Chairman of Electronic Transaction Services (now Paymark), Chief Manager Electronic Banking and Payments at Bank of New Zealand and has held senior roles at Retail Financial Services (trading as Farmers Credit), National Australia Bank, ASB Bank and The Warehouse Group. He has extensive Board experience including The Warehouse Financial Services, The Merino Company of New Zealand, and Bendon Group.
Bruce specialises in achieving strategic growth for companies and the restructuring of under-performing entities. He is a Fellow of FINSIA and holds an MBA and a PGDipBus (Information Systems) both from the University of Auckland. Bruce lives with his family in Auckland.
Civil Proceedings were filed against Bruce Gordon (and Dennis Broit, Eric Watson, Gregory Muir, Mark Hotchin and Sir Tipene O’Regan) on 30 March 2014 in the High Court, Auckland Registry. The Financial Markets Authority (FMA) alleges that the directors and promoters made untrue statements in the registered prospectuses and investment statements of Hanover Finance, Hanover Capital and United Finance dated 7 December 2007, made further untrue statements when they signed prospectus extension certificates on 31 March 2008 and that certain advertisements contained untrue statements about some of the matters referred to above.
Graham Shaw | Independent Director
Graham is a chartered accountant with over 30 years’ experience in business. He sits on a number of corporate and not-for-profit boards, and has extensive SaaS governance experience from being on the board of Xero
for eight years and more recently Gentrack.
He spent 10 years with KPMG primarily as an advisor to businesses. He then joined Works Infrastructure where he held a number of finance roles before being appointed Chief Executive Officer, leading the company to substantial growth and successful expansion into Australia. Graham has also been Chief Executive Officer of Kensington Swan, one of New Zealand’s national law firms.
Graham has a BCom from the University of Canterbury, is a Member of Chartered Accountants Australia and New Zealand, a Chartered Member of the Institute of Directors in New Zealand, a Fellow of the New Zealand Institute of Management and a Companion of the Institution of Professional Engineers New Zealand. Graham lives with his family in Wellington.
Christopher Huljich | Non-Executive Director
Christopher Huljich was the co-founder of Best Corporation which floated on the NZX in 1991, and was subject to a takeover by the Danone Group in 1995. He has over 40 years’ experience in both commercial and residential
property in New Zealand and Australia including large scale commercial, industrial and residential developments and has business interests in many listed and unlisted companies in New Zealand and Australia. Christopher is the Managing Partner of Christopher & Banks Private Equity and has
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invested in many SaaS-based companies, including the sole pre-IPO funding for Diligent Board Member Services. He is also the co-founder of the Huljich Foundation which aims to provide memorable experiences for children suffering from life threatening disease. Christopher brings immense business knowledge across many industries as well as good strategic appreciation and vision. Chris lives with his family in Auckland.
Douglas (Doug) Kemsley | Non-Executive Director
Doug has more than 20 years’ experience as an investor in and director of software and technology companies in New Zealand. Doug was a co-founder and director of CA-Systems, a $1,200 start-up which sold to MYOB for $22 million in 1999. During his
time as Chairman of Maxnet, the company grew from a start-up internet service provider to become a leading data centre and cloud services provider and was subsequently acquired by Vocus Communications in 2012. Outside of his investment in Pushpay, Doug is passionate about a number of causes in the Non-Profit Organisation (NPO sector in New Zealand and Nepal. Formerly, a helicopter pilot in the Royal New Zealand Air Force and an administrator of a community health program in Nepal, Doug lives with his family in Hamilton.
Christopher (Chris) Heaslip | Chief Executive Officer, Executive Director and Co-Founder
Chris Heaslip is the Chief Executive Officer (CEO) and Co-Founder of Pushpay. Along with Eliot Crowther, Chris envisioned an integrated Consumer friendly cloud-based mobile commerce solution that could simultaneously provide a
platform for increased sales and revenue, while simplifying business processes and reducing costs. Chris has worked in and for a number of
SMEs and Corporate Organisations to develop effective and efficient systems and optimal accounting treatment.
He has previously served as CEO of an accounting and tax consultancy and prior to that as a tax management professional and business adviser at KPMG. Chris was also an investigator at the New Zealand Inland Revenue Department. Chris is a Chartered Accountant by vocation, with a BCom (Accounting), DipCom (Taxation and Law) and a MCom Hons (Taxation) all from the University of Auckland. Chris lives with his family in Seattle in the USA.
Christopher Heaslip is a director of Bitcoinica Consultancy Limited, which entered liquidation on 10 January 2013.
Eliot Crowther | Sales, Executive Director and Co-Founder
Eliot Crowther is a Co-Founder of Pushpay (along with CEO Chris Heaslip) and is a proven sales professional with several years’ experience working in commercial high value sales. Eliot co-founded Pushpay after realising there was a
significant opportunity to aggregate mobile commerce tools to enable Merchants to efficiently and effectively communicate and transact with Consumers. Eliot helps drive Merchant growth and Consumer engagement through targeted product offerings.
Prior to co-founding Pushpay, Eliot was a leading sales executive at HRV, the home ventilation business. His in-depth understanding of the sales process and mobile commerce was essential in establishing two of Pushpay’s key vertical markets, the Faith Sector and Non-Profit Organisations (NPOs). Eliot is now focused on executing Pushpay’s strategy to adapt its mobile commerce solutions to expand into SMEs and Corporate Organisations.
Eliot, a former New Zealand representative in cycling, holds a DipAppSc from AUT University and lives with his family in Seattle in the USA.
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Peter Huljich | Alternate Non-Executive Director
Peter is an investment professional with over 15 years’ experience. He is a partner of Christopher & Banks Private Equity and has served on a number of listed and unlisted boards including Diligent Board Member Services, Mike Pero
Mortgages and Sugar International.
He co-founded Huljich Wealth Management, which managed the largest KiwiSaver Scheme (in terms of members) with a 100% New Zealand owned manager where he served in a number of roles including Chief Investment Officer and Chief Executive Officer prior to the KiwiSaver business being acquired by Fisher Funds Management in 2011.
Peter has a BCom from the University of Auckland, a DipNZX from Kaplan and a DipInvRel from the Australasian Investor Relations Association. He is also a Member of the Institute of Directors in New Zealand and is a Fellow of FINSIA.
Directors’ Interests
Remuneration
Pushpay pays Director’s fees at $30,000 per annum for Non-Executive Directors and $45,000 per annum for the Chairman. Additional fees will also be paid for members of the Audit and Risk Management Committee, the Nominations and Remuneration Committee, and the Technology, Innovation and Intellectual Property Committee at $6,000 per annum for Non-Executive Directors and $9,000 for the Chairman. Currently, the Pushpay Board of Directors fulfils the duties and responsibilities of the Audit and Risk Management Committee, the Nominations and Remuneration Committee, and the Technology, Innovation and Intellectual Property Committee.
Pushpay may appoint additional non-executive Directors in accordance with the Company’s constitution. The Directors’ potential fee pool is currently set at a maximum of $300,000 per annum for all Directors.
Douglas Kemsley and Christopher Huljich have agreed to not receive Directors’ fees through to the period ending 30 September 2015. Other than
the payment of Directors’ fees from the date of his appointment, Bruce Gordon has not received any other fees or other remuneration from Pushpay.
Pushpay may pay additional fees to non-executive Directors for consulting services, over and above their Director duties. Prior to his appointment, Bruce Gordon received consulting fees relating to strategic business and general management advice provided totalling $65,000 (excluding GST).
Christopher Heaslip receives remuneration in his role as the CEO of Pushpay and does not currently receive any Directors’ fees. Christopher Heaslip is currently paid a gross salary of USD$163,320 per annum plus health benefits. Christopher may be issued shares in Pushpay under the SIS in the future.
Eliot Crowther receives remuneration in his Sales role at Pushpay and does not currently receive any Directors’ fees. Eliot Crowther is currently paid a gross salary of USD$133,320 per annum plus commission and health benefits. Eliot may be issued shares in Pushpay under the SIS in the future.
Expenses
The Directors are entitled to be paid for all reasonable travel, accommodation and other expenses incurred by them in connection with their attendance at Board of Directors or Pushpay shareholder meetings, or otherwise in connection with Pushpay’s business.
Indemnification and Insurance
Under Pushpay’s constitution and the Companies Act 1993, the Directors are entitled to be, and are as at the date of this document, indemnified and insured by Pushpay against certain costs and liabilities.
Retirement Benefits
Directors are not currently entitled to any retirement benefits on their retirement or compensation for loss of office.
Directors’ Shareholdings
As at the date of this Information Memorandum, the Directors have relevant interests in the number of shares in Pushpay listed alongside their names in the table ‘Directors’ of Pushpay Shareholdings’ on page 37.
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39 Refer to Loans to Directors on page 38.
Director Nature of Relevant
Interest
Relevant Registered Holder/s SIS Shares39 Total Number
of Shares
Total
Shareholding % Bruce
Gordon
Beneficial owner Geelong Investments Limited 233,514 137,109 0.27%
Beneficial owner Pushpay Trustees Limited 233,514 233,514 0.47%
Beneficial owner Emma Jane Gordon + East Street
Trustees Limited
- 212,491 0.42%
583,114 1.16%
Christopher
Huljich
Beneficial owner Christopher & Banks Private Equity V
Limited
- 11,805,188 23.56%
Registered holder Christopher Peter Huljich + Colin
Gordon Powell
- 2,000,116 3.99%
Beneficial owner
and registered
holder
Christopher Peter Huljich + Connie
Maria Francis Huljich + Elizabeth
Anne Ferguson + Colin Gordon Powell
+ Peter Karl Christopher Huljich
- 879,496 1.76%
Beneficial owner Huljich Family Trust Nominees
Limited
- 252,496 0.50%
Registered holder William Norman Birnie + Nicole Marie
Way + Christopher Peter Huljich
- 25,000 0.05%
14,962,296 29.86%
Douglas
Kemsley
Beneficial owner
and registered
holder
Douglas David Kemsley + Linda Tanu
Kemsley + Michael John Roberts
- 4,179,501 8.34%
4,179,501 8.34%
Christopher
Heaslip
Beneficial owner DDS Trustee Services Limited - 7,428,037 14.83%
7,428,037 14.83%
Eliot
Crowther
Beneficial owner
and registered
holder
Eliot Barry Crowther + Dorette
Crowther + Heaslip Trustee (No.10)
Limited
- 7,079,744 14.13%
7,079,744 14.13%
Peter Huljich Beneficial owner Christopher & Banks Private Equity V
Limited
- 11,805,188 23.56%
Power to control* Christopher Peter Huljich + Colin
Gordon Powell
- 2,000,116 3.99%
Registered holder Christopher Peter Huljich + Connie
Maria Francis Huljich + Elizabeth
Anne Ferguson + Colin Gordon Powell
+ Peter Karl Christopher Huljich
- 879,496 1.76%
Beneficial owner Huljich Family Trust Nominees
Limited
- 252,496 0.50%
14,937,296 29.81%
Directors’ of Pushpay Shareholdings
Source: Pushpay (2015, March)
Note: Numbers rounded
* The power to control the exercise of a right to vote attached to the financial product under section 235(1)(c) of the Financial Markets Conduct Act 2013 and the power to control the acquisition or disposal of the financial product under section 235(1)(d) of the Financial Markets Conduct Act 2013.
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Loans to Directors
On 11 February 2014 Pushpay provided unsecured loan facilities to Geelong Investments Limited (an investment entity related to Bruce Gordon) that enables him to acquire 233,514 shares at $0.343 per share through the SIS. The loans are interest free and must be repaid by 11 February 2017.
Graham Shaw was invited to participate in the SIS on his appointment as a Director, subject to obtaining an NZX waiver or Pushpay shareholder approval in respect of the provision of an interest free loan to him in accordance with the terms of the SIS. Graham Shaw’s participation in the SIS, including the provision of an interest free loan, would be on the same terms as all other participants in the SIS.
Key details of the offer of SIS participation to Graham Shaw are:
• issue of 23,896 ordinary shares for Graham Shaw’s benefit in the SIS at a price of $2.762 per share ($66,000). This price was set by reference to the 20 day volume weighted average price prior to 20 January 2015;
• the purchase price for the shares will be funded by an interest free loan of $66,000 from Pushpay, which must be repaid by 31 March 2018;
• prior to the loan being repaid in full by Graham Shaw, the shares will be held by the SIS trustee – Pushpay Trustees Limited; and
• the offer is subject to the granting of an NZX waiver or Pushpay shareholder approval in respect of the provision of a loan to Graham Shaw for the offer.
The Company has been corresponding with the NZX and the NZX has stated that they are inclined to grant a waiver. A waiver will allow Graham Shaw’s participation in the SIS to proceed in the near future.
Material Transactions Entered Into Between Pushpay and Directors
Pushpay was incorporated on 25 July 2011 and has raised over $15.6 million of capital to date.
Since the start of 2013, Pushpay has raised the following capital (some of which was from persons who are now Directors):
• 11 February 2013 – raised $156,000 of new shares from nine habitual and/or eligible investors at a price of $4.89 per share (equivalent to $0.269 per share following the Share Split);
• 11 February 2013 – issued $500,000 of new shares to Douglas Kemsley (through his investment entity) at a price of $7.28 per share (equivalent to $0.401 following the Share Split);
• 21 May 2013 – issued $150,000 of new shares to Douglas Kemsley (through his investment entity) at a price of $7.17 per share (equivalent to $0.395 following the Share Split);
• 17 July 2013 – issued $350,000 of new shares to Douglas Kemsley (through his investment entity) at a price of $6.92 per share (equivalent to $0.381 following the Share Split);
• 24 December 2013 – issued $2,000,000 of new shares to Christopher Huljich (through his investment entity) at a price of $5.21 per share (equivalent to $0.287 per share following the Share Split);
• 20 February 2014 – issued $300,000 of new shares to Alliance Equities 2 Limited at a price of $6.26 per share (equivalent to $0.345 per share following the Share Split);
• 11 April 2014 – raised $2,778,910 of new shares from 16 habitual and/or eligible investors at a price of $10.68 per share (equivalent to $0.588 per share following the Share Split); and
• 4 July 2014 – raised $9,000,000 of new shares from around 73 habitual and/or eligible investors at a price of $1.00 per share (following the Share Split).
Since 2011, Pushpay has entered into the following material transactions in respect of which any one or more of the current Directors of Pushpay were interested:
Material Transactions with Bruce Gordon
On 11 April 2014 Pushpay issued $125,000 of new shares to East Street Trust (an investment entity related to Bruce Gordon), at a price of $10.68 per share (equivalent to $0.588 per share following the Share Split).
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On 11 June 2014 Pushpay sold 137,109 shares from the Pushpay Employee Share Ownership Plan (now the SIS) to Geelong Investments Limited (an investment entity related to Bruce Gordon) at a price of $0.401 per share.
Emma Gordon (the wife of Bruce Gordon), is a trustee of East Street Trust. Bruce Gordon is a director of Pushpay and a director of Geelong Investments.
Material Transactions with Christopher Huljich
On 19 December 2013 Pushpay entered into an Investment Agreement with Christopher & Banks Private Equity V Limited (Christopher & Banks) (an investment entity related to Christopher Huljich), pursuant to which Christopher & Banks subscribed for 383,679 preference shares in Pushpay which, immediately following their issue by Pushpay, constituted 20% of the total shares on issue in Pushpay. The issue price was satisfied by the payment of $2,000,000. The preference shares were issued to Christopher & Banks on 24 December 2013. On 26 May 2014 Christopher & Banks waived all dividend entitlements and converted the same preference shares into ordinary shares at a rate of one ordinary share for each preference share.
On 11 April 2014 Pushpay issued $1,008,280 of new shares to Christopher & Banks (an investment entity related to Christopher Huljich) and a further $780,000 of new shares to a number of other investment entities related to Christopher Huljich, at a price of $10.68 per share (equivalent to $0.588 per share following the Share Split).
On 9 May 2014 Pushpay entered into an Underwriting Agreement with Christopher & Banks, pursuant to which Christopher & Banks agreed to underwrite, for nil consideration, the issue of $9 million of new shares, which closed on 4 July 2014. The issue of those $9 million of new shares was a private capital raise to a variety of habitual and/or eligible investors, a number of whom are related to the Directors including Christopher Huljich. As the shares available under that capital raise were oversubscribed, the contemplated underwriting arrangements were not ultimately required and therefore not utilised.
On 4 July 2014 Pushpay issued $2,201,000 of new shares to Christopher & Banks (an investment
entity related to Christopher Huljich) and a further $1,969,000 of new shares to a number of other investment entities related to Christopher Huljich, at a price of $1.00 per share.
On 16 March 2015 Christopher & Banks provided a standby funding facility to the Company of up to $4.0 million.
Christopher Huljich is a director of Pushpay and is also a director of Christopher & Banks. He is also either a director, trustee or related to the same of all other investment entities referred to above.
Material Transactions with Douglas Kemsley
On 11 February 2013 Pushpay entered into an Investment Agreement with D & L Kemsley Family Trust (Kemsley Family Trust) (an investment entity related to Douglas Kemsley), pursuant to which Kemsley Family Trust subscribed for:
• 68,658 shares in Pushpay which, immediately following their issue by Pushpay, constituted 5.0% of the total shares on issue in Pushpay. The issue price was satisfied by the payment of $500,000. The shares were issued to Kemsley Family Trust on 11 February 2013;
• 20,912 shares in Pushpay which, immediately following their issue by Pushpay, constituted 1.5% of the total shares on issue in Pushpay. The issue price was satisfied by the payment of $150,000. The shares were issued to Kemsley Family Trust on 21 May 2013;
• 50,563 shares in Pushpay which, immediately following their issue by Pushpay, constituted 3.5% of the total shares on issue in Pushpay. The issue price was satisfied by the payment of $350,000. The shares were issued to Kemsley Family Trust on 17 July 2013; and
• 90,074 shares in Pushpay which, immediately following their issue by Pushpay, constituted 4.6% of the total shares on issue in Pushpay. The issue was for nil consideration, in consideration for the agreed early termination of an existing investment agreement applicable to Douglas David Kemsley. The shares were issued to Kemsley Family Trust on 20 February 2014.
