Despite submitting its 2022 audited financials and second quarter financials before the end of September, the Jamaica Stock Exchange (JSE) has maintained the suspension of trading in iCreate’s ordinary shares due to the absence of an appointed mentor.

The JSE suspended trading in iCreate’s shares on August 21 due to the extended delay in the submission of the company’s audited financials. iCreate submitted the documents on Friday to the JSE which published them on September 30. However, it appears that the JSE is following up on other breaches surrounding the Junior Market company as it now citing the breach of Junior Market Rule 503 – Mentor Requirement, Section 1 (a).

iCreate’s first mentor was Sandra Glasgow who resigned on July 4, 2019. Lissant Mitchell was appointed as a director, chairman of the board and mentor a day after Glasgow’s resignation. Mitchell along with five other directors resigned from iCreate’s board in April 2020 where the company at the time disclosed it would announce the appointment of a new mentor to the board of directors within the next five days.

There are currently 40 approved Junior Market mentors with Christopher Yeung, Hugh Graham and Anand James being the latest to be approved this year. However, none of iCreate’s current directors are approved by the JSE as mentors with the company’s 2021 annual report making no mention of an approved mentor. Also, no disclosure can be found on the JSE’s website announcing iCreate’s new mentor.

Some Junior Market companies have requested exemptions from the JSE on the mentor requirement including recently listed companies Image Plus Consultants Limited and One Great Studio Company Limited. After the passing of Michael Fraser, Stationery and Office Supplies Limited received an exemption from the JSE to waive the mentor requirement at a time when they were almost at the five-year mark since listing on the JSE in September 2017.

Qualified audit

While the JSE release indicates that it has accepted iCreate’s 2022 audited financials, the company’s audit received a ‘qualified’ opinion from its auditors Crichton Mullings & Associates. This was done on the basis of two reasons: there was the absence of comprehensive and reliable documentation supporting intellectual property and valuation of computer software held by its subsidiary; being unable to carry out audit procedures to assess the impairment of the acquisition of shares as required by auditing standards.

While the qualified opinion was highlighted, Crichton Mullings noted that the financial statements give a true and fair view of the group and company as at December 31, 2022, in accordance with International Financial Reporting Standards (IFRS) and the Jamaican Companies Act.

iCreate’s 2021 audited financials had received an unqualified opinion. Diligent.com also mentioned, “Investors don’t find qualified opinions acceptable, as they project a negative opinion about a company’s financial status.”

There are four types of audit opinions for the presentation of audited financial statements. As defined by diligent.com, an unqualified opinion is a clean report, a qualified opinion is a qualified report, a disclaimer of opinion is a disclaimer report, and an adverse opinion is an adverse audit report. Most companies on the JSE receive unqualified opinions by their auditors unless there is a severe situation which would limit them from expressing an opinion.

MFS Capital Partners Limited’s (formerly SSL Venture Capital Limited) auditors expressed no opinion for its 2018 audited financials while MFS received a qualified opinion for its 2023 audited financials.

Along with the qualified opinion, iCreate’s auditors noted that the financials have been prepared on an ongoing basis while noting that the going concern assumption was included as a key audit matter. This is related to the accumulated losses over the years and continuous capital raises to fund its operations.

Significant differences in reported numbers

For iCreate’s 2022 unaudited financials, the company reported $136.05 million in revenue and $22.83 million in net profit. However, the audited numbers for iCreate as a standalone company revealed $47.38 million in revenue and a $32.76 million net loss. For the consolidated group numbers which includes its 51 per cent controlled subsidiary GetPAID Group Limited, the revenue was $79.36 million, consolidated net loss of $46.84 million and a net loss attributable to shareholders $39.94 million.

While iCreate initially reported in its unaudited fourth quarter financials total assets and shareholders’ equity of $852.93 million and $673.52 million, respectively, the company subsequently reported in its first quarter 2023 report total assets and shareholders equity of $697.93 million and $518.52 million, respectively. However, the company’s standalone audited numbers revealed $695.66 million in total assets and $464.71 million in shareholders equity. The group numbers showed total assets of $718.13 million and equity of $475.13 million, respectively.

The audited notes revealed that the GetPAID stake was acquired on January 1, 2022, through the issuance of $25.50 million in five-year convertible preference shares that attract an interest rate of six per cent. However, none of iCreate’s unaudited quarterly financial statements appropriately represented the non-controlling interest (NCI) on neither the income statement, balance sheet nor statement of equity. iCreate’s first quarter 2023 unaudited financial statements did not represent this separation either. Only the second quarter numbers which were published on the same day as the audited financial statements show this represented NCI.

As it relates to the Visual Vibe.com Limited, the audited financial statements revealed that the total cost of acquisition in progress was US$4.125 million or $646.64 million with $470.60 million accounted for as deposit on purchase consideration. It noted convertible debt of $331.13 million which was converted to ordinary shares at $1.00 per share and a special purpose vehicle (SPV) being formed called Kintyre Holdings SPV to access a US$1-million margin loan from Victoria Mutual Investments Limited (VMIL). It was noted that 310 million shares were issued at a price of $0.50 to VMIL as security.

There is no Kintyre SPV on the Jamaican, Barbadian nor St Lucian company registries. However, Kintyre Holdings Limited which is connected to former founder, chief executive officer (CEO) and President Tyrone Wilson, saw its share count increase by 368.13 million shares in the fourth quarter of 2022.

iCreate’s second quarter report showed a 41 per cent dip in consolidated revenue to $43.79 million with a consolidated net loss of $136.16 million for the first six months of 2023. The bulk of this loss was attributed to the $107.49 million in acquisition-related expenses, while the dip in revenue was noted to be related to a decrease in the number of corporate training projects.

The report segregated the different business divisions and noted that iCreate reported a net loss of $29.8 million for the six-month period. GetPAID generated revenue of $18.8 million and $3.6 million in net profit while Visual Vibe.com contributed $9.3 million in revenue and $2.6 million in net profit for the month of June. Visual Vibe had total assets of $96.8 million and $82.1 million in equity with the report noting that a detailed growth plan has been developed for the business which includes the injection of additional capital.

iCreate acquired Visual Vibe.com for a purchase consideration of US$3.75 million with the acquisition being settled with a cash consideration of US$3 million and a US$1.27 million vendor’s note which was to be settled by September 30. The net identifiable assets of Visual Vibe.com was $78.77 million while the goodwill related to the deal was $509.85 million. This means that even on an annualised basis of Visual Vibe’s June earnings, iCreate would have paid 19 times earnings and six times total assets.

iCreate’s shares last traded at $1.03 on August 18 which left it down 42 per cent year to date. Apart from the resignation of Wilson in August, it was also noted that Chief Revenue Officer Declan Tully resigned from the company which is now being run by interim CEO Arlene Martin and chaired by Ivan Carter.

“The group is focused on growth in revenue and cash flows from all member companies, as well as reaping synergies across the group to benefit our many clients. At the same time we will be streamlining and strengthening internal processes and capabilities to realise our strategic objectives,” the Q2 report concluded.