IncentiaPay : Cleansing Notice

For personal use only

ASX RELEASE

23 May 2022

The Manager

Company Announcements

Australian Securities Exchange

Level 5, 20 Bridge Street

SYDNEY NSW 2000

Cleansing Notice given under Section 708A(12C)(e) of the Corporations Act

IncentiaPay Limited (IncentiaPay or the Company) (ASX: INP) gives this cleansing notice (Cleansing Notice) under section 708A(12C)(e) of the Corporations Act 2001 (Cth) (Corporations Act) as amended by ASIC Corporations (Sale Offers: Securities Issued on Conversion of Convertible Notes) Instrument 2016/82.

The Company hereby gives notice that:

1. the Convertible Loan Deed (defined below) was issued without disclosure to investors under Part 6D.2 of the Corporations Act; and
2. this Cleansing Notice has been given in accordance with section 708A(12C)(e) of the Corporations Act.

The issue of this Cleansing Notice enables the fully paid ordinary shares in the capital of the Company (Shares) to be issued on the conversion of the debt, on the terms described below, to be on-sold to retail investors without further disclosure.

This Cleansing Notice is important and should be read in its entirety.

1. Background

The Company entered into a conditional non-binding convertible loan deed with New Gold Coast Holdings Limited (NGCH) on or about 16 March 2022 which provides for a $22.5 million loan facility, of which $5 million has already been drawn having been provided under the loan deed with NGCH dated on or about 2 June 2021 as announced to the ASX on 3 June 2021 (First Loan Deed), that is convertible into new fully paid ordinary shares (Shares) in the Company (Convertible Loan Deed). The Convertible Loan Deed becomes binding upon the Company's receipt of shareholder approval:

1. under item 7 of section 611 of the Corporations Act and Chapter 2E of the Corporations
   Act in connection with the Company's entry into the Convertible Loan Deed and the issues of shares contemplated under the Convertible Loan Deed; and
2. under Chapter 2E of the Corporations Act and ASX Listing Rule 10.1 in connection with the Loan Security (defined below),

(together, the Conditions Precedent). Shareholders passed all resolutions in the Notice of 2022 Extraordinary General Meeting dated 21 April 2022 by their requisite majority at the 2022 Extraordinary General Meeting, held today, in satisfaction of the Conditions Precedent.

Full details of the material terms of the Convertible Loan Deed are set out in section 4 below and the Company's ASX announcement dated 16 March 2022.

2. Contents of this Cleansing Notice

This Cleansing Notice sets out the following:

IncentiaPay Limited ABN 43 167 603 992 Suite 7, Level 6, 3 Spring St NSW 2000 Australia p [phone] | e [e-mail] www.incentiapay.com

For personal use only

1. in relation to the Convertible Loan Deed:
2. 1. the effect of entry into the Convertible Loan Deed on the Company;
   2. a summary of the rights and liabilities attaching to the Convertible Loan Deed; and
   3. a summary of the rights and liabilities attaching to the Shares that will be issued on the conversion of the debt under the Convertible Loan Deed; and
3. any information that:
4. 1. has been excluded from continuous disclosure notice in accordance with the ASX Listing Rules; and
   2. is information that investors and their professional advisers would reasonably require for the purpose of making an informed assessment of:
   3. 1. the assets and liabilities, financial position and performance, profits and losses and prospects of the Company; and
      2. the rights and liabilities attaching to the Shares; and
   4. other information relating to the Company's status as a disclosing entity.

3. The effect of the issue on the structure of the Company

3.1. Effect of the issue on the Company

The principal effect of the entry into the Convertible Loan Deed on the Company will be to:

1. increase the Company's cash reserves by a further $17.5 million by way of drawdowns consisting of:
2. 1. $3.9 million made available upon satisfaction of the Conditions Precedent;
   2. $3.3 million made available in June 2022;
   3. $5.2 million made available in September 2022;
   4. $4.1 million made available in December 2022; and
   5. $1 million made available in March 2023,

(together, the Drawdowns);

1. give rise to the Company having a liability for amounts drawn under the Drawdowns;
2. consolidate the Company's liabilities to NGCH owing under the First Loan Deed, being the $5 million drawn down by the Company, under the terms of the Convertible Loan Deed; and
3. if the debt under the Convertible Loan Deed is converted, either whole or in part, increase the number of Shares on issue as a consequence of the issue of Shares on the conversion of the debt under the Convertible Loan Deed.

