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Global fintech leader in automated VAT claim and return solutions, Way2VAT Ltd (ASX:W2V, Way2VAT or the Company), provides an update on its activities for the quarter ended 30 June 2022 (Q2 FY22), alongside the Company’s Appendix 4C.

Commenting on the Company’s achievements over Q2 FY22, Way2VAT Founder & CEO, Amos Simantov, said:

“This quarter has allowed us to showcase the innovation inherent in our patented technology platform with the launch and initial rollout of a world-first new product and solid revenue growth across all segments and markets.

“The Smart Spend Debit Mastercard, which was built to meet customer demand and is the world’s first spend card for the SMB and Enterprise market that fully automates VAT/GST returns from end- to-end, allows us to upsell to our existing SMB and enterprise clients and will drive strong sales in its own right.

“The card will generate additional new annualised income streams for Way2VAT with the company earning revenue through a Software-as-a-Service (SaaS) model consisting of monthly charges to card users, administration licenses and a percentage from each successful VAT/GST refund.

“Our enterprise customer base increased to 215, as we welcomed TikTok, the world’s leading shortform video hosting service with 1.4 billion users, while our SMB clients increased by 13% from 750 to 850 through indirect sales with our existing partners that now include DACH region specialist Circula, as well as Xero, Sage, Zoho, WebExpenses and Allocate.

“Market conditions are improving as both business and personal travel and expense management increases across all markets, but especially Europe and North America. This allows Way2VAT to harness our global leadership in the technology of integrated VAT claim and return solutions through our operations in more than 40 countries and in over 20 languages.”

Financial highlights

Transaction volume for Half year (H1 FY22) increased 8% to $7.870 million, up from $7.267 million for the corresponding period (H1 FY21) and increased 153% to $5.637 million in Q2 FY22 compared to the previous quarter ($2.228 million in Q1 FY22).

Cash receipts for the quarter were $194k, down 45% on the previous quarter ($354k). Receipts of cash are affected by the time lag nature of the business, with a three to six-month typical period for VAT claims to be submitted and approved from relevant tax authorities. The transactional volume increase of 8% on pcp reflects growth in the business which will lead to increased revenue in subsequent quarters.

Way2Vat Raised $1.09 million via an oversubscribed Share Placement. The upsized Placement received strong support from existing shareholders and several new leading institutional and sophisticated investors.

The Placement Price of A$0.051 represented a 18.5% discount to the 5-day volume weighted average price of the Shares of A$0.0626 recorded on ASX prior to 6 June 2022 (the date of the trading halt). The Company issued 21,176,470 Shares under the Placement which utilised the Company’s ASX Listing Rule 7.1 capacity. An additional 196,078 Shares under the Placement will be made with shareholder approval, as it relates to the Director’s participation. The Placement was not underwritten.

As a result, the cash balance at 30 June 2022 was $2.116 million.

In June 2022, the Israeli Innovation Authority (IIA) approved a funding grant of $625k to support Way2VAT’s research and development and initial marketing and commercialisation of its new Smart Spend Debit Mastercard.

During the quarter, $210k in payments were made to related parties and their associates, being wages for the CEO (incl. superannuation equivalent), Chairman, Non-Executive Directors and Strategic Advisor.

Operational highlights

Launch and initial rollout of world-first Smart Spend Debit Mastercard automating VAT/GST returns for SMB and Enterprise market

During the quarter Way2VAT partnered with Railsbank (now Railsr) to launch the Smart Spend Debit Mastercard – the world’s first spend card for the SMB and Enterprise market that fully automates VAT/GST returns from end-to-end.

Demand for the card will continue to grow with debit cards being widely used and accepted globally. With around seven in 10 cards issued in Europe carrying a debt function, consumers are utilising the flexibility and ease of debit payment¹. In Europe, the debt card base grew by 42.7 million last year reaching a total of 813.5 million, up 5.5%.

Way2VAT’s Smart Spend card is built to meet client demand for a product of this type, the card allows companies to submit spend receipts and capture invoices through Way2VAT’s proprietary technology platform. The new technology is an end-to-end process from capture of the receipt through to payment that automatically analyses, reconciles, sorts and submits documentation to foreign tax authorities. Employees can simply spend their allocated amounts and the VAT/GST is automatically submitted with all relevant administration completed.

The card is being rolled out to customers in the aviation, security, automotive and technology sectors. These sectors were chosen as they showcase the broad range of capability and different uses that the card will offer.

Enterprise clients

During the quarter, Way2VAT signed new deals with major multinational enterprise clients – taking enterprise client numbers to 215 – a 25% increase in 12 months.

TikTok, the world’s leading shortform video hosting service with 1.4 billion users of their app and 27,000 employees around the world, has become an enterprise client that is finding value in Way2VAT’s VAT/GST claim and return solution – initially for its UK, European and Asia Pacific operations, but with the capability to expand further.