Douglas Kemsley is a director of Pushpay and a trustee of Kemsley Family Trust.
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Material Transactions with Christopher Heaslip
On 2 April 2013 (prior to the Share Split) Dorchester Trust (an investment entity related to Christopher Heaslip) transferred 58,130 shares to the trustee company of the Pushpay Employee Share Ownership Plan (now the SIS), Pushpay Trustees Limited.
On 11 June 2014 (following the Share Split) Dorchester Trust received 263,843 shares from the trustee company of the Pushpay Employee Share Ownership Plan (now the SIS), Pushpay Trustees Limited, being shares returned to Christopher Heaslip from a prior holder via Pushpay Trustees Limited.
Christopher Heaslip is a director of Pushpay and is also a director of Dorchester Trustee Limited.
Material Transactions with Eliot Crowther
On 2 April 2013 (prior to the Share Split) Crowther Family Trust (an investment entity related to Eliot Crowther) transferred 58,130 shares to the trustee company of the Pushpay Employee Share Ownership Plan (now the SIS), Pushpay Trustees Limited.
On 11 June 2014 (following the Share Split) Crowther Family Trust received 263,843 shares from the trustee company of the Pushpay Employee Share Ownership Plan (now the SIS), Pushpay Trustees Limited, being shares returned to him from a prior holder via Pushpay Trustees Limited.
Eliot Crowther is a director of Pushpay and is also a trustee of Crowther Family Trust.
Material Transactions with Peter Huljich
On 19 December 2013 Pushpay entered into an Investment Agreement with Christopher & Banks Private Equity V Limited (Christopher & Banks) (an investment entity related to Peter Huljich), pursuant to which Christopher & Banks subscribed for 383,679 preference shares in Pushpay which, immediately following their issue by Pushpay, constituted 20% of the total shares
on issue in Pushpay. The issue price was satisfied by the payment of $2,000,000. The preference shares were issued to Christopher & Banks on 24 December 2013. On 26 May 2014 Christopher & Banks waived all dividend entitlements and converted the same preference shares into ordinary shares at a rate of one ordinary share for each preference share.
On 11 April 2014 Pushpay issued $1,008,280 of new shares to Christopher & Banks (an investment entity related to Peter Huljich) and a further $780,000 of new shares to a number of other investment entities related to Peter Huljich, at a price of $10.68 per share (equivalent to $0.588 per share following the Share Split).
On 9 May 2014 Pushpay entered into an Underwriting Agreement with Christopher & Banks, pursuant to which Christopher & Banks agreed to underwrite, for nil consideration, the issue of $9 million of new shares, the offer for which closed on 4 July 2014. The issue of those $9 million of new shares was a private capital raise to a variety of habitual and/or eligible investors, a number of whom are related to the Directors including Peter Huljich. As the shares available under that capital raise were oversubscribed, the contemplated underwriting arrangements were not ultimately required and therefore not utilised.
On 4 July 2014 Pushpay issued $2,201,000 of new shares to Christopher & Banks (an investment entity related to Peter Huljich) and a further $1,944,000 of new shares to a number of other investment entities related to Peter Huljich, at a price of $1.00 per share.
On 16 March 2015 Christopher & Banks provided a standby funding facility to the Company of up to $4.0 million.
Peter Huljich is an alternate director of Pushpay and is an employee of Christopher & Banks. He is also either a director, trustee or related to the same of all other investment entities referred to above.
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Introduction to Pushpay Senior Management
At present, Pushpay has 67 staff members and plans to increase the team to around 178 employees in the Medium Term, subject to the Company being able to secure high performing and talented employees.
Further Details on Pushpay Senior Management
Christopher (Chris) Heaslip | Chief Executive Officer, Executive Director and Co-Founder
Refer to page 35 for Chris’ biography.
Derrell Hunter | Chief Financial Officer 40
Derrell is a respected professional in the finance industry with experience of 20 years at KPMG and over 13 years in Chief Financial Officer positions. Derrell brings a wealth of knowledge to Pushpay with experience as a Venture Capital Group
co-founder and chairman; CFO, COO and director of several private entrepreneurial companies; public company CFO; and most recently CFO of a faith based non-profit organisation with over 150 staff based out of Georgia in the USA. Derrell is a financial and operational leader with the unique combination of strategic vision and a hands-on focus on operational excellence.
5. PUSHPAY’S MANAGEMENT TEAM
Pushpay’s Organisation Chart
Source: Pushpay (2015, March)
Chris HeaslipCEO, Executive
Director, Co-Founder
Derrell Hunter
CFO
Finance Operations
Paul Shingles
COO
Partnerships
Tim Abare
Senior Vice President -
Partnerships
Noah Hickey
GM - Enterprise Solutions
Enterprise Solutions Sales
Eliot CrowtherSales, Executive
Director, Co-Founder
40 Derrell Hunter is currently on a personal leave of absence. During this time, Kevin Underwood will assume his responsibilities.
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Paul Shingles | Chief Operations Officer
Paul joined Pushpay after returning from the UK where he spent six years working in the software industry, most notably as COO of Clearlybusiness, a London-based innovation unit of Barclays bank. As well as supporting Barclays’
strategic solutions like Barclays Pingit, Clearlybusiness developed award winning cloud solutions for Barclays’ SME customers across Europe, the Middle East and Africa.
His experience at Barclays has left him with an understanding of what it takes to deliver growth and innovation in a fast paced SaaS business, and he brings a clear focus on execution and delivery. Prior to working in the UK Paul spent more than five years in the New Zealand telecommunications industry.
Tim Abare | Senior Vice President – Partnerships
Tim Abare has worked at an executive or general manager level for non-profit and corporate organisations for over 30 years. He is widely recognised in the USA Faith Sector as a thought and action leader with a history of creating
and leading strategic growth initiatives and building profitable brands and organisations. Prior to joining Pushpay, Tim was the Chief Operating Officer for a USA-based non-profit organisation, with a staff of 240 people across 14 countries, which in 2013 and 2014 delivered record-setting top and bottom line growth. Tim is responsible for developing and implementing Pushpay’s channel partnership strategies, and participates in the development and execution of Pushpay’s overall sales growth plan. A key part of his role includes building and measuring successful processes and go-to-market strategies with our strategic channel partners and internal teams to maximise market penetration and engagement.
Noah Hickey | General Manager – Enterprise Solutions
Noah Hickey is a business development professional with a proven track record in increasing business revenues and profit growth within competitive markets. Prior to joining Pushpay, Noah played an integral role at Huljich Wealth Management as Head
of Distribution from 2008-2011. From 2011-2014 he sat on the executive team at Fisher Funds Management as Head of Business Development and Sales. Noah, a former All White of 10 years, recently stepped down from the board of the New Zealand Professional Footballers Association, but remains on the board of the Wellington Phoenix FC. In addition, Noah is a member of the Capital Campaign Committee and an ambassador for Ronald McDonald House Auckland. Noah will be responsible for developing and implementing Enterprise level client relationships in both New Zealand and Australian markets. A key part of his role will include helping clients accelerate and improve their ability to attract, acquire, retain, and develop affinity with their customers.
Eliot Crowther | Sales, Executive Director and Co-Founder
Refer to page 35 for Eliot’s biography.
The Pushpay Share Incentive Scheme (SIS)
Pushpay recognises it is important to incentivise employees, non-executive directors and contractors through share ownership. The SIS is aimed at motivating key employees, non-executive directors and contractors and at attracting potential high achievers to work at Pushpay. Non-executive directors and contractors,
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as well as employees, are eligible to participate in the SIS.
At the date of the Information Memorandum, Pushpay Senior Management beneficially own the following shares in Pushpay, including SIS Shares.
The SIS Shares are held in trust, by the trustee for the SIS, Pushpay Trustees Limited, of which Christopher Heaslip is the sole director.
Some, or all, of the SIS Shares may be bought back by Pushpay, if the employee ceases to be employed by the Company or does not meet loan repayments. If Pushpay was to buy back any of the SIS Shares they would likely be held in the SIS for future use or cancelled.
Senior Management Role SIS Shares Total Shares in Pushpay
Beneficially Owned41
Total % Holding
Christopher Heaslip CEO, Executive Director, Co-Founder
- 7,428,037 14.83%
Derrell Hunter CFO 100,000 100,000 0.20%Paul Shingles COO 191,654 215,116 0.43%Tim Abare Senior Vice President -
Partnerships 84,997 101,997 0.20%
Eliot Crowther Sales, Executive Director, Co-Founder
- 7,079,744 14.13%
Noah Hickey GM - Enterprise Solutions 300,000 1,054,993 2.11%
Pushpay Senior Management Share Ownership
Source: Pushpay (2015, March)
Note: Numbers rounded
41 Includes SIS Shares.
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No investment is risk-free and the shares in Pushpay are no exception. Potential investors should seek financial and legal advice before deciding to acquire shares in Pushpay.
Pushpay shares may trade lower than the price paid and there is a risk that investors may not be able to sell their shares due to the illiquid nature of the shares. The market prices for technology shares are historically volatile. As discussed on pages 52 and 53, a number of key shareholders have entered into Deeds of Embargo preventing them from selling their shares for a period of time. This may have the effect of further reducing the liquidity of Pushpay’s shares.
Pushpay actively manages risk through the Audit and Risk Management Committee, which reports regularly to the Board.
Pushpay is an Early Stage Company
Pushpay is an early stage technology business, and is a high risk investment. At this stage, the Company has a limited trading history, and there can be no certainty that Pushpay can successfully execute on its business plan and strategies. Potential investors should seek financial advice before deciding to invest.
In particular, investors should consider the following risks:
Pushpay Will Continue to Make Losses
For the foreseeable future, Pushpay will be focusing on establishing and growing its business. Pushpay may or may not achieve the results it is planning for, and the costs to execute its business strategy may be higher than currently anticipated.
The Financial Statements for the six month period ended 30 September 2014 show that Pushpay and its subsidiaries recorded an ‘operating loss after tax’ of $2.572 million, and as at the interim balance date had ‘total equity’ of $11.615 million. As at the interim balance date the consolidated group had $5.599 million in ‘cash and cash equivalents’, and the Company has prepared forecasts which indicate that the $5.599 million of ‘cash and cash equivalents’ in addition to Cash Flows from operations and the standby funding
facility of up to $4.000 million provided by Christopher & Banks, will enable the Company to continue operating in the near term. In addition, Pushpay does not expect to be profitable or pay dividends, and will have Negative Cash Flow, in the Medium Term.
Pushpay May Need to Raise Further Capital
Pushpay may require further funding in the future to maintain and grow its business. There is a risk that required future funding may not be available on favourable terms or may not be available at all. If Pushpay does not raise new capital when required, Pushpay will need to adopt alternative funding options or a modified growth strategy.
Pushpay Operates in a Competitive Market
As discussed in Section 3 and elsewhere in this Information Memorandum, Pushpay operates in a competitive market. There is a risk that Pushpay is unable to compete successfully against its current and any future competitors, which would have an adverse effect on Pushpay’s business.
In particular, new entrants may enter the market offering free or cheaper mobile payment offerings with the same or a greater range of functions than Pushpay’s offering. Existing or new competitors may exert downward price pressure in Pushpay’s key target markets, and competitors with greater resources may be able to develop, promote and sell their products more actively than Pushpay. To respond to competitive pressure, Pushpay may need to introduce a low priced (or free) pricing plan in the future. Conversions from that plan to a fully priced plan may not eventuate or such plans may adversely affect Pushpay’s business.
As Pushpay operates in the payments sector, it has a number of dependencies to deliver its service to Consumers. Pushpay is dependent on financial service providers such as card schemes, networks, gateways, ISOs, ODFIs and banks to provide its service. Some of these providers operate in the mobile payments space, or may do so in the future. Should a financial service provider block a merchant from using Pushpay to accept payments this would significantly affect Pushpay’s business.
6. RISKS RELATING TO PUSHPAY
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Pushpay is also dependent on mobile operating systems such as Apple’s iOS, Google’s Android and Microsoft’s mobile platform to allow Consumers to download and install payment Apps on their Smart Mobile Devices. Google currently has its own payments service and others may also operate in the mobile payments space, or may do so in the future. Should a mobile operating system block the use of Pushpay’s App or not let their Consumers use Pushpay, this would significantly affect Pushpay’s business. In addition, because a substantial number of Consumers access Pushpay through Smart Mobile Devices, the Company is particularly dependent on the interoperability of services with Smart Mobile Devices and operating systems.
Pushpay’s recent acquisition of RTR means that Pushpay may also face competitive risks from competitors providing SMS services. As this market is a mature market, competitors may exert downward price pressure, or look to provide new technology or other value-added services to customers. This could erode RTR’s competitiveness in the markets in which it operates. RTR is also dependent on telecommunication providers to deliver SMS services. Some of these providers offer SMS services or may do so in the future. If a provider blocked RTR from using its services, it would significantly affect RTR’s business.
Pushpay’s Business Relies on Customer Renewals
Pushpay is a SaaS business, and in most cases, does not lock Merchants or Clients into long-term contracts. It is important that customers renew their subscriptions with Pushpay when the existing subscription term rolls over, which for most customers is on a monthly basis. Although Pushpay’s historical Retention has been high, if customers do not renew their subscriptions, or renew on less favourable terms, revenue may decline which could adversely affect Pushpay’s business. RTR offers both gateway SMS services and campaign related SMS services. Gateway SMS services are based on licensing fees and other fees that are billed monthly. Pushpay’s business relies on customer renewals, and faces risks that customers do not renew their subscriptions or renew on less favourable terms. RTR had three Clients, CLX Networks, Co-Operative Bank and Vodafone New Zealand, that each represented
more than 10% of revenue in the year ended 31 March 2014. RTR faces the risk that a significant customer may not renew its subscription or subscribes for fewer services in the future.
Pushpay Operates in a Rapidly Evolving Market
Pushpay’s success depends on its ability to expand its products in response to changing technology, customer demands and competition. If Pushpay’s products fail to keep pace with rapid technological advancements, particularly in the mobile environment, Pushpay’s results may be adversely affected. The success of new features depends on several factors including the timely completion, introduction and market acceptance of these new features. Because Pushpay services are designed to operate on numerous systems, Pushpay needs to enhance its services on web browsers, mobile Apps and other communication, browser and database technologies. Modifications to Pushpay’s software to operate on existing systems, or new systems may increase development expense, or may not be successful in developing for systems, which in turn would adversely affect its business. Additionally, the development of entirely new technologies to replace existing offerings could make Pushpay’s existing or future products outdated or less competitive.
In some cases Pushpay may choose to advance its business through acquisitions rather than developing the technology and competencies internally. An example of this is Pushpay’s recent acquisition of RTR. Should it be unable to successfully integrate acquisitions (management, technology, staff, and IP) across to Pushpay, its business may be materially affected.
Pushpay’s Success Depends on Adoption of New Technology
As discussed in Section 3 and elsewhere in this Information Memorandum, many companies and organisations rely on traditional payment methods and Consumer engagement, which are well established. These companies and organisations may be reluctant to change to Smart Mobile Device technology. The failure of Pushpay’s offering to achieve and maintain acceptance in its key target markets would adversely affect Pushpay’s business and impact its future growth.
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Pushpay’s Business Relies on Partners
To date, Pushpay has relied primarily on a direct sales model. However, in order to scale the growth of the business, Pushpay has developed a number of significant commercial relationships. For example, in the case of the Faith Sector, with Church Community Builder (CCB) and Renewed Vision in the USA. Termination of existing relationships, or the failure by Pushpay to develop new partner relationships in key markets, will slow the growth of Pushpay’s business, and may have an adverse effect on its financial performance.
Pushpay’s Technology Relies on Third Parties
Pushpay is reliant on a number of parties to provide essential services on an out-sourced basis. There is the possibility of third party failure risks in relation to security, back-up and dependence on the internet, data centres, mapping software, third party licences and mobile networks, which are outside the direct control of Pushpay. There are risks of outages caused by third party data centre providers, which would mean Pushpay’s customers may not be able to access the Pushpay system. To mitigate these risks, Pushpay operates a comprehensive security and back-up regime for data storage, working with third party experts. Pushpay has an ongoing security review process undertaken by external consultants. Pushpay uses secure data hosting businesses with back-up capabilities provided in a remote location. RTR’s risks relating to reliance on third parties have very similar characteristics to those applicable to Pushpay outlined above. With a security and back-up regime for data storage, RTR maintains over 99% uptime, and provides delivery receipts and SMS message queuing if a network is down.
Pushpay’s Business is Subject to Credit, Fraud and Compliance Risk
Pushpay’s wholly-owned USA-based subsidiary, ZipZap Processing has a wholesale processing agreement with First Data to provide payment processing services to Merchants in the United States. As a Wholesale ISO, ZipZap Processing assumes the credit risk for each Merchant should they be unable or unwilling to meet their obligation to pay fees owed or amounts associated with transactions that result in returns, chargebacks, or similar transactions.
ZipZap Processing is subject to payment card association operating rules, certification requirements and rules governing electronic funds transfers, which could change or be reinterpreted making it difficult or impossible for us to remain compliant. If we fail to comply with these rules or requirements, we may be subject to fines and higher transaction fees and/or the loss of our ability to process credit and debit card payments or facilitate other types of online payments, which could negatively impact business results.
