Harmoney : Cleansing Notice

For personal use only

Harmoney Corp Limited

79 Carlton Gore Rd, Newmarket,

Auckland 1023, New Zealand

www.harmoney.co.nz 0800 HARMONEY

29 December 2021

Company Announcements Platform

Australian Securities Exchange

20 Bridge Street Sydney NSW 2000

By Electronic Lodgement

NOTICE UNDER SECTION 708A(12C)(E) OF THE CORPORATIONS ACT 2001 (Cth)

NOT FOR DISTRIBUTION TO ANY PERSON OR ADDRESS IN THE UNITED STATES

1 PURPOSE OF THIS NOTICE

This cleansing notice (Cleansing Notice) is given jointly by Harmoney Corp Limited (NZCN 5177041; ARBN 645 036 595; ASX:HMY) ) (Harmoney or the Company) and its wholly-owned subsidiary, Harmoney Australia Pty Ltd (ACN 604 342 823) (Issuer) under section 708A(12J) of the Corporations Act 2001 (Cth) (Corporations Act) and complies with section 708A(12K), as notionally inserted by ASIC Instrument 21-1072 (ASIC Exemption).

The ASIC Exemption is technical relief which has been given by the Australian Securities and Investments Commission (ASIC) from the on-sale restrictions of the Corporations Act so that any ordinary securities issued on conversion of convertible securities can be on-sold without a prospectus provided that a cleansing notice containing certain prescribed information is provided to ASX Limited (ABN 98 008 624 691) (ASX) at or just prior to the time the convertible securities are issued.

The convertible securities referred to in section 2 of this Cleansing Notice will be issued by the Issuer without disclosure to investors under Part 6D.2 of the Corporations Act. Each convertible security is a 'convertible note' within the meaning of the Corporations Act.

The purpose of this Cleansing Notice is to enable the fully paid ordinary shares in the capital of the Company (Shares) that may be issued on the conversion of the convertible securities to be on-sold to retail investors without a prospectus in accordance with the ASIC Exemption.

This Cleansing Notice is an important document and should be read in its entirety. No offer or invitation is made pursuant to this Cleansing Notice for any person to subscribe for or apply to acquire any of the convertible notes, or other securities issued by the Company or the Issuer. You are not required to do anything in response to this notice. Neither ASIC nor ASX takes any responsibility for the contents of this Cleansing Notice.

2 BACKGROUND

The Company announced on 29 December 2021, the signing of a A$20 million financing package

(Facility) involving, in part, the issue of secured convertible securities up to an aggregate amount of A$8 million (Convertible Notes) by the Issuer to certain wholesale investors within Australia and in certain foreign jurisdictions (Investors). Each of the Investors are professional investors or sophisticated investors for the purposes of section 708 of the Corporations Act.

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From the closing of the Facility, the Investors are required to advance to the Issuer up to A$20 million (Facility Amount) and the Issuer is required to issue Convertible Notes to the Investors with an aggregate face value of up to A$8 million with a term of 36 month (with the option to extend the term to 42 months) on the terms set out in the Loan Note Subscription Agreement entered into between, amongst others, the Issuer, the Company and the Investors and dated 24 December 2021 (Subscription Agreement).

The Convertible Notes and any Shares to be issued on conversion of the Convertible Notes will be issued under the Company's available placement capacity under ASX Listing Rule 7.1.

The directors of the Company consider that the raising of capital by the issue of the Convertible Notes on the terms of the Subscription Agreement is in the best interests of the Company and the Issuer.

3 The effect of the issue on the Company and Issuer

3.1 Summary

The principal effects of the issue by the Issuer of the Convertible Notes, and any subsequent issue by the Company of Shares on conversion of the Convertible Notes, on the Company and the Issuer will be as follows:

1. the Issuer will issue the Convertible Notes;
2. the issue of the Convertible Notes will:
3. 1. increase the Harmoney Group's cash reserves by a maximum of A$20 million (before any expenses associated with the issue of the Convertible Notes);
   2. impose on the Company (and certain of its subsidiaries, including the Issuer) obligations (financial or otherwise) and restrictions in relation to its business operations aimed protecting the interests of the Investors under the terms of the Subscription Agreement;
   3. increase the Harmoney Group's indebtedness by an amount equal to A$20 million plus all accrued and unpaid interest;
4. the Issuer may elect to redeem the outstanding value of the Convertible Notes in certain customary circumstances provided that if the Convertible Notes were to be redeemed prior to their stated maturity date, the Company must grant to the Investors a call option to subscribe for the number of Shares that will be determined by reference to the aggregate face value of the outstanding Convertible Notes, such call option to be exercisable by the option holders during an exercise period referable to the remaining term of the Convertible Notes as if the Convertible Notes were not redeemed early;
5. the Investors may elect to convert the Convertible Notes to Shares at any time during the term of the Convertible Notes; and
6. if the Convertible Notes are converted to Shares, either in whole or in part, the issue of Shares will increase the number of Shares on issue. This will dilute existing Shareholders and will decrease the Harmoney Group's indebtedness accordingly. The potential effect of the conversion and the issue of Shares on the Company's capital structure is shown in further detail below.

3.2 Rights and liabilities attaching to the Convertible Notes

A summary of the key rights and liabilities attaching to the Convertible Notes is set out in Schedule 1 of this Cleansing Notice. That summary is not exhaustive and does not constitute a definitive statement of the rights and liabilities of the Investors.

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3.3 Rights and liabilities attaching to Shares issued on conversion of the Convertible Notes

A summary of the rights and liabilities attaching to Shares, including the Shares to be issued to the Investors on conversion of the Convertible Notes, is set out below.

