Questions raised over $1.9m Tikforce deal
Link copied to
A major shareholder of TikForce has accused the HR software maker of defaulting on a convertible note related to a potential $1.9 million government contract.
ASX-listed Tikforce — a platform that performs background checks on employees — has had a number of stumbles this year such as shareholder requisitioned meetings trying to kick out the board.
The stock (ASX:TKF) has been in decline since it backdoor-listed onto the ASX in 2016.
Now the owners of a convertible note — including former Tikforce corporate advisor and major shareholder Alignment Capital — allege the company lost an unnamed major contract and did not tell the market, thereby breaching the terms of the note.
The group also claims the convertible note was conditional on running a rights issue, the shortfall of which was cancelled in February.
The convertible note — debt that in the event of bankruptcy is paid out ahead of shareholders — was set up in October last year for $600,000 to give cash-strapped Tikforce some working capital. It was later raised to $750,000.
But Tikforce said in a market disclosure the contract Alignment is referring to never existed.
Stockhead is seeking comment from Tikforce.
The contract that was not a contract
Stockhead understands the contract the parties are arguing about is a trial for JobActive — a government-run placement service that connects job seekers with employers via a national network of providers.
Last year Tikforce made ASX announcements in April, July and August concerning a deal to verify the credentials of 2500 “jobseekers”.
But the announcements were light on detail.
Tikforce repeatedly switched between calling it a commercial roll-out and a trial.
It only revealed the arrangement was part of the JobActive program in its annual report in September, the last time Tikforce referred to the trial.
The real client was never explicitly identified, although references were made to the Federal government.
A spokesperson for the Federal Department of Jobs and Small Business told Stockhead there is no current contract with Tikforce, but it’s possible Tikforce had a contract with a JobActive service provider.
Optimistic revenue forecasts
Revenue forecasts were highly optimistic and never fulfilled, judging from an analysis of the company’s quarterly reports.
In April, Tikforce said it expected $500,000 in revenue that quarter from what it called a “commercial rollout”. It said each identity verification was worth “over $200”.
The company reported $95,000 sales revenue in the June quarter.
Tikforce said the low payment rate from the JobActive work was due to “changing from a credit card to a post transition integrated invoicing processes”.
But the following quarter it still only made $71,000 — in spite of telling the market that it earned $43,500 in July alone from the JobActive program.
In the December quarter Tikforce said it had “over $200,000” in billings coming in — in fact what they got was $80,000 in total.
In July, the company said it planned to lift the number of identities verified to 10,000 and was no longer calling it a commercial rollout, but the “WA based trial for the national jobseeker network, announced in April 2017”.
In August, the “program” was now worth $190 per transaction and those 10,000 people were to be onboarded “over the next nine to twelve months”.
Real or not real
This is not the first time Tikforce has announced a contract that wasn’t exactly what it said it was.
Tikforce has unveiled 17 contracts and commercial arrangements to the market since it listed and four MoUs.
In September 2016 they prematurely announced a deal with Davidson HR Consulting in New Zealand that would pay 50c for each user taking a psychometric test.
A spokesman for the company said the deal was still under negotiation when Tikforce announced it to the market. Davidson’s CEO tore up the contract before it was signed.
The loss was not announced to the market.
In February last year it said it had entered a binding agreement with Perth rideshare platform Kapuddle “to provide driver pre-qualification and ongoing verification”.
A Kapuddle spokesman told Stockhead they worked with Tikforce on the Tik.Ride platform but didn’t have anything else to do with them.
ResourcesWA still works with Tikforce, for whom they verify anywhere between 10 to 90 profiles a month.
AngloGold Ashanti (ASX:AGG) and Iluka (ASX:ILU) both confirmation to the market in late 2017 of their two-year contracts with Tikforce.
Since the start of 2017, Tikforce has also announced contracts with MTM Metro, the Victorian Level Crossing Removal Authority, Titan Recruitment, car booking app owner BRG Technologies, National Disability Services, and UK health and safety contractor Contractors Health and Safety Scheme (CHAS).