3.2. Pro-forma balance sheet of the Company taking into account issue of the Convertible Loan Deed

1. Set out below is a pro-forma consolidated balance sheet of the Company, as at 31 December 2021, based on the consolidated balance sheet of the Company under its 2022 interim financial report (released to ASX on 28 February 2022) adjusted to reflect the Convertible Loan Deed, prepared on the basis of the accounting policies normally adopted by the Company.
2. The pro-forma financial information is presented in an abbreviated form in so far as it does not include all of the disclosures required by Australian Accounting Standards applicable to the annual financial statements. The pro-forma financial information is not audited. The classification of the allocations between debt and equity for the Convertible Loan Deed may change in the future.

2

Pro-forma Statement of Financial Position as at 31 December 2021

Consolidated Group

For personal use only

	FY2021
	$'000
ASSETS
Current assets
Cash and cash equivalents	5,445
Deferred consideration	-
Trade and other receivables	658
Inventories	131
Other assets	1,643
Total current assets	7,877
Non-current assets
Deferred consideration
Trade and other receivables	313
Right-of-use asset	47
Property, plant and equipment	657
Deferred tax assets
Intangible assets	15,370
Total non-current assets	16,387
TOTAL ASSETS	24,264
LIABILITIES
Current liabilities
Trade and other payables	5,507
Lease liabilities	954
Borrowings	4,904
Current tax liabilities
Deferred revenue	4,272
Provisions	930
Total current liabilities	16,567
Non-current liabilities
Lease liabilities	705
Borrowings	28
Deferred revenue	27
Provisions	130
Total non-current liabilities	890
TOTAL LIABILITIES	17,457
NET ASSETS	6,807
EQUITY
Issued capital	131,467
Reserves	685
Retained earnings	(125,345)
TOTAL EQUITY	6,807

Adj	31 Dec 2021
	$'000
11,433	16,878
	-
-	658
-	131
-	1,643
11,433	19,310
-	-
-	313
-	47
-	657
-	-
-	15,370
-	16,387
11,433	35,697
-	5,507
-	4,904
	-
-	4,272
-	930
-	16,567
19,405	19,433
-	130
19,405	20,295
19,405	36,862
(7,972)	(1,165)
	131,467
-	685
(7,972)	(133,317)
(7,972)	(1,165)

3

For personal use only

3.3. Potential effect on share structure

1. As at the date of this Cleansing Notice, the issued capital of the Company is 1,265,063,625 Shares.
2. The capital structure of the Company will be affected by the conversion of the debt under the Convertible Loan Deed by NGCH which will result in additional Shares being issued.
3. The issue price of Shares to be issued upon conversion of the debt under the Convertible Loan Deed is the higher of:
4. 1. $0.022 per Share; or
   2. a 20% premium above the volume weight average price of the Company's Shares for the 30 days immediately prior to the issue date of the relevant Shares.
5. The debt under the Convertible Loan Deed can be converted at any time prior to 31 December 2024 (being the period from the date the Conditions Precedent have been satisfied until 31 December 2024) (Conversion Period) at the request of NGCH.
6. If NGCH elects to convert the maximum debt under the Convertible Loan Deed, then 1,022,727,273 new Shares would be issued (assuming full drawdown and conversion, a conversion price of $0.022 per Share and the Company meeting all of its obligations with respect to interest under the Convertible Loan Deed, resulting in no additional amounts being capitalised, up until 31 December 2024). The actual effect of the share capital of the Company will depend on how much of the debt under the Convertible Loan Deed is converted and the price at which the Shares convert (which may vary if the 20% premium to the volume weighted average price over 30 trading days up to the day before conversion is over $0.022 per Share). The effect on the issued share capital of the Company on conversion of the debt under the Convertible Loan Deed (assuming full drawdown and conversion, a conversion price of $0.022 per Share and the Company meeting all of its obligations with respect to interest under the Convertible Loan Deed, resulting in no additional amounts being capitalised, up until 31 December 2024) is set out in the table below.