ZipZap Processing also provides Merchants with the ability to process bank payments in the USA through the ACH Payments network, which is governed by NACHA rules. The risks associated with processing ACH Payments are similar to those identified above for credit card processing which means that ZipZap Processing is responsible for the credit risk of our Merchants. Additionally, failure to comply with NACHA rules or requirements, may result in fines and higher transaction fees and/or the loss of our ability to process bank payments which could negatively impact business results.
To mitigate these risks we engage external consultants on a periodic basis to audit internal systems and processes to ensure we are following industry best practices in credit underwriting, fraud detection and are compliant with the various rules governing the payments industry.
Pushpay’s Business Involves Intellectual Property
Pushpay has not applied to register for any patents for the intellectual property it has developed. The intellectual property under development or in use by Pushpay may be subject to patent applications by unrelated parties in New Zealand or in other jurisdictions. Alternatively, other parties may develop and patent other very similar, potentially substitutable products, processes or technologies. Such events may be outside the control of Pushpay and may have adverse consequences for its business. Pushpay may or may not decide to register patents in the future. There is a risk that any patents Pushpay seeks to have registered in the future may not be registered in New Zealand or any other particular jurisdiction. Any enforcement of Pushpay’s intellectual property rights could be costly, time-consuming and distracting to
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management and have a material adverse effect on Pushpay’s business.
Pushpay has decided to register the Pushpay trademark in its key geographical markets and may or may not decide to register trademarks in other jurisdictions in the future. There is a risk that any trademarks Pushpay has registered (or seeks to register in the future) may infringe on other trademarks. Any enforcement of Pushpay’s trademark rights could be costly, time-consuming and distracting to management and have a material adverse effect on Pushpay’s business.
Pushpay is likely to settle a current trademark dispute where all relevant trademarks and domains will be transferred to the Company. Pushpay will then hold trademarks on the Pushpay name in each of its major jurisdictions (New Zealand, Australia, Canada, the USA and Europe).
RTR, with the support and backing of seven other mobile software solution providers including three of New Zealand’s largest telecommunication companies, have taken legal action opposing a patent application. The patent application that is being opposed is fundamentally parallel to a patent application that was ruled invalid by the Commissioner of Patents in 2006. RTR anticipates a positive outcome in the coming months.
Pushpay and RTR are Impacted by Security and Privacy Concerns
Pushpay and RTR are reliant on data transmission over the internet. Any systems failure or compromise of security that results in the unauthorised access to or release of user data (including payment information) could harm Pushpay’s or RTR’s reputation, erode customer confidence in the effectiveness of its security measures, negatively impact Pushpay’s or RTR’s ability to attract new customers, or cause existing customers to elect not to renew their agreements. Furthermore, Pushpay or RTR may have to pay fines in relation to a security breach.
Pushpay consumers can use its service to store personal or identifying information. Foreign data protection, privacy and other laws and regulations are often more restrictive and costly to comply with than in New Zealand. Existing and proposed laws both in New Zealand and internationally can be costly to comply with and/or delay the release of new features or new products. Compliance
with privacy rules could increase costs, require management attention or make changes to the way products function. Some countries are currently considering rules, which would require local storage and usage of data. Furthermore, should Pushpay or RTR suffer a privacy breach this could harm its reputation, erode customer confidence in the effectiveness of its security measures, negatively impact its ability to attract new customers, or cause existing customers to elect not to renew their agreements.
Pushpay May Face Greater Regulation in the Future
The performance of Pushpay and consequently the value of its shares is influenced by both regulatory changes and an environment of regulatory uncertainty in each jurisdiction in which Pushpay operates. A significant portion of Pushpay’s revenue is from international markets. The complexity of identifying and complying with local regulations will require increased expenditure. Failure to identify and comply with regulations will materially impact Pushpay’s business.
The key regulations that govern the payments market are:
• Privacy;
• Data protection;
• PCI compliance;
• Financial Service Provider / banking licence regulations; and
• Consumer guarantees / contract law.
There may be further risks associated to local regulations that have not been identified or have not been enacted at the current time. These risks may have significant implications that may affect the viability of the business and adversely affect the value of its shares. However, Pushpay is a software service and not a financial service provider, and does not require banking licences as it relies on third party service providers, which minimises some of the direct risks that would be faced by being a financial service provider. This significantly reduces compliance costs otherwise associated with fraud detection and associated risks, and reduces requirements for direct customer interaction, as no funds are held directly by Pushpay at any stage of a transaction.
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If, at some point in the future, Pushpay becomes a financial service provider it will be exposed to risks it does not currently face. However, if Pushpay decides to become a financial service provider, plans will be put in place to mitigate these risks as much as possible.
Pushpay may be subject to Consumer guarantees and contract law in some countries. However, the legal relationship for payments exists directly between Merchant and Consumer, which reduces the risks that Pushpay may otherwise face.
As discussed above, privacy, data protection, and PCI compliance are direct responsibilities of Pushpay, and there are risks that security could be breached and data lost or stolen. To manage this risk, Pushpay is PCI DSS Level 1 compliant. Pushpay’s subsidiary, ZipZap Processing, is an ISO that re-sells services as a third party payment processor. ZipZap Processing’s supplier service providers (including banks) are primarily responsible for ensuring compliance with the requirements of anti-money laundering or countering financing of terrorism laws (such as the Bank Secrecy Act 1970 in the USA). However, ISO’s may be subject to further regulation in the future. In addition, ZipZap Processing may be subject to contractual or reputational risks for any failure to maintain adequate standards. ZipZap Processing is currently PCI DSS Level 1 compliant. In the future, it will undergo periodic reviews of compliance and may face risks that it cannot be certified in a timely manner or for reasonable cost.
While SMS messaging is a mature industry, it could face further regulation in the future, both in
New Zealand and internationally. The Department of Internal Affairs in New Zealand works with industry and provides oversight in relation to privacy and unwanted content such as spam. New regulation may impact the delivery and content of SMS messaging in a way that could negatively impact RTR’s business.
Pushpay Needs to be Able to Hire Qualified Staff
Any failure to generally attract, retain, motivate and effectively manage qualified personnel could adversely affect Pushpay’s business. Pushpay will need to hire additional key software development staff in the future and they may or may not be available. Pushpay has put in place an appropriate employee compensation structure for an organisation of its nature and will continue to monitor this. In addition, all members of Pushpay’s senior management either participate in the SIS or are “Substantial Product Holders” (see Section 9 for more information).
Pushpay is Exposed to Exchange Rate and Currency Risk
There is exchange rate risk attached to earnings on Pushpay’s operations outside of New Zealand. Consequently, there may be a risk that unfavourable foreign currency movements may occur impacting the profitability of Pushpay. Pushpay does not presently use foreign exchange instruments to hedge its foreign currency exposure. As the business grows, Pushpay may utilise some appropriate foreign currency strategies to mitigate some of its exchange rate risk.
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7. DESCRIPTION OF THE SECURITIES
Issuer
The Issuer of the shares is Pushpay Holdings Limited.
NZAX Listing
The securities quoted on the NZAX are the fully paid ordinary shares of Pushpay Holdings Limited.
Pushpay Holdings Limited listed on the NZX Alternative Market (NZAX) on 14 August 2014 under the ticker code ‘PAY’ with 98 shareholders and 50,000,000 fully paid ordinary shares.
At the time of listing, the NZAX Sponsor was Harmos Horton Lusk Limited.
Ordinary Shares
As at the date of this Information Memorandum, the issued capital of the Company comprises 50,102,766 ordinary shares and no other securities are on issue. All ordinary shares issued to date are fully paid up.
As at the date of this Information Memorandum, there are 165 shareholders registered.
Each share in Pushpay confers on the holder the right to:
• One vote on a poll at a meeting of shareholders of Pushpay;
• An equal participation with all other existing Pushpay shares in any dividend declared;
• An equal participation with all other Pushpay shares in the residual assets on a liquidation of Pushpay;
• Be sent reports, notices of meetings and other information sent to Pushpay’s shareholders; and
• All other rights as a shareholder conferred by the Companies Act 1993 and Pushpay’s constitution.
Registered Office
The registered office of Pushpay is Ground Floor, Microsoft House, 22 Viaduct Harbour Avenue, Auckland 1010, New Zealand.
NZX Main Board
Pushpay is listed on the NZX Alternative Market (NZAX) operated by NZX Limited.
Pushpay intends to apply to the NZX, within one month following the completion of the possible Entitlement Offer, for permission to cease quotation of its ordinary shares on the NZX Alternative Market (NZAX) and to contemporaneously commence quotation of those shares on the NZX Main Board. This would be at NZX’s sole discretion and would be subject to Pushpay satisfying any pre-conditions set by NZX for an NZX Main Board Listing.
Following Pushpay’s recent board changes, Pushpay now satisfies NZX Main Board Listing Rule 3.3.1(c) as the board has determined both Bruce Gordon and Graham Shaw to be Independent Directors.
Pushpay believes the move to the NZX Main Board is in the best interest of shareholders and is likely to lead to increased investor exposure and higher liquidity.
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8. FINANCIAL INFORMATION
Historical Financial Information
Financial statements for the Company are available in Appendix A: Annual Report 2014 and Appendix B: Interim Report 2015 of this Information Memorandum, on the NZX website at https://www.nzx.com/companies/PAY and on the Pushpay website at https://pushpay.com/investors/reports .
No Prospective Financial Information
This Information Memorandum does not contain any prospective financial information. Pushpay gives no guarantee, undertaking, representation or warranty as to its future performance. Prospective investors are solely responsible for forming their own view on Pushpay’s prospects.
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9. FURTHER DETAILS
Substantial Product
Holder
Nature of Relevant
Interest
Relevant Registered Holder/s Total Number
of Shares Held
Total
Shareholding %Christopher & Banks
Private Equity V
Limited
Registered holder Christopher & Banks Private Equity V
Limited
11,805,188 23.56%
11,805,188 23.56%
Christopher Huljich Beneficial owner Christopher & Banks Private Equity V
Limited
11,805,188 23.56%
Registered holder Christopher Peter Huljich + Colin
Gordon Powell
2,000,116 3.99%
Beneficial owner and
registered holder
Christopher Peter Huljich + Connie
Maria Francis Huljich + Elizabeth Anne
Ferguson + Colin Gordon Powell +
Peter Karl Christopher Huljich
879,496 1.76%
Beneficial owner Huljich Family Trust Nominees Limited 252,496 0.50%
Registered holder William Norman Birnie + Nicole Marie
Way + Christopher Peter Huljich
25,000 0.05%
14,962,296 29.86%
Peter Huljich Beneficial owner Christopher & Banks Private Equity V
Limited
11,805,188 23.56%
Power to control Christopher Peter Huljich + Colin
Gordon Powell
2,000,116 3.99%
Registered holder Christopher Peter Huljich + Connie
Maria Francis Huljich + Elizabeth Anne
Ferguson + Colin Gordon Powell +
Peter Karl Christopher Huljich
879,496 1.76%
Beneficial owner Huljich Family Trust Nominees Limited 252,496 0.50%
14,937,296 29.81%
Substantial Product Holders
Source: Pushpay (2015, March)
Note: Numbers rounded
Substantial Product Holders
To the best of the Company’s knowledge, the only persons with a relevant interest in 5% or more of the voting securities of the Company as at the date of this Information Memorandum are set out below and have provided the following disclosures:
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These persons above are “Substantial Product Holders” (as defined in the Financial Markets Conduct Act 2013). Unless an exception applies under that Act, substantial product holders are obliged to file substantial product holder notices with the Company and NZX Limited under that Act, disclosing their relevant interests.
Trading Restrictions
Bruce Gordon (Chairman), Christopher Huljich (Non-Executive Director), Douglas Kemsley (Non-Executive Director), Christopher Heaslip
(CEO, Executive Director, Co-Founder), Rodney Macdonald (Former CFO, Former Executive Director), Eliot Crowther (Sales, Executive Director, Co-Founder) and Aaron Bhatnagar have, through the respective registered holders of their interests, each entered into a Deed of Embargo with Pushpay such that they are restricted from selling, granting an option over, mortgaging or otherwise disposing of such number of their shares as are specified in the table on page 53, in each case for the applicable period specified in the table, unless the Board of Directors approves such action.
Substantial Product
Holder
Nature of Relevant
Interest
Relevant Registered Holder/s Total Number
of Shares Held
Total
Shareholding %Douglas David
Kemsley + Linda
Tanu Kemsley
+ Michael John
Roberts
Registered holder Douglas David Kemsley + Linda Tanu
Kemsley + Michael John Roberts
4,179,501 8.34%
4,179,501 8.34%
Douglas Kemsley Beneficial owner and
registered holder
Douglas David Kemsley + Linda Tanu
Kemsley + Michael John Roberts
4,179,501 8.34%
4,179,501 8.34%
DDS Trustee Services
Limited
Registered holder DDS Trustee Services Limited 7,428,037 14.83%
7,428,037 14.83%
Christopher Heaslip Beneficial owner DDS Trustee Services Limited 7,428,037 14.83%
7,428,037 14.83%
Eliot Barry Crowther
+ Dorette Crowther
+ Heaslip Trustee
(No.10) Limited
Registered holder Eliot Barry Crowther + Dorette
Crowther + Heaslip Trustee (No.10)
Limited
7,079,744 14.13%
7,079,744 14.13%
Eliot Crowther Beneficial owner and
registered holder
Eliot Barry Crowther + Dorette
Crowther + Heaslip Trustee (No.10)
Limited
7,079,744 14.13%
7,079,744 14.13%
Substantial Product Holders (Continued)
Source: Pushpay (2015, March)
Note: Numbers rounded
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Trading Restrictions
Related Individual Relevant Registered Holder/s Number of
Shares
Shareholding
%
Expiry Date of
RestrictionBruce Gordon Geelong Investments Limited / Pushpay Trustees
Limited
370,623 0.74% 31 July 2015
Emma Jane Gordon + East Street Trustees
Limited
212,491 0.42% 31 July 2015
583,114 1.16%
Christopher Huljich Christopher & Banks Private Equity V Limited 9,337,795 18.64% 31 July 2015
Christopher Peter Huljich + Colin Gordon Powell 492,992 0.98% 31 July 2015
Christopher Peter Huljich + Connie Maria Francis
Huljich + Elizabeth Anne Ferguson + Colin Gordon
Powell + Peter Karl Christopher Huljich
246,496 0.49% 31 July 2015
Huljich Family Trust Nominees Limited 246,496 0.49% 31 July 2015
10,323,779 20.61%
Douglas Kemsley Douglas David Kemsley + Linda Tanu Kemsley +
Michael John Roberts
4,179,501 8.34% 31 July 2015
4,179,501 8.34%
Christopher Heaslip DDS Trustee Services Limited 7,428,037 14.83% 31 July 2016
7,428,037 14.83%
Rodney Macdonald Rodney Macdonald + Rex Macdonald + Leonard
Gardner
1,838,434 3.67% 31 July 2015
Rodney John Macdonald 82,992 0.17% 31 July 2016
1,921,426 3.83%
Eliot Crowther Eliot Barry Crowther + Dorette Crowther +
Heaslip Trustee (No.10) Limited
7,079,744 14.13% 31 July 2016
7,079,744 14.13%
Aaron Bhatnagar Alliance Equities 2 Limited 1,501,198 3.00% 31 July 2015
1,501,198 3.00%
Total number of
shares subject to
trading restrictions 33,016,799 65.90%
Source: Pushpay (2015, March)
Note: Numbers rounded
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Alteration of Pushpay Shares
The terms and conditions attaching to Pushpay shares may only be altered with the approval of a special resolution of the shareholders of Pushpay subject to the rights of interest groups under the Companies Act 1993, or in special circumstances by court order. A special resolution of shareholders is a resolution that is approved by 75% of the shareholders present and voting at a meeting of the shareholders of Pushpay.
Section 117 of the Companies Act 1993 restricts a company from taking any action that affects the rights attached to its shares unless that action has been approved by a special resolution of the shareholders whose rights are affected by the action. Under certain circumstances a shareholder whose rights are affected by a special resolution may require the company to purchase its shares.
Returns
Holders of shares in Pushpay will receive the benefit from any increase in the market price of their shares or bear the loss from any decline in the market price. In the event of liquidation of Pushpay, the holders of shares in Pushpay will be entitled to participate in the remaining surplus of assets (if any) after payment of all creditors.
In addition, holders of shares in Pushpay are entitled to receive any dividends or benefit declared by Pushpay. The determination as to whether to pay a dividend is up to the Board of Directors, but the Board of Directors must have regard to the solvency of Pushpay and any dividend will be determined after the consideration of Pushpay’s capital requirements, operating performance, financial position and Cash Flow at the relevant time. If a dividend was declared in connection with the results for the end of any financial period, Pushpay’s current intention is that the dividend would be paid within six months of that period end.
Any dividend return will be determined by the profitability of the business operations of Pushpay and the Pushpay group of companies as a whole. Whether future dividends are paid, and to what extent, will depend on a variety of factors, including those discussed under Section 6 in this Information Memorandum. Nothing in this
Information Memorandum is to be construed as a promise of profitability or Pushpay’s prospects. There is no assurance that dividends will be paid by Pushpay at any time in the future.
The Board of Directors has no present intention of distributing any dividends in the foreseeable future as Pushpay currently intends to focus on reinvesting profits back into the business in connection with Pushpay’s growth strategy.
Consequences of Insolvency
Pushpay shareholders will not be liable to pay any money to any person as a result of the insolvency of Pushpay. All of Pushpay’s creditors (secured and unsecured) will rank ahead of Pushpay shareholder claims if Pushpay is liquidated. After all such creditors have been paid any remaining assets will be available for distribution between all holders of Pushpay shares who will rank equally amongst themselves. There may not be sufficient remaining assets to enable Pushpay shareholders to recover all or any of their investment.
Annual Information
Pushpay shareholders will annually be sent, in the post or by email, a copy of, or a notice that they are entitled to receive a copy of Pushpay’s annual report and financial statements, interim report, notices of meetings of shareholders and all other shareholder communications.