The summary is not exhaustive and does not purport to constitute a definitive statement of the rights and liabilities of Shareholders and is qualified by the terms of the Company's Constitution (a full copy of which is available from Company on request free of charge).

Ranking of Shares

At the date of this Cleansing Notice, all shares are of the same class and rank equally in all respects. Specifically, the Shares issued on conversion of the Convertible Notes will rank equally with existing Shares.

Voting rights

Subject to any special rights or restrictions (at present there are none), at a general meeting every shareholder present in person and each other person present as proxy, attorney or representative has one vote on a show of hands, and on a poll each shareholder present in person has one vote for each Share held and each person present as proxy, attorney or representative of a shareholder has one vote for each Share held by the Shareholder that person represents (with adjusted voting rights for partly paid ordinary Shares).

Dividend rights

Subject to the Company's Constitution and the terms of issue or rights of any Shares with special rights to dividends (at present there are none), the board of the Company may from time to time authorise a dividend.

Variation of rights

The rights attaching to the Shares may only be varied by the consent in writing of the holders of 75% of the Shares, or with the sanction of a special resolution passed at a general meeting.

The Company's Constitution can only be amended by a special resolution passed by at least three quarters of the holders of the Shares present (in person or by proxy) and entitled to vote and voting on the resolution at a general meeting.

Transfer of Shares

Subject to the Company's Constitution, the Companies Act 1993 (NZ) (Companies Act), the ASX Listing Rules and the ASX Settlement Operating Rules, Shares may be transferred.

Issue of further Shares

Subject to the ASX Listing Rules and any rights and restrictions attached to Shares, the board of the Company has full discretion to issue, consolidate or subdivide Shares and grant options over unissued Shares.

General meetings

Subject to any restrictions in the Company's Constitution, the Companies Act and any rights or restrictions attached to any class or classes of Shares, each shareholder is entitled to receive notice of, and to attend and vote at, general meetings of the Company and to receive all notices, reports, accounts and other documents required to be sent to Shareholders under the Company's Constitution, the Companies Act and the ASX Listing Rules.

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Rights on winding up

If the Company is liquidated, the liquidator may, with the sanction of an ordinary resolution of shareholders, divide among the shareholders in kind the whole or any part of the Company's surplus assets, attribute values to assets the liquidator considers appropriate and determine how the division is to be carried out between the shareholders or different classes of shareholders.

3.4 Pro forma balance sheet of the Company taking into account issue of the Convertible Notes

Set out below is a pro forma consolidated Statement of Financial Position as at 30 June 2021 for the Company, based on the consolidated Statement of Financial Position as at 30 June 2021 for the Company and adjusted to reflect the issue of Convertible Notes issued by the Issuer (exclusive of costs), and prepared on the basis of the accounting policies normally adopted by the Company.

This table should be read in conjunction with the last audited Annual Report for the year ended 30 June 2021.

The following adjustments and assumptions have been made in relation to the table:

1. The pro forma financial information is presented in an abbreviated form and does not include all of the disclosures required by the New Zealand equivalents to the International Financial Reporting Standards applicable to the annual financial statements. The pro forma financial information is not audited.
2. Cash proceeds of up to A$20 million arising from the drawdown of funds under the Facility, including from the issue of the Convertible Notes, have been recognised. The Convertible Notes have been provisionally accounted for as financial liabilities and presented in non-current borrowings.
3. The provisional accounting for the Convertible Notes and allocations between liabilities and equity may change in the future.
4. Transaction costs have not been included. However, when incurred they will reduce the carrying amount of the liability and be amortised over the life of the Convertible Notes.
5. The adjustments are reflected at an NZD/AUD exchange rate of 0.9500.

Harmoney Corp Limited (NZCN 5177041; ARBN 645 036 595)

Pro forma Statement of Financial Position as at 30 June 2021

	Actual	Convertible	Pro forma
	30 June 2021	Notes Issued	30 June 2021
	$'000	$'000	$'000
Assets
Cash and cash equivalents	76,464	21,053	97,517
Trade and other assets	1,894	-	1,894
Finance receivables	294,821	-	294,821
Property and equipment	642	-	642
Intangible assets	3,455	-	3,455
Deferred tax assets	11,490	-	11,490

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Total assets	388,766	21,053	409,819
Liabilities
Payables and accruals	7,324	-	7,324
Borrowings	291,541	12,632	304,173
Convertible note	-	8,421	8,421
Provisions	13,405	-	13,405
Lease liability	717	-	717
Derivative financial instruments	85	-	85
Total liabilities	313,072	21,503	334,125
Net assets	75,694	-	75,694

Share capital

Foreign currency translation reserve

Share based payment reserve Cash flow hedge reserve Accumulated losses

131,399	-	131,399
564	-	564
216	-	216
(85)	-	(85)
(56,400)	-	(56,400)

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Equity	75,694	-	75,694

3.5 Potential effect on capital structure

The effect of conversion of the Convertible Notes on the Company's issued share capital will depend on what portion (if any) of the Convertible Notes are converted to Shares at any one time.

As at the date of this Cleansing Notice, the issued capital of the Company and warrants and performance rights held in respect of the Company, including the Convertible Notes, is as follows:

Type of security	Securities on issue	Number on issue	Number on issue
	as at the date of	on date of Closing	assuming full
	this Cleansing	of Subscription	conversion of the
	Notice	Agreement	Convertible Notes
Shares	101,018,964	101,018,964	104,352,297
Warrants	181,364	181,364	181,364
Performance Rights	8,696,000	8,696,000	8,696,000
Convertible Notes	0	8,000,000	0

The Convertible Notes are convertible into Shares at the conversion price at A$2.40 per share.

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