	Security			Number
	Shares currently on issue	1,265,063,625
	Shares issued upon conversion of the debt under the Convertible	1,022,727,273
	Loan Deed
	Total Shares on issue following conversion of the Convertible	2,287,790,898
	Loan Deed

4. Rights and liabilities under the Convertible Loan Deed

The following is a broad summary of the rights, privileges and restrictions attaching to the Convertible Loan Deed. The summary is not exhaustive and does not constitute a definitive statement of the rights and liabilities of the Company or NGCH. The key commercial terms relating to the Convertible Loan Deed are summarised below.

4.1. Loan Facility

The Convertible Loan Deed provides that NGCH will provide a loan facility to the Company for a principal amount of $22,500,000 as follows:

1. on commencement, $5 million will be taken as drawn down by the Company and used in repayment of Company's outstanding amounts under First Loan Deed;
2. on commencement, $500,000 will be made available to the Company for the purpose of repaying any amounts outstanding under the Company's loan deed with Suzerain

4

For personal use only

Investments Holdings Limited dated on or about 27 February 2020 as amended from time to time;

1. $7 million will be made incrementally available to the Company to be drawn down up to and including December 2022 for working capital purposes; and
2. $10 million will be made incrementally available to the Company to be drawn down up to and including March 2023 for growth capital purposes.

NGCH is not obligated to make an advance under the Convertible Loan Deed if an event of default is continuing or if an event has occurred which will constitute an event of default after time.

1. Interest rate and repayment
   If there is no event of default, the interest rate accruing under the facility provided under the Convertible Loan Deed is 12.5% per annum calculated daily and any interest accruing must be paid monthly by the Company.
   The Company must repay the aggregate of the outstanding balance of the $22,500,000, all interest payable under the Convertible Loan Deed (whether capitalised or not) and all other amounts payable by the Company under the Convertible Loan Deed on or before 31 December 2024 (Repayment Date).
   If an event of default has occurred there will be no capitalisation of interest and accrued and uncapitalised interest will be payable on the last day of each month during the term and on the Repayment Date (without limiting NGCH's right to exercise its rights under the Convertible Loan
   Deed or any security interest (applicable) following an event of default).
   Interest on overdue monies will be payable at the overdue rate, being 14.5% per annum. Interest at the overdue rate must be paid on demand and if not paid will be capitalised monthly (without limiting NGCH's right to exercise its rights under the Convertible Loan Deed or any security interest (applicable) following an event of default).
2. Events of default
   It will be an event of default if any of the following events occur:
3. 1. the Company fails to:
   2. 1. pay an amount under the Convertible Loan Deed when due;
      2. to comply with any of its obligations under the Convertible Loan Deed; or
      3. satisfy within the time stipulated anything which NGCH made a condition of its waiving compliance with a condition precedent or undertaking in this deed;
   3. an Insolvency Event occurs with respect to the Company or the Company (or an analogous process under an overseas law is commenced);
   4. the Company ceases or threatens to cease to carry on its business or a substantial party of its business;
   5. any Security Interest securing amounts greater than $100,000 become enforceable or is enforced over all or any of the assets and undertakings of the Company (or an analogous process under an overseas law is commenced);
   6. a distress, attachment or other execution is levied, enforce or applied for over all or any of the assets or undertakings of the Company (or an analogous process under an overseas law is commenced);
   7. a warranty, representation or statement made by the Company under the Convertible Loan Deed is untrue or misleading in any material respect;
   8. an obligation of the Company in the Convertible Loan Deed becomes wholly or partly invalid, void, voidable or unenforceable;
   9. the Company repudiates the Convertible Loan Deed or evidences an intention to repudiate it;
   10. it is or becomes unlawful for the Company to perform any of its obligations under the

5