On Request Information
The shareholders of Pushpay may at any time request in writing that Pushpay provide:
• a copy of the most recent annual report (and/or interim report) of Pushpay;
• a copy of the most recent financial statements of Pushpay required to be registered under applicable law and all documents required to be registered with those financial statements; and
• a copy of the Disclosure Document dated 14 August 2014.
A shareholder of Pushpay may also request a copy of Pushpay’s Constitution, Corporate Governance Code and/or Disclosure Document.
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The above information may be requested in writing from:
The Board of Directors Pushpay Holdings Limited Ground Floor, Microsoft House 22 Viaduct Harbour Avenue Auckland 1010 New Zealand
Pushpay will not charge a fee for any of the above information requests.
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APPENDIX A: ANNUAL REPORT 2014
PUSHPAY HOLDINGS LIMITEDANNUAL REPORT 2014
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PUSHPAY HOLDINGS LIMITED ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 MARCH 2014
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PUSHPAY HOLDINGS LIMITED ANNUAL REPORT FOR THE YEAR ENDED 31 MARCH 2014 CONTENTS DIRECTORY 3 DIRECTORS’ RESPONSIBILITY STATEMENT 4 INDEPENDENT AUDITOR’S REPORT 5 STATEMENT OF COMPREHENSIVE INCOME 6 STATEMENT OF CHANGES IN EQUITY 7 STATEMENT OF FINANCIAL POSITION 9 STATEMENT OF CASH FLOWS 10 NOTES TO FINANCIAL STATEMENTS 11
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PUSHPAY HOLDINGS LIMITED DIRECTORY AS AT 31 MARCH 2014
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PUSHPAY HOLDINGS LIMITED ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 MARCH 2014 DIRECTORY COMPANY NUMBER 3481675 DIRECTORS Eliot Barry CROWTHER Bruce Patrick GORDON Christopher HEASLIP Christopher Peter HULJICH Douglas David KEMSLEY Rodney MACDONALD REGISTERED OFFICE 3 Ferncroft Street, Grafton, Auckland 1010 POSTAL ADDRESS PO Box 40429, Glenfield, Auckland 0747 AUDITORS Deloitte, 80 Queen Street, Auckland 1010 ACCOUNTANTS Battley and Johnson, 3 Ferncroft Street, Grafton, Auckland 1010 BANKERS ASB SOLICITORS Buddle Findlay, 188 Quay Street, Auckland 1010 WEBSITE www.pushpay.com
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PUSHPAY HOLDINGS LIMITED ANNUAL REPORT FOR THE YEAR ENDED 31 MARCH 2014 CONTENTS DIRECTORY 3 DIRECTORS’ RESPONSIBILITY STATEMENT 4 INDEPENDENT AUDITOR’S REPORT 5 STATEMENT OF COMPREHENSIVE INCOME 6 STATEMENT OF CHANGES IN EQUITY 7 STATEMENT OF FINANCIAL POSITION 9 STATEMENT OF CASH FLOWS 10 NOTES TO FINANCIAL STATEMENTS 11
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PUSHPAY HOLDINGS LIMITED DIRECTORS’ RESPONSIBILITY STATEMENT
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PUSHPAY HOLDINGS LIMITED ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 MARCH 2014 DIRECTORS’ RESPONSIBILITY STATEMENT The Directors of Pushpay Holdings Limited are pleased to present to shareholders the financial statements for the year ended 31 March 2014. The Directors are responsible for presenting financial statements in accordance with New Zealand law and generally accepted accounting practice, which give a true and fair view of the financial position of the Company as at 31 March 2014 and the results of its operations and cash flows for the year ended on that date. The Directors consider the financial statements of the Company have been prepared using accounting policies which have been consistently applied and supported by reasonable judgements and estimates and that all relevant financial reporting and accounting standards have been followed. The Directors believe that proper accounting records have been kept which enable with reasonable accuracy, the determination of the financial position of the Company and facilitate compliance of the financial statements with the Financial Reporting Act 1993. The Directors consider that they have taken adequate steps to safeguard the assets of the Company and to prevent and detect fraud and other irregularities. Internal control procedures are also considered to be sufficient to provide a reasonable assurance as to the integrity and reliability of the financial statements. The Financial Statements are signed on behalf of the Board by: Director Director Dated
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PUSHPAY HOLDINGS LIMITED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 MARCH 2014
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PUSHPAY HOLDINGS LIMITED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 MARCH 2014 Group Parent 2014 2013 2014 2013 (Audited) (Unaudited) (Audited) (Unaudited) Notes $’000 $’000 $’000 $’000 Revenue Operating Revenue 316 8 - - Other Income 12 - - - _______ _______ _______ _______ Total Revenue and Other Income 3 328 8 - - Operating Expenses 4 (1,966) (574) (215) (10) _______ _______ _______ _______ Operating (Loss) before income tax (1,638) (566) (215) (10) Income tax expense 5 - - - - _______ _______ _______ _______ Operating loss for the year after tax (1,638) (566) (215) (10) Other comprehensive income Items that may be reclassified subsequently to profit or loss: Translation of foreign operations 34 5 - - _______ _______ _______ _______ Total comprehensive loss for the year (1,604) (561) (215) (10) attributable to the shareholders of the company _______ _______ _______ _______ Earning/(loss) per share Basic (loss) per share (cents) 14 (110.85) (52.52) (14.58) (0.93) The accompanying notes form part of these financial statements.
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PUSHPAY HOLDINGS LIMITED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 MARCH 2014
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PUSHPAY HOLDINGS LIMITED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 MARCH 2014 Share Foreign Based Share Currency Payment Accumulated Total Capital Reserve Reserve Losses Equity Notes $’000 $’000 $’000 $’000 $’000 GROUP Balance at 1 April 2012 (unaudited) 80 - - (7) 73 Comprehensive loss Loss for the year - - - (566) (566) Currency translation movements - 5 - - 5 _______ _______ _______ _______ _______ Total comprehensive income - 5 - (566) (561) Transactions with owners Issue of shares 929 - - - 929 Capital raising costs (30) - - - (30) _______ _______ _______ _______ _______ Balance as at 31 March 2013 (unaudited) 979 5 - (573) 411 _______ _______ _______ _______ _______ Balance at 1 April 2013 (unaudited) 979 5 - (573) 411 Comprehensive loss Loss for the year - - - (1,638) (1638) Currency translation movements - 34 - - 34 _______ _______ _______ _______ _______ Total comprehensive income - 34 - (1,638) (1,604) Transactions with owners Issue of shares 12 885 - - - 885 Capital raising costs (4) - - - (4) Share based payments - - 92 - 92 _______ _______ _______ _______ _______ Balance as at 31 March 2014 (audited) 1,860 39 92 (2,211) (220) _______ _______ _______ _______ _______ The accompanying notes form part of these financial statements.
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PUSHPAY HOLDINGS LIMITED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 MARCH 2014
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PUSHPAY HOLDINGS LIMITED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 MARCH 2014 Share Based Share Payment Accumulated Total Capital Reserve Losses Equity Notes $’000 $’000 $’000 $’000 PARENT Balance at 1 April 2012 (unaudited) 80 - - 80 Comprehensive loss Loss for the year - - (10) (10) _______ _______ _______ _______ Total comprehensive income - - (10) (10) Transactions with owners Issue of shares 929 - - 929 Capital raising costs (30) - - (30) _______ _______ _______ _______ Balance as at 31 March 2013 (unaudited) 979 - (10) 969 _______ _______ _______ _______ Balance at 1 April 2013 (unaudited) 979 - (10) 969 Comprehensive loss Loss for the year - - (215) (215) _______ _______ _______ _______ Total comprehensive income - - (215) (215) Transactions with owners Issue of shares 12 885 - - 885 Capital raising costs (4) - - (4) Share based payments - 92 - 92 _______ _______ _______ _______ Balance as at 31 March 2014 (audited) 1,860 92 (225) 1,727 _______ _______ _______ _______ The accompanying notes form part of these financial statements.
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PUSHPAY HOLDINGS LIMITED STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH 2014
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PUSHPAY HOLDINGS LIMITED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 MARCH 2014 Share Based Share Payment Accumulated Total Capital Reserve Losses Equity Notes $’000 $’000 $’000 $’000 PARENT Balance at 1 April 2012 (unaudited) 80 - - 80 Comprehensive loss Loss for the year - - (10) (10) _______ _______ _______ _______ Total comprehensive income - - (10) (10) Transactions with owners Issue of shares 929 - - 929 Capital raising costs (30) - - (30) _______ _______ _______ _______ Balance as at 31 March 2013 (unaudited) 979 - (10) 969 _______ _______ _______ _______ Balance at 1 April 2013 (unaudited) 979 - (10) 969 Comprehensive loss Loss for the year - - (215) (215) _______ _______ _______ _______ Total comprehensive income - - (215) (215) Transactions with owners Issue of shares 12 885 - - 885 Capital raising costs (4) - - (4) Share based payments - 92 - 92 _______ _______ _______ _______ Balance as at 31 March 2014 (audited) 1,860 92 (225) 1,727 _______ _______ _______ _______ The accompanying notes form part of these financial statements.
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PUSHPAY HOLDINGS LIMITED STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH 2014 Group Parent 2014 2013 2014 2013 (Audited) (Unaudited) (Audited) (Unaudited) Notes $’000 $’000 $’000 $’000 Assets Current assets Cash and cash equivalents 8 2,746 271 2,709 200 Trade and other receivables 9 185 20 - - _______ _______ _______ _______ Total current assets 2,931 291 2,709 200 ___________ ___________ ___________ ___________
Non-current assets Trade and other receivables 9 - - 2,659 828 Investments in subsidiaries 16 - - 2 1 Property, plant and equipment 6 64 23 - - Intangible assets 7 803 249 - - _______ _______ _______ _______ Total non-current assets 867 272 2,661 829 ___________ ___________ ___________ ___________
Total assets 3,798 563 5,370 1,029 ___________ ___________ ___________ ___________
Liabilities Current liabilities Trade and other payables 10 351 92 - - Shareholder advances - 60 - 60 Employee benefits 11 24 - - - Preference shares 12 2,000 - 2,000 - Capital contributions in advance 20 1,643 - 1,643 - _______ _______ _______ _______ Total current liabilities 4,018 152 3,643 60 ___________ ___________ ___________ ___________
Total non-current liabilities - - - - ___________ ___________ ___________ ___________
Total liabilities 4,018 152 3,643 60 ___________ ___________ ___________ ___________
Net (liabilities) / assets (220) 411 1,727 969 ___________ ___________ ___________ ___________
Equity Share capital 12 1,860 979 1,860 979 Foreign currency translation reserve 39 5 - - Share based payment reserve 13 92 - 92 - Accumulated losses (2,211) (573) (225) (10) _______ _______ _______ _______ Total equity (220) 411 1,727 969 ___________ ___________ ___________ ___________
The accompanying notes form part of these financial statements. For and on behalf of the Board 26 May 2014: Pushpay Holdings Limited – Director Pushpay Holdings Limited – Director
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PUSHPAY HOLDINGS LIMITED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 MARCH 2014
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PUSHPAY HOLDINGS LIMITED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 MARCH 2014 Group Parent 2014 2013 2014 2013 (Audited) (Unaudited) (Audited) (Unaudited) Notes $’000 $’000 $’000 $’000 CASH FLOWS FROM OPERATING ACTIVITIES Cash was provided from (applied to): Receipts from customers 204 3 - - Payment to suppliers & employees (1,467) (488) (58) (10) _______ _______ _______ _______ Net cash inflow(outflow) from 19 (1,263) (485) (58) (10) operating activities ___________ ___________ ___________ ___________
CASH FLOWS FROM INVESTING ACTIVITIES Cash was provided from (applies to): Proceeds from sale fixed assets 2 - - - Purchase of property, plant and equipment (53) (26) - - Capitalised development costs and intangible assets (644) (225) - - Purchase shares in subsidiary - - (1) - Advances to subsidiaries - - (1,831) (740) _______ _______ _______ _______ Net cash inflow(outflow) from (695) (251) (1,832) (740) investing activities ___________ ___________ ___________ ___________
CASH FLOWS FROM FINANCING ACTIVITIES Cash was provided from (applied to): Issue of ordinary shares (net of costs) 816 909 816 909 Issue of preference shares 2,000 - 2,000 - Capital received in advance 20 1,643 - 1,643 - Proceeds from shareholder advances - 41 - 41 Repayment of shareholder advances (60) - (60) - _______ _______ _______ _______ Net cash inflow(outflow) from 4,399 950 4,399 950 financing activities ___________ ___________ ___________ ___________
Net increase/(decrease) in cash held 2,441 214 2,509 200 Foreign currency translation adjustment 34 5 - - Add cash and cash equivalents at start of year 271 52 200 - _______ _______ _______ _______ Balance at end of year 2,746 271 2,709 200 ___________ ___________ ___________ ___________
COMPRISED OF: _______ _______ _______ _______ Cash and cash equivalents 8 2,746 271 2,709 200 ___________ ___________ ___________ ___________
The accompanying notes form part of these financial statements.
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PUSHPAY HOLDINGS LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2014
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PUSHPAY HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2014 1. Corporate information Pushpay Holdings Limited is a limited Company, domiciled and incorporated in New Zealand and registered under the New Zealand Companies 1993. The registered office of the Company is 3 Ferncroft Street, Grafton, Auckland, 1010, New Zealand. The financial statements presented are for Pushpay Holdings Limited (the “Parent”) and its subsidiaries (together “the Group”) for the year ended 31 March 2014. The financial statements for the year ended 31 March 2014 were authorised for issue in accordance with a resolution of the Directors on 26 May 2014. The Group’s principal activity is the provision of a platform for mobile commerce and electronic payments and tools for merchants to engage with consumers. 2. Summary of significant accounting policies The financial statements have been prepared in accordance with New Zealand generally accepted accounting practice (“NZ GAAP”). They comply with New Zealand equivalents to International Financial Reporting Standards (“NZ IFRS”) and other applicable Financial Reporting Standards, as appropriate for profit-oriented entities. The financial statements comply with International Financial Reporting Standards (“IFRS”). (a) Basis of preparation The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been consistently applied to the period presented, unless otherwise stated. The financial statements have been prepared in accordance with the requirements of the Financial Reporting Act 1993 and Companies Act 1993. The financial statements for the “Parent” are for Pushpay Holdings Limited as a separate legal entity. The consolidated financial statements for the “Group” are for the economic entity comprising Pushpay Holdings Limited and its subsidiaries. The Company and Group are designated as profit-orientated entities for financial reporting purposes. The financial statements are presented in thousands of New Zealand dollars. (b) Critical accounting estimates and judgements The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and reported amounts of assets, liabilities, income and expenses. There are areas involving a higher degree of judgement or complexity or areas where assumptions and estimates are significant to the financial statements including the determination of the functional currency for Pushpay Holdings Limited. Determination of functional currency: NZ IAS 21 The Effects of Changes in Foreign Exchange Rates defines the functional currency as the currency of the primary economic environment in which an entity operates. The primary economic environment in which an entity operates is normally the one in which it primarily generates and expends cash. Although a majority of the sales are denominated in US dollars, as the services provided are web based the selling prices are influenced by a series of global factors. The New Zealand economic environment influences a significant proportion of the expenses incurred. In addition funding for the Company is sourced in New Zealand dollars. Therefore, the Directors have concluded that the New Zealand dollar is the functional currency of the Company. Key sources of estimation uncertainty and key judgements Judgements made by management in the application of NZIFRS that have significant effects on the financial statements and estimates with a significant risk of material adjustments in the next year are disclosed where applicable, in the relevant notes to the financial statements. Key sources of estimation, uncertainty and judgement include:
• Judgement is required in relation to the application of the going concern assumption (refer note 22); • If the intangible assets to which the development expenditure relate are not economically viable in the future the
development expenditure asset could be overstated (refer note 7); and • The Company determines whether finite life intangibles are impaired at least on an annual basis. Determining the
recoverable amounts of intangible assets require judgement in relation to the effects of uncertain future events at balance date and assumptions are required with respect to future cash flows and discount rates used (refer note 7).
• Determining the fair value of a share based payment made to employees and directors require management to exercise their judgement as to the fair value of the shares issued. (refer Note 13).
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be measurable under the circumstances.
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PUSHPAY HOLDINGS LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 31 MARCH 2014
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PUSHPAY HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2014 2. Summary of significant accounting policies (continued) (c) Changes in accounting policies and disclosures The accounting policies adopted are consistent with those of the previous year. (d) Basis of consolidation The consolidated financial statements incorporate the financial statements of the Parent and entities (including structured entities) controlled by the Parent and its subsidiaries. Control is achieved when the Parent:
Has power over the investee; Is exposed, or has the rights, to variable returns from its involvement with the investee; and Has the ability to use its power to affect its returns.
The Parent reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above. When the Parent has less than a majority of the voting rights of an investee, it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The Parent considers all relevant facts and circumstances in assessing whether or not the Parent’s voting rights in an investee are sufficient to give it power, including:
The size of the Parent’s holding of voting rights relative to the size and dispersion of holdings of the other vote holders; Potential voting rights held by the Parent, other vote holders or other parties; Rights arising from other contractual arrangements; and Any additional facts and circumstances that indicate that the Parent has, or does not have, the current ability to direct the
relevant activities at the time decisions need to be made, including voting patterns at previous shareholders’ meetings. Subsidiaries are fully consolidated from the date on which control is transferred to the Parent. They are de-consolidated from the date that control ceases. The acquisition method of accounting is used to account for the acquisition of subsidiaries by the Parent. The consideration transferred for an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange. Costs directly attributable to the acquisition are expensed in the income statement. Inter-Company transactions, balances and unrealised gains and losses on transactions between Group companies are eliminated. Accounting policies of subsidiaries are consistent with the policies adopted by the Group. (e) Foreign currency translation (i) Functional and presentation currency Items included in the financial statements of each subsidiary are measured using the currency of the primary economic environment in which it operates. The consolidated financial statements are presented in New Zealand dollars, which is the Company’s functional currency and the Group’s presentation currency. (ii) Transactions and balances Foreign currency transactions are translated into the functional currency using a monthly exchange rate set at the start of each month as an estimate of the exchange rate prevailing at the dates of transactions based on monthly exchange rates. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the profit or loss. (iii) Foreign operations The results and financial position of all foreign operations that have a functional currency different from New Zealand dollars are translated into the presentation currency as follows:
• Assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position;
• Income and expenses for each profit and loss component of the statement of comprehensive income are translated at average exchange rates; and
• All resulting exchange differences are recognised as other comprehensive income. (f) Revenue recognition Revenue comprises the fair value of the consideration or receivable for the provision of services, excluding Goods and Services tax, Value Added Tax, rebates and discounts. Revenue is recognized as follows:
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PUSHPAY HOLDINGS LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 31 MARCH 2014
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PUSHPAY HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2014 2. Summary of significant accounting policies (continued) (c) Changes in accounting policies and disclosures The accounting policies adopted are consistent with those of the previous year. (d) Basis of consolidation The consolidated financial statements incorporate the financial statements of the Parent and entities (including structured entities) controlled by the Parent and its subsidiaries. Control is achieved when the Parent:
Has power over the investee; Is exposed, or has the rights, to variable returns from its involvement with the investee; and Has the ability to use its power to affect its returns.
The Parent reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above. When the Parent has less than a majority of the voting rights of an investee, it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The Parent considers all relevant facts and circumstances in assessing whether or not the Parent’s voting rights in an investee are sufficient to give it power, including:
The size of the Parent’s holding of voting rights relative to the size and dispersion of holdings of the other vote holders; Potential voting rights held by the Parent, other vote holders or other parties; Rights arising from other contractual arrangements; and Any additional facts and circumstances that indicate that the Parent has, or does not have, the current ability to direct the
relevant activities at the time decisions need to be made, including voting patterns at previous shareholders’ meetings. Subsidiaries are fully consolidated from the date on which control is transferred to the Parent. They are de-consolidated from the date that control ceases. The acquisition method of accounting is used to account for the acquisition of subsidiaries by the Parent. The consideration transferred for an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange. Costs directly attributable to the acquisition are expensed in the income statement. Inter-Company transactions, balances and unrealised gains and losses on transactions between Group companies are eliminated. Accounting policies of subsidiaries are consistent with the policies adopted by the Group. (e) Foreign currency translation (i) Functional and presentation currency Items included in the financial statements of each subsidiary are measured using the currency of the primary economic environment in which it operates. The consolidated financial statements are presented in New Zealand dollars, which is the Company’s functional currency and the Group’s presentation currency. (ii) Transactions and balances Foreign currency transactions are translated into the functional currency using a monthly exchange rate set at the start of each month as an estimate of the exchange rate prevailing at the dates of transactions based on monthly exchange rates. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the profit or loss. (iii) Foreign operations The results and financial position of all foreign operations that have a functional currency different from New Zealand dollars are translated into the presentation currency as follows:
• Assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position;
• Income and expenses for each profit and loss component of the statement of comprehensive income are translated at average exchange rates; and
• All resulting exchange differences are recognised as other comprehensive income. (f) Revenue recognition Revenue comprises the fair value of the consideration or receivable for the provision of services, excluding Goods and Services tax, Value Added Tax, rebates and discounts. Revenue is recognized as follows:
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PUSHPAY HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2014 2. Summary of significant accounting policies (continued) (i) Provision of services The provision of services is recognized in the accounting period in which the services are rendered, by reference to completion of the specific transaction assessed on the basis of the actual service provided as a proportion of the total services to be provided. Revenue in advance represents amounts billed to customers in advance of the provision of services and are accounted for as a liability. (ii) Government grants Grants from the Government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Group will comply with all attached conditions. Government grants whose primary condition is that the Group should purchase, construct, or otherwise acquire non-current assets are recognised as deferred revenue in the statement of financial position and transferred to profit or loss on a systematic and rational basis over the useful lives of the related assets. (iii) Interest Interest revenue is accrued on a timely basis by reference to the principal outstanding and using the effective interest rate method. (g) Income tax Income tax expense comprises current and deferred tax. Income tax is recognized in the profit or loss component of the statement of comprehensive income. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the reporting date, and any adjustment to tax payable in respect of previous year. Deferred tax is recognised, using the balance sheet liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the reporting date and are expected to apply when the related deferred tax asset is realized or the deferred tax liability is settled. A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which temporary differences can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related benefits will be realised. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred tax assets and liabilities relate to income tax levied by the same taxation authority on either the same taxable entity or different entities where there is an intention to settle the balance on a net basis. (h) Goods and Services Tax (GST) Assets, liabilities, revenues and expenses are stated exclusive of GST, with the exception of receivables and payables, which include GST. (i) Financial instruments Financial assets and financial liabilities are recognised on the Group’s statement of financial position when the Group becomes a party to the contractual provisions of the instrument. (j) Leases Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to profit or loss on a straight-line basis over the period of the lease. (k) Cash and cash equivalents Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments readily convertible to a known amount of cash and which are subject to an insignificant risk of changes in value. (l) Trade and other receivables Trade receivables are amounts due from customers for services performed in the ordinary course of business and measured at amortised cost less any impairment. If collection is expected in one year or less they are classified as current assets. If not, they are presented as non-current assets. Appropriate allowances for estimated irrecoverable amounts are recognized in profit or loss when there is objective evidence that the asset is impaired. The allowance recognized is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition.
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PUSHPAY HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2014 2. Summary of significant accounting policies (continued) (m) Trade and other payables Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if it is expected to settle the liability in its normal operating cycle. If not, they are presented as non-current liabilities. Trade payables are recognized initially at fair value and subsequently measured at cost. (n) Property, plant and equipment All property, plant and equipment are stated at historical cost less depreciation and impairment. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Depreciation is calculated on a straight line basis so as to write off the next cost of the asset over its expected useful life to its estimated residual value. The following estimates of useful lives are used in the calculation of depreciation. Category Estimated useful life Office equipment 5 years Computer equipment 3 years An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in profit and loss. (o) Intangible assets Research costs are expensed as incurred. Costs associated with maintaining internal computer software programs are recognized as an expense incurred. Costs that are directly associated with the development of the software products controlled by the Group are recognised as intangible assets where the following criteria are met:
- It is technically feasible to complete the software product so that it will be available for use; - Management intends to complete the software product and use or sell it; - There is an ability to use or sell the software product; - It can be demonstrated how the software product will generate probable future economic benefits; - Adequate technical, financial and other resources to complete the development and to use or sell the software product
are available and; - The expenditure attributable to the software product during its development can be reliably measured.
Directly attributable costs that are capitalised as part of the capitalised software development costs include the software development employee costs. Other development expenditures that do not meet these criteria are recognised as expenses as incurred. Development costs previously recognised as expenses are not recognised as assets in a subsequent period. Computer software development costs recognised as assets are amortised over their estimated useful lives. Other tangible assets acquired are initially measured at cost. Internally generated assets, excluding capitalised development costs, are not capitalised and expenditure is recognized in the profit and loss in the year in which the expenditure is incurred. The useful lives of the Group’s intangible assets are assessed to be finite. Assets with finite lives are amortised over the ir useful lives and tested for impairment whenever there are indications that the assets may be impaired. Amortisation is recognized in the income statement on a straight-line basis over the estimated useful life of the intangible asset, from the date it is available for use. The estimated useful lives are: Trademarks/patents 10 years Software development costs 2-5 years (p) Investments in subsidiaries The investment in the subsidiaries in the Parent financial statements is stated at cost less impairment.
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PUSHPAY HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2014 2. Summary of significant accounting policies (continued) (m) Trade and other payables Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if it is expected to settle the liability in its normal operating cycle. If not, they are presented as non-current liabilities. Trade payables are recognized initially at fair value and subsequently measured at cost. (n) Property, plant and equipment All property, plant and equipment are stated at historical cost less depreciation and impairment. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Depreciation is calculated on a straight line basis so as to write off the next cost of the asset over its expected useful life to its estimated residual value. The following estimates of useful lives are used in the calculation of depreciation. Category Estimated useful life Office equipment 5 years Computer equipment 3 years An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in profit and loss. (o) Intangible assets Research costs are expensed as incurred. Costs associated with maintaining internal computer software programs are recognized as an expense incurred. Costs that are directly associated with the development of the software products controlled by the Group are recognised as intangible assets where the following criteria are met:
- It is technically feasible to complete the software product so that it will be available for use; - Management intends to complete the software product and use or sell it; - There is an ability to use or sell the software product; - It can be demonstrated how the software product will generate probable future economic benefits; - Adequate technical, financial and other resources to complete the development and to use or sell the software product
are available and; - The expenditure attributable to the software product during its development can be reliably measured.
Directly attributable costs that are capitalised as part of the capitalised software development costs include the software development employee costs. Other development expenditures that do not meet these criteria are recognised as expenses as incurred. Development costs previously recognised as expenses are not recognised as assets in a subsequent period. Computer software development costs recognised as assets are amortised over their estimated useful lives. Other tangible assets acquired are initially measured at cost. Internally generated assets, excluding capitalised development costs, are not capitalised and expenditure is recognized in the profit and loss in the year in which the expenditure is incurred. The useful lives of the Group’s intangible assets are assessed to be finite. Assets with finite lives are amortised over the ir useful lives and tested for impairment whenever there are indications that the assets may be impaired. Amortisation is recognized in the income statement on a straight-line basis over the estimated useful life of the intangible asset, from the date it is available for use. The estimated useful lives are: Trademarks/patents 10 years Software development costs 2-5 years (p) Investments in subsidiaries The investment in the subsidiaries in the Parent financial statements is stated at cost less impairment.
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PUSHPAY HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2014 2. Summary of significant accounting policies (continued) (q) Impairment of non-financial assets At each reporting date, the Group assesses whether there is any indication that an asset may be impaired. Where an indicator of impairment exists, the Group makes a formal estimate of the recoverable amount. Where the carrying value of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Recoverable amount is the greater of fair value less costs to sell or the asset’s value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date. (r) Employee Benefits (i) Entitlements Provision is made for benefits accruing to employees in respects of wages and salaries, annual leave and sick leave when it is probable that settlement will be required and they are capable of being measured reliably. Provision made in respect of employee benefits expected to be settled within 12 months, are measured at their nominal values using the remuneration rate expected to apply at the time of settlement. Provisions made in respect of employee benefits which are not expected to be settled within 12 months are measured at the present value of the estimated future cash outflows to be made by the Group in respect of services provided by employees up to reporting date. (ii) Employee share scheme The Group operates an equity settled, share based plan, under which selected employees are issued shares using funds lent to them by the Company. The amount is determined by reference to the fair value of the shares issued. (s) Earnings per share The Group presents basic and diluted earnings per share (“EPS”) data for its ordinary shares. Basic EPS is calculated by dividing the Group profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares on issue during the period. (t) Share capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds. (u) Segment reporting An operating segment is a component of an entity that engages in business activities from which it may earn revenue and incur expenses, whose operating results are regularly reviewed by the CEO (who is the entity’s Chief Operating Decision Maker) to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. The Group currently operates in one operating segment providing mobile commerce and payment solutions in New Zealand, United States and Australia. Discrete financial information is not produced on a geographical basis and the operating results are reviewed on a group basis. (v) Share based payments Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date. Details regarding the determination of the fair value of equity-settled share-based transactions are set out in note 13. The fair value determined at the grant date of equity-settled share-based payments is expensed on a straight-line basis over the vesting period. At the end of each reporting period, the company revises its fair value estimate of the number of equity instruments issued. The impact of the revision of the original estimates, if any, is recognised in profit and loss over the remaining vesting period, with a corresponding adjustment to the equity-settled share-based payment reserve. (w) Adoption of new revised standards and interpretations NZ-IFRS 9 Financial Instruments (effective for accounting periods beginning on or after 1 January 2017) – This standard is addressing financial assets and financial liabilities. The standard is not expected to have a material impact on the Group financial statements. The Group will adopt the standard for the year ending 31 March 2018. There are a number of other amendments to accounting standards as part of the ongoing improvement process. None of these changes is expected to have a significant impact on the company or Group.
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PUSHPAY HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2014 3. Revenues and other income Group Parent 2014 2013 2014 2013 (Audited) (Unaudited) (Audited) (Unaudited) $’000 $’000 $’000 $’000 Revenue from sale of services 316 8 - - Government grants 12 - - - _______ _______ _______ _______ 328 8 - - _______ _______ _______ _______ 4. Expenses Group Parent 2014 2013 2014 2013 (Audited) (Unaudited) (Audited) (Unaudited) $’000 $’000 $’000 $’000 Operating expenses include: Amortisation of intangible assets 90 - - - Depreciation 10 4 - - Lease expenses 60 15 - - Employee benefits/entitlements 865 271 - - Employee benefits – defined contribution expense 12 4 - - Fees paid to Auditors – audit of financial statements 16 - - - Foreign Exchange (Gains)/Losses 44 (2) 43 (2) Interest paid 2 - 2 - Share based payments (Note 13) 92 - 92 - 5. Reconciliations of income tax expense to prima facie tax payable Group Parent 2014 2013 2014 2013 (Audited) (Unaudited) (Audited) (Unaudited) $’000 $’000 $’000 $’000 Profit/(Loss) before tax (1,638) (566) (215) (10) _______ _______ _______ _______ Tax benefit at effective income tax rate of 28% 459 158 60 3 Tax effect of non-deductible expenses - - - - Future benefit of tax losses not recognised (459) (158) (60) (3) _______ _______ _______ _______ Income tax expense - - - - _______ _______ _______ _______ Comprising Current tax - - - - Deferred tax - - - - _______ _______ _______ _______ Income tax expense/(credit) - - - - _______ _______ _______ _______ Imputation credit account balance - - - - _______ _______ _______ _______ Closing balance - - - - _______ _______ _______ _______
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PUSHPAY HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2014 3. Revenues and other income Group Parent 2014 2013 2014 2013 (Audited) (Unaudited) (Audited) (Unaudited) $’000 $’000 $’000 $’000 Revenue from sale of services 316 8 - - Government grants 12 - - - _______ _______ _______ _______ 328 8 - - _______ _______ _______ _______ 4. Expenses Group Parent 2014 2013 2014 2013 (Audited) (Unaudited) (Audited) (Unaudited) $’000 $’000 $’000 $’000 Operating expenses include: Amortisation of intangible assets 90 - - - Depreciation 10 4 - - Lease expenses 60 15 - - Employee benefits/entitlements 865 271 - - Employee benefits – defined contribution expense 12 4 - - Fees paid to Auditors – audit of financial statements 16 - - - Foreign Exchange (Gains)/Losses 44 (2) 43 (2) Interest paid 2 - 2 - Share based payments (Note 13) 92 - 92 - 5. Reconciliations of income tax expense to prima facie tax payable Group Parent 2014 2013 2014 2013 (Audited) (Unaudited) (Audited) (Unaudited) $’000 $’000 $’000 $’000 Profit/(Loss) before tax (1,638) (566) (215) (10) _______ _______ _______ _______ Tax benefit at effective income tax rate of 28% 459 158 60 3 Tax effect of non-deductible expenses - - - - Future benefit of tax losses not recognised (459) (158) (60) (3) _______ _______ _______ _______ Income tax expense - - - - _______ _______ _______ _______ Comprising Current tax - - - - Deferred tax - - - - _______ _______ _______ _______ Income tax expense/(credit) - - - - _______ _______ _______ _______ Imputation credit account balance - - - - _______ _______ _______ _______ Closing balance - - - - _______ _______ _______ _______
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PUSHPAY HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2014 5. Reconciliations of income tax expense to prima facie tax payable (continued) The Group had estimated tax losses of $1,638,576 (2013: $566,218) during the period. In terms of the Income Tax Act 2007 these losses are forfeited as at balance date, due to breaches in the shareholder continuity rules. New shareholders have changed the company ownership by more than 51%. 6. Property, plant and equipment Office Computer GROUP Equipment Equipment Total $’000 $’000 $’000 As at 1 April 2012 Cost - 1 1 Accumulated depreciation - - - _______ _______ _______ Carrying amount at beginning of year - 1 1 _______ _______ _______ Year ended 31 March 2013 Additions 4 22 26 Disposals - - - Depreciation - (4) (4) _______ _______ _______ Carrying amount at end of year 4 19 23 _______ _______ _______ As at 31 March 2013 Cost 4 23 27 Accumulated depreciation - (4) (4) _______ _______ _______ Carrying amount at end of year 4 19 23 _______ _______ _______ Year ended 31 March 2014 Additions 17 36 53 Disposals (1) (1) (2) Depreciation (1) (9) (10) _______ _______ _______ Carrying amount at end of year 19 45 64 _______ _______ _______ As at 31 March 2014 Cost 20 58 78 Accumulated depreciation (1) (13) (14) _______ _______ _______ Carrying amount at end of year 19 45 64 _______ _______ _______ There are no plant, property and equipment in the Parent Company.
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PUSHPAY HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2014 7. Intangible assets Software Patents & Development Trademarks Total $’000 $’000 $’000 Group cost Balance at 1 April 2012 - - - Additions 243 6 249 _______ _______ _______ Balance at 31 March 2013 243 6 249 _______ _______ _______ Amortisation Balance at 1 April 2012 - - - Amortisation - - - _______ _______ _______ Balance at 31 March 2013 - - - _______ _______ _______ Net carrying value 31 March 2013 243 6 249 _______ _______ _______ Group cost Balance at 1 April 2013 243 6 249 Additions 639 5 644 _______ _______ _______ Balance at 31 March 2014 882 11 893 _______ _______ _______ Amortisation Balance at 1 April 2013 - - - Amortisation 90 - 90 _______ _______ _______ Balance at 31 March 2014 90 - 90 _______ _______ _______ Net carrying value 31 March 2014 792 11 803 _______ _______ _______ There are no intangible assets in the Parent Company. The Group capitalises software development costs based on direct costs associated with the project and a proportion of employee costs. Software development relates to the continued development of the Company’s mobile commerce and electronic payment software. During the year ended 31 March 2014 the Board reviewed the intangible assets and have determined that there is no evidence of impairment of any intangible assets. The calculation of the recoverable amounts has been determined based on a value in use calculation that uses cash flow projection based on financial forecast approved by management covering a three year period. Management has determined that the recoverable amount calculations are most sensitive to change in the following assumptions. Post-tax discount rates of 20% have been applied in these projections. Cash flows beyond the three year period have been based on a detailed forecast produced by management. The recoverable amount is sensitive to the assumptions being achieved. If these assumptions are not achieved, it is likely that the recoverable amount of the capitalized development expenditure will be less than the carrying value. If the post-tax discount rate were increased to 25%, and all other assumptions were held, the surplus in the impairment calculation would become negative. If the forecast cash flows in the impairment calculation were reduced by 10% and all the other assumptions were held, the surplus in the impairment calculation would remain positive.
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PUSHPAY HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2014 7. Intangible assets Software Patents & Development Trademarks Total $’000 $’000 $’000 Group cost Balance at 1 April 2012 - - - Additions 243 6 249 _______ _______ _______ Balance at 31 March 2013 243 6 249 _______ _______ _______ Amortisation Balance at 1 April 2012 - - - Amortisation - - - _______ _______ _______ Balance at 31 March 2013 - - - _______ _______ _______ Net carrying value 31 March 2013 243 6 249 _______ _______ _______ Group cost Balance at 1 April 2013 243 6 249 Additions 639 5 644 _______ _______ _______ Balance at 31 March 2014 882 11 893 _______ _______ _______ Amortisation Balance at 1 April 2013 - - - Amortisation 90 - 90 _______ _______ _______ Balance at 31 March 2014 90 - 90 _______ _______ _______ Net carrying value 31 March 2014 792 11 803 _______ _______ _______ There are no intangible assets in the Parent Company. The Group capitalises software development costs based on direct costs associated with the project and a proportion of employee costs. Software development relates to the continued development of the Company’s mobile commerce and electronic payment software. During the year ended 31 March 2014 the Board reviewed the intangible assets and have determined that there is no evidence of impairment of any intangible assets. The calculation of the recoverable amounts has been determined based on a value in use calculation that uses cash flow projection based on financial forecast approved by management covering a three year period. Management has determined that the recoverable amount calculations are most sensitive to change in the following assumptions. Post-tax discount rates of 20% have been applied in these projections. Cash flows beyond the three year period have been based on a detailed forecast produced by management. The recoverable amount is sensitive to the assumptions being achieved. If these assumptions are not achieved, it is likely that the recoverable amount of the capitalized development expenditure will be less than the carrying value. If the post-tax discount rate were increased to 25%, and all other assumptions were held, the surplus in the impairment calculation would become negative. If the forecast cash flows in the impairment calculation were reduced by 10% and all the other assumptions were held, the surplus in the impairment calculation would remain positive.
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PUSHPAY HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2014 8. Cash and cash equivalents Group Parent 2014 2013 2014 2013 (Audited) (Unaudited) (Audited) (Unaudited) $’000 $’000 $’000 $’000 Cash at bank and on hand 2,746 271 2,709 200 As at 31 March 2014 the amounts held in foreign currencies were as follows:- US dollars 25 56 - - Australian dollars 1 - - - 9. Trade and other receivables Group Parent 2014 2013 2014 2013 (Audited) (Unaudited) (Audited) (Unaudited) $’000 $’000 $’000 $’000 Gross trade receivables 18 1 - - Provision for impairment of receivables - - - - _______ _______ _______ _______ Net trade receivables 18 1 - - Amounts owing by subsidiaries - - 2,659 828 Prepayments and other receivables 167 19 - - _______ _______ _______ _______ Total trade and other receivables 185 20 2,659 828 _______ _______ _______ _______ Comprising: Current assets 185 20 - - Non-current assets - - 2,659 828 _______ _______ _______ _______ 185 20 2,659 828 _______ _______ _______ _______ Amounts owing by subsidiaries are subject to interest if demanded, unsecured and repayable on demand. Impaired receivables As at 31 March 2014 trade receivables with impairment in respect of the Group: Nil. (2013: Nil). As at 31 March 2014 trade receivables with impairment in respect of the Parent: Nil. (2013: Nil). Aging analysis The aging analysis of these trade receivables is as follows:- Group Parent 2014 2013 2014 2013 (Audited) (Unaudited) (Audited) (Unaudited) $’000 $’000 $’000 $’000 1-60 days overdue 12 - - - 61-90 days overdue - 1 - - 91+ days overdue 6 - - - Impairment provision - - - - _______ _______ _______ _______ 18 1 - - _______ _______ _______ _______
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PUSHPAY HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2014 10.Trade and other payables Group Parent 2014 2013 2014 2013 (Audited) (Unaudited) (Audited) (Unaudited) $’000 $’000 $’000 $’000 Trade payables 114 92 - - Other payables and accrued expenses 21 - - - Grant revenue in advance 216 - - - _______ _______ _______ _______ 351 92 - - _______ _______ _______ _______ 11. Current employee benefits Group Parent 2014 2013 2014 2013 (Audited) (Unaudited) (Audited) (Unaudited) $’000 $’000 $’000 $’000 Liability for annual and long service leave 24 - - - _______ _______ _______ _______ 24 - - - _______ _______ _______ _______ 12. Share capital & shares Share capital Group Parent Number Number of shares of shares 000’s $’000 000’s $’000 Balance at 1 April 2012 1,000 80 1,000 80 Movements during year Issue of shares 236 929 236 929 Share issue costs - (30) - (30) Issue of shares to Pushpay Trustees Ltd 137 - 137 - _______ _______ _______ _______ Balance at 31 March 2013 1,373 979 1,373 979 _______ _______ _______ _______ Movements during year Issue of shares 209 1,820 209 1,820 Share issue costs - (4) - (4) Capital raised on employee share scheme Allotment (Note 13) - 65 - 65 _______ _______ _______ _______ Balance at 31 March 2014 1,582 1,860 1,582 1,860 _______ _______ _______ _______ The paid up capital comprises ordinary shares. The total number of ordinary shares on issue is 1,582,675 shares (2013: 1,373,166). The shares have no par value. All ordinary shares are issued and paid up except for 36,217 shares held by Pushpay Trustee Limited. All ordinary shares rank equally with one vote attached to each fully paid ordinary share. In February 2014 the Company acquired 90,010 shares as Treasury Stock and at the same time transferred these shares to a new shareholder for market value consideration.
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PUSHPAY HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2014 10.Trade and other payables Group Parent 2014 2013 2014 2013 (Audited) (Unaudited) (Audited) (Unaudited) $’000 $’000 $’000 $’000 Trade payables 114 92 - - Other payables and accrued expenses 21 - - - Grant revenue in advance 216 - - - _______ _______ _______ _______ 351 92 - - _______ _______ _______ _______ 11. Current employee benefits Group Parent 2014 2013 2014 2013 (Audited) (Unaudited) (Audited) (Unaudited) $’000 $’000 $’000 $’000 Liability for annual and long service leave 24 - - - _______ _______ _______ _______ 24 - - - _______ _______ _______ _______ 12. Share capital & shares Share capital Group Parent Number Number of shares of shares 000’s $’000 000’s $’000 Balance at 1 April 2012 1,000 80 1,000 80 Movements during year Issue of shares 236 929 236 929 Share issue costs - (30) - (30) Issue of shares to Pushpay Trustees Ltd 137 - 137 - _______ _______ _______ _______ Balance at 31 March 2013 1,373 979 1,373 979 _______ _______ _______ _______ Movements during year Issue of shares 209 1,820 209 1,820 Share issue costs - (4) - (4) Capital raised on employee share scheme Allotment (Note 13) - 65 - 65 _______ _______ _______ _______ Balance at 31 March 2014 1,582 1,860 1,582 1,860 _______ _______ _______ _______ The paid up capital comprises ordinary shares. The total number of ordinary shares on issue is 1,582,675 shares (2013: 1,373,166). The shares have no par value. All ordinary shares are issued and paid up except for 36,217 shares held by Pushpay Trustee Limited. All ordinary shares rank equally with one vote attached to each fully paid ordinary share. In February 2014 the Company acquired 90,010 shares as Treasury Stock and at the same time transferred these shares to a new shareholder for market value consideration.
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PUSHPAY HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2014 12. Share capital & shares (continued) Preference shares The total number of preference shares on issue is 383,679 shares (2013: Nil), and the total value of these shares is $2,000,000 (2013: Nil). Preference shares have no par value. They rank in priority to ordinary shares in a liquidation and convert to ordinary shares on listing or earlier at any time at the option of the holder. Preference shares are also entitled to a dividend of 7.5%, however this dividend has been waived for the year ended 31 March 2014. The shares may be redeemed at the option of the holder subject to certain redemption criteria. The preference shares issued by the Company have been classified as liabilities. However subsequent to year end (refer note 21) the preference shares have been converted to ordinary shares and have consequently been re-classified as equity. 13. Share based payments In April 2013 the group established an employee share scheme that entitles selected executives and employees to purchase shares in the company. Under this scheme the ordinary shares in Pushpay Holdings Limited are issued to a Trustee, Pushpay Trustee Limited, a wholly owned subsidiary and allocated to participants on grant date, using funds lent to them by the Company. Under the scheme the shares are beneficially owned by the participants subject to terms and conditions in the Trust Deed. The number of shares issued is determined by the Board. Terms and conditions of grants are: Number of Outstanding loans Grant date Personnel entitled instruments Terms and conditions as at 31/03/2014 01/04/2013 Employees 17,857 All shares vest on grant $130,000 Date and are subject to loans repayable over three years 01/02/2014 Director 11,516 All shares vest on grant $60,000 Date and are subject to loans repayable over three years 01/02/2014 Employees 44,145 All shares vest on grant $230,000 Date and are subject to loans repayable over three years 11/02/2014 Director 4,823 All shares vest on grant $30,000 Date and are subject to loans repayable over two years 8,039 All shares vest on grant $50,000 Date and are subject to loans repayable over three years _______ 86,380 ____________
All shares are held by the Trustee until the loans have been repaid. Loans are subject to full recourse and attract interest at prevailing FBT interest rates. The number and grant price is as follows: 2014 Company and Group Issue price Number of shares Total at 1 April 2013 - - Granted during the year $7.28 17,857 Granted during the year $5.21 55,661 Granted during the year $6.22 12,862 _______ Total 31 March 2014 86,380 ____________
The fair value of services received in return for the share granted is based on the fair value of share granted measured using a Black Scholes model with the following inputs: Issue Date 01/04/2013 01/02/2014 11/02/2014 Estimated fair value per share at granted date 6.98 5.14 6.14 Exercise price per share 7.28 5.21 6.22 Expected volatility 40% 40% 40% Risk free interest rate 3.5% 3.5% 3.5%
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PUSHPAY HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2014 13. Share based payments (continued) Expected volatility was estimated by reference to the volatility of listed equity securities for businesses of a similar nature to the company operating in the technology industry. Operating expenses 2014 2013 $’000 $’000 Share based payment expense 92 - The Trustee also holds fully paid shares on behalf of employees not part of the scheme. The Trustee holds 170,473 shares (2013: 137,316). Of these shares, 90,709 (2013: nil) shares are held on behalf of employees and subject to employee loans. A further 43,547 shares (2013: nil) are classified as shares with loans fully paid (or have been fully paid in cash). The remaining 36,217 shares (2013: 137,316) are unallocated. 14. Earnings per share The loss of $1,638,576 (2013: $566,218) represented a loss per share shown below based on weighted average ordinary shares on issue during the year. Group Parent 2014 2013 2014 2013 (Audited) (Unaudited) (Audited) (Unaudited) Weighted average ordinary shares issued 1,478,122 1,077,583 1,478,122 1,077,583 Basic loss per share (cents) 110.85 52.52 14.58 0.93 Calculated on a weighted average basis of the number of shares on issue. Diluted loss per share is the same as basic loss per share. 15. Segment reporting The Company is organised into one operating segment, providing the development and deployment of mobile commerce and payment solutions. The segment result is reflected in the financial statements. The Company operated principally in New Zealand during the year ended 31 March 2014. It also has a presence in the US and Australia. While there are customers across all regions the Company is experiencing growth in the US “faith” sector selling its products to churches. Software and product development are primarily for this market but are transferable to other vertical market and geographic locations. 16. Subsidiaries Country of Ownership Name Incorporation 2014 2013 Pushpay Ltd New Zealand 100% 100% Pushpay IP Ltd New Zealand 100% -% Pushpay Trustee Ltd New Zealand 100% -% eChurch Inc United States 100% 100% ZipZap Processing Inc (not trading) United States 100% -% Pushpay Inc (not trading) United States 100% -% Pushpay Pty Ltd Australia 100% 100% All companies have a 31 March balance date. The parent Company has equity greater than the Group equity, due to losses incurred in the subsidiaries. The Board has reviewed the carrying value of investments in subsidiaries and consider no impairment is required. 17. Related parties The Group has a related party relationship between its Parent, subsidiaries and its directors and executive officers. (i) Group entities The following balances were outstanding with related parties at 31 March: Consolidated Parent 2014 2013 2014 2013 (Audited) (Unaudited) (Audited) (Unaudited) $’000 $’000 $’000 $’000 Amounts due from subsidiaries - - 2,659 828 These amounts relate to the funding of the subsidiary operations by the Parent under normal trading and commercial terms. None of the balances are secured. Each subsidiary is responsible for its own direct costs.
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PUSHPAY HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2014 13. Share based payments (continued) Expected volatility was estimated by reference to the volatility of listed equity securities for businesses of a similar nature to the company operating in the technology industry. Operating expenses 2014 2013 $’000 $’000 Share based payment expense 92 - The Trustee also holds fully paid shares on behalf of employees not part of the scheme. The Trustee holds 170,473 shares (2013: 137,316). Of these shares, 90,709 (2013: nil) shares are held on behalf of employees and subject to employee loans. A further 43,547 shares (2013: nil) are classified as shares with loans fully paid (or have been fully paid in cash). The remaining 36,217 shares (2013: 137,316) are unallocated. 14. Earnings per share The loss of $1,638,576 (2013: $566,218) represented a loss per share shown below based on weighted average ordinary shares on issue during the year. Group Parent 2014 2013 2014 2013 (Audited) (Unaudited) (Audited) (Unaudited) Weighted average ordinary shares issued 1,478,122 1,077,583 1,478,122 1,077,583 Basic loss per share (cents) 110.85 52.52 14.58 0.93 Calculated on a weighted average basis of the number of shares on issue. Diluted loss per share is the same as basic loss per share. 15. Segment reporting The Company is organised into one operating segment, providing the development and deployment of mobile commerce and payment solutions. The segment result is reflected in the financial statements. The Company operated principally in New Zealand during the year ended 31 March 2014. It also has a presence in the US and Australia. While there are customers across all regions the Company is experiencing growth in the US “faith” sector selling its products to churches. Software and product development are primarily for this market but are transferable to other vertical market and geographic locations. 16. Subsidiaries Country of Ownership Name Incorporation 2014 2013 Pushpay Ltd New Zealand 100% 100% Pushpay IP Ltd New Zealand 100% -% Pushpay Trustee Ltd New Zealand 100% -% eChurch Inc United States 100% 100% ZipZap Processing Inc (not trading) United States 100% -% Pushpay Inc (not trading) United States 100% -% Pushpay Pty Ltd Australia 100% 100% All companies have a 31 March balance date. The parent Company has equity greater than the Group equity, due to losses incurred in the subsidiaries. The Board has reviewed the carrying value of investments in subsidiaries and consider no impairment is required. 17. Related parties The Group has a related party relationship between its Parent, subsidiaries and its directors and executive officers. (i) Group entities The following balances were outstanding with related parties at 31 March: Consolidated Parent 2014 2013 2014 2013 (Audited) (Unaudited) (Audited) (Unaudited) $’000 $’000 $’000 $’000 Amounts due from subsidiaries - - 2,659 828 These amounts relate to the funding of the subsidiary operations by the Parent under normal trading and commercial terms. None of the balances are secured. Each subsidiary is responsible for its own direct costs.
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PUSHPAY HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2014 17. Related parties (continued) (ii) Key management personnel Interest Paid Balances outstanding 2014 2013 2014 2013 (Audited) (Unaudited) (Audited) (Unaudited) $’000 $’000 $’000 $’000 (a) Loans to directors and executive Directors executive - - - 60 Directors non-executive 2 - - - All loans are with the Parent and include transactions under the employee share scheme. None of the balances are secured. No amounts have been written off or forgone during the year. (b) Remuneration Key management personnel are defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly and include the Chief executive and his direct reports. The following table summarises remuneration paid to key management personnel: Consolidated Parent 2014 2013 2014 2013 (Audited) (Unaudited) (Audited) (Unaudited) $’000 $’000 $’000 $’000 Directors’ fees 5 - 5 - Short term employee benefits 410 99 - - (c) Shareholding and loans Directors of the Company and their immediate relatives control 81.98% (2013: 66.66%) of the voting shares. Director and shareholder loans of $60,300 were repaid during the year. 18. Financial risk management The Group is subject to a number of financial risks including liquidity risk, credit risk and market risk. The Group does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes. Specific risk management objectives and policies are set out below: (a) Capital risk management The Group manages its capital to ensure that the company will be able to continue as a going concern while maximizing the return to stakeholders through the optimization of debt and equity. The capital structure of the Group consists of shares, comprising issued capital and retained losses. The Group’s board of directors reviews the capital structure on a regular basis to ensure that entities in the Group are able to continue as going concerns. The Group is not subject to externally imposed capital requirements. (b) Interest rate risk The Group’s interest rate risk arises from its cash balances. These are placed on deposit at variable rates that expose the Group to cashflow interest rate risk. The Group does not enter into forward rate agreements. The Group’s management regularly reviews its banking arrangements to ensure the best returns on funds. Group Parent 2014 2013 2014 2013 (Audited) (Unaudited) (Audited) (Unaudited) $’000 $’000 $’000 $’000 Financial assets - cash and cash equivalents 2,746 271 2,709 200 _______ _______ _______ _______ 2,746 271 2,709 200 _______ _______ _______ _______ Cash at the Bank is subject to floating interest rate risk.
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PUSHPAY HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2014 18. Financial risk management (continued) (c) Credit risk Credit risk refers to the risk that a counter-party will default on its contractual obligations resulting in financial loss to the Group. Financial instruments which potentially subject the Group to credit risk, principally consist of accounts receivable. The Board monitors and manages the exposure to credit risk by ensuring the customers have an appropriate credit history. The majority of sales have customers paying before the service is delivered. The maximum exposures to credit risk at balance date are: Group Parent 2014 2013 2014 2013 (Audited) (Unaudited) (Audited) (Unaudited) Notes $’000 $’000 $’000 $’000 Accounts receivable 9 132 20 2,659 828 Cash and cash equivalents 8 2,746 271 2,709 200 The Group does not require any collateral or security to support financial instruments. (d) Liquidity risk management Liquidity risk is the risk that the Company or Group cannot pay contractual liabilities as they fall due. During the year the Company raised $2,885,420 by way of private placement. Following receipt of these proceeds the Company had sufficient cash to meet its requirements (note 22). The Board regularly reviews its liquidity position by examining future cash requirements. (e) Foreign currency risk The Group is exposed to foreign currency movements against the New Zealand dollar. The US and Australian operations are funded directly from New Zealand and will require continual funding for at least the next twelve months. As a result the financial statement can be affected by movements in these notes. During this time the foreign currency risk will increasingly be mitigated by regeneration of revenues in the US. The following sensitivity is based on the foreign currency risk exposures in existence at the reporting date. At 31 March 2014, had the New Zealand dollar moved, as illustrated in the table below, with all other variables held constant, post tax profit and other comprehensive income would have been affected as follows: Group Parent 2014 2013 2014 2013 (Audited) (Unaudited) (Audited) (Unaudited) $’000 $’000 $’000 $’000 Increase in value of NZ Dollar of 10 percent Impact on profit before taxation (11) (3) - - Impact on equity before taxation (11) (3) - - Decrease in value of NZ Dollar of 10 percent Impact on profit before taxation 14 3 - - Impact on equity before taxation 14 3 - - The sensitivity was calculated by taking the spot rate as at balance date of 0.8663 (2013: 0.8371) for USD and moving this spot rate by the reasonably possible movements of plus and minus 10 percent and then re-converting the foreign currency into NZD with the “new spot rate”. This methodology reflects the translation methodology undertaken by the group. (f) Fair value of financial instruments The carrying value of cash and cash equivalents, trade receivables, trade payables and accruals are assumed to approximate their fair values due to the short term maturity of these assets and liabilities. Non current receivables from subsidiaries do not materially differ from their carrying value.
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PUSHPAY HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2014 18. Financial risk management (continued) (c) Credit risk Credit risk refers to the risk that a counter-party will default on its contractual obligations resulting in financial loss to the Group. Financial instruments which potentially subject the Group to credit risk, principally consist of accounts receivable. The Board monitors and manages the exposure to credit risk by ensuring the customers have an appropriate credit history. The majority of sales have customers paying before the service is delivered. The maximum exposures to credit risk at balance date are: Group Parent 2014 2013 2014 2013 (Audited) (Unaudited) (Audited) (Unaudited) Notes $’000 $’000 $’000 $’000 Accounts receivable 9 132 20 2,659 828 Cash and cash equivalents 8 2,746 271 2,709 200 The Group does not require any collateral or security to support financial instruments. (d) Liquidity risk management Liquidity risk is the risk that the Company or Group cannot pay contractual liabilities as they fall due. During the year the Company raised $2,885,420 by way of private placement. Following receipt of these proceeds the Company had sufficient cash to meet its requirements (note 22). The Board regularly reviews its liquidity position by examining future cash requirements. (e) Foreign currency risk The Group is exposed to foreign currency movements against the New Zealand dollar. The US and Australian operations are funded directly from New Zealand and will require continual funding for at least the next twelve months. As a result the financial statement can be affected by movements in these notes. During this time the foreign currency risk will increasingly be mitigated by regeneration of revenues in the US. The following sensitivity is based on the foreign currency risk exposures in existence at the reporting date. At 31 March 2014, had the New Zealand dollar moved, as illustrated in the table below, with all other variables held constant, post tax profit and other comprehensive income would have been affected as follows: Group Parent 2014 2013 2014 2013 (Audited) (Unaudited) (Audited) (Unaudited) $’000 $’000 $’000 $’000 Increase in value of NZ Dollar of 10 percent Impact on profit before taxation (11) (3) - - Impact on equity before taxation (11) (3) - - Decrease in value of NZ Dollar of 10 percent Impact on profit before taxation 14 3 - - Impact on equity before taxation 14 3 - - The sensitivity was calculated by taking the spot rate as at balance date of 0.8663 (2013: 0.8371) for USD and moving this spot rate by the reasonably possible movements of plus and minus 10 percent and then re-converting the foreign currency into NZD with the “new spot rate”. This methodology reflects the translation methodology undertaken by the group. (f) Fair value of financial instruments The carrying value of cash and cash equivalents, trade receivables, trade payables and accruals are assumed to approximate their fair values due to the short term maturity of these assets and liabilities. Non current receivables from subsidiaries do not materially differ from their carrying value.
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PUSHPAY HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2014 19. Reconciliation of net profit/(loss) with cash flows from operating activities Group Parent 2014 2013 2014 2013 (Audited) (Unaudited) (Audited) (Unaudited) $’000 $’000 $’000 $’000 Net profit/loss for the year (1,638) (566) (215) (10) Adjustments for non-cash items: Depreciation 10 4 - - Amortisation of development costs and intangibles 90 - - - Employee share scheme expenses (Note 12) 65 - 65 - Share based payment expense (Note 13) 92 - 92 - _______ _______ _______ _______ (1,381) (562) (58) (10) _______ _______ _______ _______ Movements in working capital Accounts receivable (165) (13) - - Accounts payable and accruals 283 90 - - _______ _______ _______ _______ 118 77 - - _______ _______ _______ _______ Net cash inflow (outflow from operating activities) (1,263) (485) (58) (10) _______ _______ _______ _______ 20. Capital received in advance Some of the new and existing shareholders paid before balance date monies for the issue of shares on 11 April 2014 amounting to $1,643,280. These funds were retained in short term deposits until the issue of new shares were completed on 11 April 2014. 21. Subsequent events On 15 May 2014 Pushpay Holdings Limited entered into an agreement for the purchase of all the assets from a text messaging service company, Run the Red Limited for settlement on 31 May 2014. Consideration is a maximum of $5,000,000 subject to performance, claw-back and retention clauses. The business delivers over 150 million text and other mobile messages per annum in New Zealand and other countries and enables the Company to deliver integrated mobile commerce communication and payment solutions to customers. The purchase price will be satisfied in cash from existing sources and new capital to be raised as noted below. On 11 April 2014 Pushpay Holdings Limited issued a further 260,204 shares for a consideration of $2,778,910. On 26 May 2014 all preference shares (as disclosed in Note 12) were converted to ordinary shares at the option of the holders. Pushpay Holdings Limited has entered into an underwriting agreement with Christopher and Banks Private Equity to underwrite a capital raise of $9,000,000 with the intention to list its shares on the NZAX market via a compliance listing. The underwriting agreement is offered subject to a number of conditions including the disclosure document being available on opening day, the NZX having approved the disclosure document and the shares proceeding to being listed on the NZAX on closing day. The underwriting agreement in some circumstances may be terminated if there is a withdrawal of the offer or a material adverse event. Pushpay Holdings Limited has formed a subsidiary called Zip Zap Processing Inc in the USA with the intention of establishing its own Independent Service Organisation for the processing of credit and debit card transactions for merchants who are customers of eChurch Inc. This business is expected to enable merchants to receive a seamless ‘one-stop’ payments solution for their electronic and mobile transaction requirements.
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PUSHPAY HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2014 22. Going concern The financial statements have been prepared using the going concern assumption. The Group has recorded a net deficit of $1,638,576 for the year ended 31 March 2014 (2013: $566,218), and as at balance date is in a net liability position of $220,000 (2013: net asset position of $411,000). At balance date the Group had $2,746,311 in cash of which $1,643,280 is from capital received in advance (refer Note 20). As disclosed in note 21 all preference shares were converted to ordinary shares subsequent to year end. Consequently the Group is in a significant positive equity position. With respect to future cash flows a further $2,778,910 of new capital has been raised subsequent to balance date. The going concern assumption is dependent on the capital raised since the reporting date, generating positive operating cashflows in the future in accordance with management’s plans and forecasts as well as raising $9,000,000 additional capital to enable the company to meet its working capital requirements and ongoing obligations, including the purchase of Run the Red Limited as noted in note 21. The company has prepared forecasts which indicate that the $2,778,910 of cash generated as a result of the post year end capital raising, cash flows from operations and raising a further $9,000,000 of additional capital subsequent to year end will enable the company to continue operating for the foreseeable future, which is not less than 12 months from the date these financial statements are approved. This additional capital raising as outlined in note 21 is 100% underwritten, subject to certain conditions as noted in note 21. The Directors believe the going concern assumption is valid and have reached this conclusion having regard to the circumstances which they consider likely to affect the company during the period of one year from the date these financials are approved, and to circumstances which they believe will occur after that date which could affect the validity of the going concern assumption. 23. Contingent liabilities As at balance date there were no material contingent liabilities. (2013: nil). 24. Capital commitments and operating lease commitments As at balance date there were no material capital commitments. (2013: nil). Non-cancellable operating lease commitments are: Consolidated Parent 2014 2013 2014 2013 (Audited) (Unaudited) (Audited) (Unaudited) $’000 $’000 $’000 $’000 Less than one year 46 - - - After one year but not more than five years - - - - _______ _______ _______ _______ 46 - - - _______ _______ _______ _______ 25. Categories of financial assets and financial liabilities Cash and cash equivalents, trade and other receivables and share scheme loans are classified as loans and receivables. Trade and other payables and capital contributions in advance are classified as financial liabilities at amortised cost.
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APPENDIX B: INTERIM REPORT 2015
Interim ReportFor the six months ended 30 September 2014
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PUSHPAY HOLDINGS LIMITED INTERIM REPORT
Chairman and Chief Executive Report 1
Auditor’s Review Report 4
Unaudited Interim Financial Statements
Consolidated Statement of Comprehensive Income 6
Consolidated Statement of Changes in Equity 7
Consolidated Statement of Financial Position 8
Consolidated Statement of Cash Flows 9
Condensed Notes to the Unaudited Interim Financial Statements 10
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Pushpay’s performance is on track, delivering on US initiatives which underpin future growth. The Company continues to deliver on its plan, has a strong product offering, solid business model and is well positioned for continued growth.
Pushpay is investing in product development and building the sales and marketing engine to accelerate growth, and is focusing its resources and talents in those areas of the business that will drive long-term growth, profitability and shareholder value.
The Group’s unaudited interim result for the six months ended 30 September 2014 comprise a total comprehensive loss attributable to the shareholders of the company of $2.717m, compared to an unaudited total comprehensive loss attributable to the shareholders of $0.568m for the six months ended 30 September 2013.
There were no dividend or distribution payments declared for the period.
The Company continues to deliver on its plan, has a strong product offering, solid business model and is well positioned for continued growth.
CHAIRMAN AND CHIEF EXECUTIVE REPORT
Financial information $’000
For the six months ended 30 September 2014 2013
Total revenue and other income 1,613 90
Total comprehensive loss for the period attributable to the shareholders of the company -2,717 -568
Net cash (outflow) from operating activities -2,785 -509
Issue of ordinary shares (net of costs) 10,374 520
As at 30 September 2014 2013
Cash and cash equivalents 5,599 12
Bank debt 0 0
Total equity 11,615 363
Net tangible assets per share (cents) 11 7 (pre-split)
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Operational highlights and updates
• Transfer of key executive functions to the U.S., including the Chief Executive, Chief Financial Officer and sales and marketing
• Acquisition of ‘Run The Red’, enhancing the overall product offering
• Full service product offering to the Faith Sector, increasing merchant loyalty and raising barriers to entry
• Recruitment of additional executives in the U.S.
• ZipZap Processing commenced operations, improving Merchant onboarding speed and increasing Average Revenue Per Merchant (ARPM)
• Pushpay is on target to grow its customer base to over 600 Merchants, and over $8.3 million in monthly payment transaction volume, by 31 December 2014. The Company plans to provide an operating update in mid-January, which will include forecast Merchant and monthly payment transaction volume to 31 March 2015
• ARPM in June 2014 was approximately $235 per Merchant per month. Pushpay now expects ARPM to increase to over $300 per month over the medium term
• Pushpay’s annual revenue retention rate (excluding upsells into the existing Merchant base) continued to exceed 95%, which the Company believes places it among the best-in-class for SaaS companies. Pushpay expects retention to remain high as the business scales.
Acquisition of ‘Run The Red’
In May 2014, Pushpay purchased the business and assets of “Run The Red” (RTR). RTR integrates text messaging with core business applications using an SMS Gateway, and facilitates personalised communication that can lead to payments and other mobile commerce experiences. Based on volumes through the quarter ended September 2014, RTR delivers over 150 million targeted text messages per year on an annualised basis.
Clients include Westpac, Sky TV, Vodafone, Z Energy, The Department of Internal Affairs, Facebook and as announced in early October, New Zealand Post Group which consists of a number of businesses including Kiwibank, New Zealand Post and Express Couriers.
Pushpay believes RTR adds significant value to the Pushpay opportunity in terms of complementary products and additional access to enterprises that are not currently Merchants. The purchase of RTR has allowed Pushpay to position itself beyond simply effecting mobile commerce payments through the incorporation of an enterprise channel that allows merchants to communicate with Consumers via Smart Mobile Devices, supplementing and enhancing the overall mobile commerce experience.
Capital raised | NZAX listing
Over the period, Pushpay raised over $11.7 million of new capital from eligible and habitual investors, including $2.7 million in April followed by a further $9.0 million in July.
The Company has used the capital in part to pay a portion of the purchase price relating to the acquisition of RTR, to further develop its technology stack and as working capital to accelerate growth in its key target territory – the U.S.
On 14 August 2014 Pushpay listed on the NZAX, at which time a Disclosure Document that included the 2014 Annual Report was provided to the NZX.
Pushpay finished the period with over $5.5 million in cash and cash equivalents and no bank debt, which the Company believes is sufficient capital to maintain its growth trajectory in the near term.
Technology
Pushpay continues to invest in the improvement of its core platforms in order to increase merchant loyalty and raise barriers to entry for new competitors. The Company now offers a full service product offering to the Faith Sector, which in the U.S. consists of over 314,000 churches, with an average size of over 500 attendees. Over the period Pushpay has developed the ability for
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Bruce Gordon
Chairman
Christopher Heaslip
Chief Executive
Merchants to accept AMEX, Discover, NZ bank payments and ACH payments (U.S. bank payments).
The Company continues to scale the platform and recently migrated to a global hosting provider to efficiently accommodate increased transaction volumes and increase the speed of the service. The Company will continue to focus on product enhancements based on its product roadmap and Merchant feedback, platform improvement and complementary products.
ZipZap Processing Inc.
During September, ZipZap Processing Inc. commenced operations as an Independent Sales Organisation (ISO) for the processing of credit card, debit card, and ACH (U.S. bank payments) transactions for Merchants. This enables Merchants to receive a seamless ‘one stop’ payment solution for their electronic and mobile transaction requirements. ZipZap Processing provides the Company with the dual benefit of faster implementation of new Merchants, which improves cash flow and also increases ARPM.
Outlook
Pushpay currently believes that the business will be cash flow break-even on a monthly basis with approximately 1,250 Merchants (assuming RTR revenue and costs remain stable), dependent on successful execution of Pushpay’s current strategy, maximising benefits from its lean operating model and based on various growth,
cost and revenue assumptions. However, as an early-stage company, Pushpay’s management believes that it is preferable to focus on and invest in growth as the best means to achieve overall value in its business. Following the focused investment in people, product and business processes, Pushpay is well positioned to execute on its growth plans and deliver long-term shareholder value.
Following the focused investment in people, product and business processes, Pushpay is well positioned to execute on its growth plans and deliver long-term shareholder value.
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AUDITOR’S REVIEW REPORT
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Notes
6 months
30 September 2014
(unaudited) $’000
6 months
30 September 2013
(unaudited) $’000
Revenue
Operating revenue 1,519 90
Other income 94 -
Total revenue and other income 1,613 90
Operating expenses 4 (4,497) (661)
Operating loss before income tax (2,884) (571)
Income tax benefit 312 -
Operating loss for the period after tax (2,572) (571)
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Translation of foreign operations (145) 3
Total comprehensive loss for the period attributable to the shareholders of the company
(2,717) (568)
(Loss) per share
Basic (loss) per share (cents) (6.77) (2.48)
Calculated on a weighted average basis of the number of shares on issue.
Adjusted for share subdivision on 3 June 2014.
The accompanying notes form part of these financial statements.
Consolidated Statement of Comprehensive Income For the six months ended 30 September 2014
UNAUDITED INTERIM FINANCIAL STATEMENTS
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Consolidated Statement of Changes in Equity For the six months ended 30 September 2014
Notes
Share
capital
$'000
Foreign
currency
reserve
$'000
Share
based
payment
reserve
$'000
Accumulated
losses
$'000
Total
equity
$'000
Balance at 1 April 2013 (unaudited) 979 5 - (573) 411
Comprehensive loss
Loss for the period - - - (571) (571)
Currency translation movements - 3 - - 3
Total comprehensive income 979 8 - (1,144) (157)
Transactions with owners
Issue of shares 520 - - - 520
Capital raising costs - - - - -
Balance as at 30 September 2013 (unaudited)
1,499 8 - (1,144) 363
Balance at 1 April 2014 (audited) 1,860 39 92 (2,211) (220)
Comprehensive loss
Loss for the period - - - (2,572) (2,572)
Currency translation movements - (145) - - (145)
Total comprehensive income 1,860 (106) 92 (4,783) (2,937)
Transactions with owners
Issue of shares 12,568 - - - 12,568
Conversion of preference shares 2,000 - - - 2,000
Capital raising costs (51) - - - (51)
Share based payments - - 35 - 35
Balance as at 30 September 2014 (unaudited)
16,377 (106) 127 (4,783) 11,615
The accompanying notes form part of these financial statements.
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Consolidated Statement of Financial Position As at 30 September 2014
Notes
30 September 2014
(unaudited) $'000
31 March 2014
(audited) $'000
Assets
Current assets
Cash and cash equivalents 5,599 2,746
Restricted cash balance 75 -
Trade and other receivables 1,516 185
Total current assets 7,190 2,931
Non-current assets
Property, plant and equipment 295 64
Intangible assets 6,043 803
Total non-current assets 6,338 867
Total assets 13,528 3,798
Liabilities
Current liabilities
Trade and other payables 1,790 351
Employee benefits 123 24
Preference shares - 2,000
Capital contributions in advance - 1,643
Total current liabilities 1,913 4,018
Total non-current liabilities - -
Total liabilities 1,913 4,018
Net assets / (liabilities) 11,615 (220)
Equity
Share capital 5 16,377 1,860
Foreign currency translation reserve (106) 39
Share based payment reserve 127 92
Accumulated losses (4,783) (2,211)
Total equity 11,615 (220)
The accompanying notes form part of these financial statements.
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Consolidated Statement of Cash Flows For the six months ended 30 September 2014
Notes
6 months to
30 September 2014
(unaudited) $'000
6 months to
30 September 2013
(unaudited) $'000
Cash flows from operating activities
Cash was provided from (applied to):
Receipts from customers 578 60
Interest received 68 -
Payment to suppliers & employees (3,431) (569)
Net cash (outflow) from operating activities 11 (2,785) (509)
Cash flows from investing activities
Cash was provided from (applied to):
Proceeds from sale of fixed assets - 2
Purchase of property, plant and equipment (186) (2)
Capitalised development costs and intangible assets (730) (295)
Purchase of business – Run The Red Limited (3,600) -
Restricted cash balance (75) -
Net cash (outflow) from investing activities (4,591) (295)
Cash flows from financing activities
Cash was provided from (applied to):
Issue of ordinary shares (net of costs) 10,374 520
Proceeds from shareholder advances - 22
Net cash inflow from financing activities 10,374 542
Net increase/(decrease) in cash held 2,998 (262)
Foreign currency translation adjustment (145) 3
Add cash and cash equivalents at start of period 2,746 271
Balance at end of period 5,599 12
Comprised of:
Cash and cash equivalents 5,599 12
The accompanying notes form part of these financial statements.
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Condensed Notes to the Unaudited Interim Financial Statements For the six months ended 30 September 2014
1. Corporate information
Pushpay Holdings Limited is a limited liability company (the “Company”), domiciled and incorporated in New Zealand and registered under the New Zealand Companies Act 1993 and listed on the NZX Alternative Market. The registered office of the Company is Ground floor Microsoft House, 22 Viaduct Harbour Avenue, Auckland 1010, New Zealand.
The unaudited interim financial statements presented are for Pushpay Holdings Limited and its subsidiaries (together “the Group”) for the six months ended 30 September 2014.
These statements were authorised for issue in accordance with a resolution of the Directors on 13 November 2014.
The Group’s principal activity is the provision of a platform for mobile commerce and electronic payments and tools for merchants to engage with consumers.
2. Basis of preparation
These general purpose financial statements for the six months ended 30 September 2014 have been prepared in accordance with NZ IAS 34, Interim Financial Reporting. In complying with NZ IAS 34, these interim financial statements also comply with IAS 34 interim financial reporting.
These interim financial statements do not include all the notes of the type normally included in an annual financial report. Accordingly, this report should be read in conjunction with the audited financial statements of Pushpay Holdings Limited and its Subsidiaries for the period ended 31 March 2014 which have been prepared in accordance with the New Zealand equivalents to International Financial Reporting Standards (NZ IFRS) and International Financial Reporting Standards (IFRS).
The Company is designated as profit-oriented entity and an issuer for the purposes of the Financial Reporting Act 2013.
All significant accounting policies have been applied on a basis consistent with those used in the audited financial statements of Pushpay Holdings Limited and its Subsidiaries for the period ended 31 March 2014.
The financial statements are presented in thousands of New Zealand dollars.
3. Additional accounting policies subsequent to 31 March 2014
Consolidation
Subsidiaries are fully consolidated from the date on which control is transferred to the parent. The acquisition method of accounting is used to account for the acquisition of subsidiaries by the parent. The consideration transferred for an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange. Costs directly attributable to the acquisition are expensed in the income statement.
Inter-company transactions, balances and unrealised gains and losses on transactions between Group companies are eliminated.
Goodwill
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any
CONDENSED NOTES TO THE UNAUDITED INTERIM FINANCIAL STATEMENTS
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Condensed Notes to the Unaudited Interim Financial Statements For the six months ended 30 September 2014 (continued)
3. Additional accounting policies subsequent to 31 March 2014 (continued)
non-controlling interests in the acquiree and the fair value of the acquirer’s previously held interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain.
Goodwill is not amortised but is reviewed for impairment at least annually. For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period.
On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.
4. Expenses
Notes
6 months to 30
September 2014
(unaudited) $'000
6 months to 30
September 2013
(unaudited) $'000
Operating expenses include:
Amortisation of intangible assets 228 25
Depreciation 29 4
Employee benefits/entitlements 1,855 389
Share based payments 35 -
5. Share capital and shares
Share capital
Notes
Number
of shares
000's
12 months to
31 March 2014
(audited) $'000
Number
of shares
000's
12 months to
31 March 2013
(unaudited) $'000
Balance at 1 April 2013 1,373 979 1,000 80
Movements during the period
Issue of shares 209 820 236 929
Share issue costs - (4) - (30)
Capital raised on employee share scheme allotment - 65 - -
Issue of shares to Pushpay Trustees Limited - - 137 -
Balance as at 31 March 2014 1,582 1,860 1,373 979
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Condensed Notes to the Unaudited Interim Financial Statements For the six months ended 30 September 2014 (continued)
5. Share capital and shares (continued)
Notes
Number
of shares
000's
6 months to 30
September 2014
(unaudited)
$'000
Number
of shares
000's
12 months to
31 March 2014
(audited)
$'000
Balance as at 31 March 2014 1,582 1,860 1,373 979
Movements during the period
Preference shares converted to ordinary shares 384 2,000 - -
Issue of shares 261 2,779 209 820
Issue of shares to Pushpay Trustees Limited 4 - - -
Share issue costs - (26) - (4)
Capital raised on employee share scheme allotment - - - 65
Balance prior to share subdivision 3 June 2014 2,231 6,613 1,582 1,860
Share subdivision 3 June 2014 -18.1554 per 1 share 40,500 -
Issue of shares 9,000 9,000
Issue of shares – purchase Run The Red Limited 500 500
Share issue costs - (25)
Capital raised on employee share scheme allotment - 289
Balance at 30 September 2014 50,000 16,377
The paid up capital comprises ordinary shares. The total number of ordinary shares on issue as at 30 September 2014 was 50,000,000 shares. The shares have no par value. All ordinary shares rank equally with one vote attached to each fully paid ordinary share.
Preference shares
At 1 April 2014 the company had 383,679 preference shares on issue at a total value of $2,000,000 classified as liabilities. On 26 May 2014 these shares were converted to ordinary shares and re-classified as equity at a rate of one ordinary share for each preference share. They rank equally with ordinary shares in all respects.
6. Share based payments
In April 2013 the Group established an employee share scheme that entitles selected directors, executives and employees to purchase shares in the Company. In August 2014 this scheme was disestablished and replaced by a new scheme. Under this scheme the ordinary shares in Pushpay Holdings Limited are issued to a Trustee, Pushpay Trustee Limited, a wholly owned subsidiary and allocated to participants on a grant date using funds lent to them by the company. All shares are held by the Trustee in accordance with the rules and trust deed of the scheme.
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Condensed Notes to the Unaudited Interim Financial Statements For the six months ended 30 September 2014 (continued)
6. Share based payments (continued)
During the six month period ended 30 September 2014 the number and grant price is as follows:-
Issue price Number of shares
Total on issue at 31 March 2014 86,380
Granted during the period 6.22 27,116
Granted during the period 10.68 8,492
121,988
Share subdivision 3 June 2014 -18.1554 per 1 share 2,214,736
Less transferred to employees in period 756,527
Total at 30 September 2014 1,458,209
The fair value of services received in return for the shares granted is based on the fair value of shares granted and Black Scholes model with the following inputs:-
Issue date – (adjusted for share subdivision) 01/04/2014 11/04/2014
Estimated fair value per share at granted date 0.063 - 0.198 0.108 - 0.263
Exercise price per share 0.343 0.588
Expected volatility 40% 40%
Risk free interest rate 3.5% 3.5%
Expected volatility was estimated by reference to the volatility of listed equity securities for businesses of a similar nature to the Company operating in the technology industry.
7. Segment reporting
The Company is organised into one operating segment, providing the development and deployment of mobile commerce and payment solutions and text mobile messaging services. The segment result is reflected in the financial statements. The Company operated principally in New Zealand during the six months ended 30 September 2014. It also has a presence in the US and Australia.
8. Related parties
1) Independent director’s fees
Independent director’s fees have been paid to Bruce Gordon during the period of $17,500.
2) Share transactions
On 11 April 2014 new capital was raised totalling $2,778,910. The following directors participated in this issue:-
• Bruce Gordon through associated party in East Street Trust: $125,000
• Christopher Huljich through beneficial ownership in Christopher & Banks Private Equity V Limited: $1,008,280
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Condensed Notes to the Unaudited Interim Financial Statements For the six months ended 30 September 2014 (continued)
8. Related parties (continued)
• Christopher Huljich through beneficial related ownership in other entities: $780,000
• Rodney Macdonald through beneficial related ownership in Sol Solis Trust: $120,160
On 4 July 2014 new capital was raised totalling $9,000,000. The following directors participated in this issue:-
• Christopher Huljich through beneficial ownership in Christopher & Banks Private Equity V Limited: $2,201,000
• Christopher Huljich through beneficial related ownership in other entities: $1,969,000
On 9 May 2014 Christopher & Banks Private Equity V Limited entered into an underwriting agreement with the Company to underwrite a capital raise of $9,000,000.
On 11 June 2014 Pushpay Trustees Limited transferred the following shares to the following directors as beneficial owners:-
• Bruce Gordon through beneficial ownership in Geelong Investments Limited: 137,109 shares
• Christopher Heaslip through beneficial ownership in Dorchester Trust: 263,843 shares
• Eliot Crowther through beneficial ownership in Crowther Family Trust: 263,843 shares
3) Remuneration
Key management personnel are defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly and include the Chief Executive and his direct reports.
The following summarises remuneration paid to key management personnel:-
6 months to 30
September 2014
(unaudited) $'000
6 months to 30
September 2013
(unaudited) $'000
Directors fees 17 -
Short term employee benefits 559 157
9. Business combination
On 15 May 2014 Pushpay Holdings Limited entered into an agreement for the purchase of all the assets from a text messaging service company, Run the Red Limited for settlement on 31 May 2014. Consideration was to be a maximum of $5,000,000 based on several variables and although the final purchase price will not be known until 30 May 2015, Pushpay has determined that the maximum purchase price will now be no more than $4,500,000. The business delivers over 150 million texts and other mobile messages per annum in New Zealand and other countries and enables the company to deliver integrated mobile commerce communication and payments solutions to customers. The purchase price was satisfied or will be satisfied in cash from existing sources and the issue of new capital.
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Condensed Notes to the Unaudited Interim Financial Statements For the six months ended 30 September 2014 (continued)
9. Business combination (continued)
Assets were purchased at fair value consisted of: $’000
Fixed assets 74
Intellectual property 1,202
Customer contracts 680
Brand name 433
Deferred tax liabilities (312)
Total identifiable net assets 2,077
Goodwill 2,423
Total consideration paid or payable 4,500
Consideration was paid or is payable in:
Cash (paid) 3,600
Shares issued 4 July 2014 500
Deferred payment amount subject to completion of supplier assignment 400
4,500
The goodwill arising from the acquisition reflects expected future synergies, integration and growth prospects of Run the Red Limited. The business contributed sales revenue and a net profit after tax to the Consolidated Statement of Comprehensive Income since acquisition of $1,155,000 and $302,000 respectively. Had the business been acquired at 1 April 2014 the sales revenue and net profit after tax are estimated at $1,750,000 and $380,000 respectively.
10. Transactions involving not for profit activity
Part of Run the Red Limited’s activities involves the collection of charity revenues for on-forwarding to registered charities and organisations. As at 30 September 2014 the following balances relating to charities were included in these classifications:-
30 September 2014
(unaudited) $'000
31 March 2014
(audited) $'000
Cash and cash equivalents 247 -
Trade and other receivables 238 -
Trade and other payables 297 -
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Condensed Notes to the Unaudited Interim Financial Statements For the six months ended 30 September 2014 (continued)
11. Reconciliation of net (loss) with cash flows from operating activities
Notes
6 months to 30
September 2014
(unaudited) $'000
6 months to 30
September 2013
(unaudited) $'000
Net (loss) for the period (2,572) (571)
Adjustments for non-cash items:
Depreciation 4 29 4
Amortisation of development costs and intangibles 4 228 25
Share based payment expense 35 -
Deferred tax benefit (312) -
(2,592) (542)
Movements in working capital:
Accounts receivable (1,331) (56)
Accounts payable and accruals 1,138 89
(193) 33
Net cash (outflow) from operating activities (2,785) (509)
12. Contingent liabilities
As at balance date there were no material contingent liabilities. (2013: nil).
13. Capital commitments and operating lease commitments
As at balance date there were no material capital commitments. (2013: nil).
Non-cancellable operating lease commitments are:-
Notes
6 months to 30
September 2014
(unaudited) $'000
6 months to 30
September 2013
(unaudited) $'000
Less than one year 333 -
After one year but not more than five years 1,493 -
1,826 -
14. Subsequent events
There were no material events subsequent to the balance date.
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Registered Office
Ground Floor, Microsoft House
22 Viaduct Harbour Avenue
Auckland 1010
New Zealand
+64 9 442 5040
Website
www.pushpay.com
Company Number
3481675
Directors
Bruce Patrick Gordon
Christopher Peter Huljich
Douglas David Kemsley
Christopher Heaslip
Rodney John Macdonald
Eliot Barry Crowther
Auditor
Deloitte
Legal Advisors
Buddle Findlay
Harmos Horton Lusk
Accountant
Battley & Johnson
Share Registrar
Link Market Services Limited
Level 7, Zurich House
21 Queen Street
Auckland 1010
New Zealand
+64 9 375 5998
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NOTES
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Issuer
Pushpay Holdings Limited
Registered Office
Ground Floor, Microsoft House
22 Viaduct Harbour Avenue
Auckland 1010
New Zealand
+64 9 377 7720
Website
www.pushpay.com
Legal Advisors
Buddle Findlay
Level 18, PwC Tower
188 Quay Street
Auckland 1010
New Zealand
+64 9 358 2555
Harmos Horton Lusk
Level 37, Vero Centre
48 Shortland Street
Auckland 1010
New Zealand
+64 9 921 4300
Auditor
Deloitte
Level 18, Deloitte Centre
80 Queen Street
Auckland 1010
New Zealand
+64 9 303 0700
Accountant
Battley & Johnson
Level 4, 3 Ferncroft Street
Grafton
Auckland 1010
New Zealand
+64 9 379 3900
Share Registrar
Link Market Services
Level 7, Zurich House
21 Queen Street
Auckland 1010
New Zealand
+64 9 375 5998
Directors
Bruce Patrick Gordon (Chairman)
46 Marlborough Street
Mount Eden
Auckland 1024
New Zealand
Graham John Shaw
2/41 Aurora Terrace
Kelburn
Wellington 6012
New Zealand
Christopher Peter Huljich
8 Karori Crescent
Orakei
Auckland 1071
New Zealand
Douglas David Kemsley
75 Windmill Road
RD 3
Hamilton 3283
New Zealand
Christopher Heaslip
6450 192nd Place NE
Redmond
Washington 98052
United States of America
Eliot Barry Crowther
8301 158th Place NE
Redmond
Washington 98052
United States of America
Peter Karl Christopher Huljich
(Alternate Director for Christopher
Peter Huljich)
8 Karori Crescent
Orakei
Auckland 1071
New Zealand