Way2VAT will originate its revenue on each successful VAT and GST reclaim transaction that it processes through its platform. Initially, it will be used by about 7,000 employees out of Europe, UK and the Asia Pacific, with potential to expand to other markets, making it a top-tier multinational Way2VAT client in these markets.

Other notable Enterprise clients signing with Way2VAT for similar services during the quarter included:

Ariston Group (formerly known as Ariston Thermo Group), headquartered in Fabriano, Italy, and a global leader in energy-efficient thermal products with over 7,700 employees in 42 countries; and

Artsana Group, headquartered in Lombardy, Italy, global manufacturer and distributor of healthcare and infant care products, with more than 8,000 employees in over 120

Platform partnerships

In April, Way2VAT increased its key partnerships to six after entering a partnership with Circula, the largest expense management solution provider in Germany, to offer Circula clients use of Way2VAT’s automated VAT claim and return solutions product for SMBs through two seamlessly integrated systems.

These partnerships and integrations with platforms such as Circula, Allocate, Elmo, Yokoy, Zoho and Xero enable Way2VAT to strengthen its presence as a leader of automated VAT recovery software for the SMB market.

The new Circula partnership will operate across thousands of organisations throughout Europe, with a particular focus on the DACH region, comprising Germany, Austria and Switzerland.

Like other partners, Circula will proactively offer the Way2VAY platform to clients. Way2VAT will originate its revenue from clients through a one-year contract based on each successful VAT reclaim transaction that it processes through the Way2VAT platform, with the ability to process large numbers of reclaims without substantially increasing the cost of processing.

During the quarter, the number of Small and medium-sized businesses (SMBs) accessing Way2VAT capability through accounting software integrations increased 13%, from 750 to 850.

Raised $1.09 million in placement to accelerate commercialisation of Smart Spend Debit MasterCard

In June 2022, Way2VAT raised $1.09 million before costs via a strongly supported share Placement to new leading institutional and sophisticated investors as well as existing shareholders. Under the Placement, Way2VAT issued 21,176,470 ordinary shares at $0.051 per share. An additional 196,078 shares are to be issued to a Director who participated in the placement subject to Shareholder approval.

Funds raised will mainly be used on Smart Spend Debit MasterCard initiatives that include accelerating growth of the Card in the UK and European market. In addition, the funds will be used for further growth opportunities, and working capital.

Way2VAT is also offering its existing eligible shareholders the opportunity to participate in a Share Purchase Plan (SPP) to raise a further $500,000 (before costs).

Funding grant to support research and development and initial marketing and commercialisation of the Smart Spend Debit Mastercard

In June 2022, Way2VAT received a funding grant for NIS 1.5 million (approximately A$625k) to support research & development and initial marketing and commercialisation of the Smart Spend Debit Mastercard.

Provided by the Israeli Innovation Authority (IIA), the grant will reimburse costs incurred by the Company on a quarterly basis during the grant term from March 2022 to February 2023. To date, the first instalment of the grant amounting NIS 525,000 (approximately A$221k) has been received.

The grant is based on an approved budget plan of NIS 5 million (approximately A$2.1 million) for research & development and marketing provided by Way2VAT and examined by the IIA for the Smart Spending Debit Mastercard Card. The IIA also allows for Way2VAT to apply for an additional grant in 2023 based on the current approved plan.

The grant is expected to be repaid to the IAA over the next few years from 2024 as a percentage of royalties from future revenues generated by the outputs of Way2VAT’s products based on the technology backed by the grant.

Product development

Way2VAT has integrated with Railsr platform BaaS (Bank as a Service) offering Rails Bank CaaS (Card as a Service) solution to support Way2Vat Smart Spending Card users. Way2VAT has implemented several features that provide a new web application for full administration of users, corporate debit cards and expenses, and a new mobile application for cardholders/employees to track and manage their own expenses on the go.

The company continues to refine its infrastructure on AWS cloud that will support platform scalability and quick rollout of new features such as:

Integrating with Railsr BaaS (Bank as a Service) and CaaS (Card as a Service) platform to enable core functionality of online virtual and physical card.

AI-powered authentication which matches the receipt’s image against the transaction data and alerts the user for any possible mismatch;

redesigned visual themes of the front-end to match specific target markets and personas; and

back-end development for data handling, business logic, workflows and integration with third party providers.

As part of the gradual expansion of the product suite, Way2VAT is undertaking final product testing of a complementary product for the VAT/GST automated platform based on its patented AIA, AI and computer vision technology.

Patent applications

Liaison continues with the International Patent Office for two recent patent applications: a full patent application for review for ‘Systems and Methods for Document Image Analysis by Alignment of Document Image Sets to Spreadsheets’; and a patent application for Automated Invoice Analysis (AIA) for the full automation of VAT ID.

Q2 FY22 Cashflow commentary

Way2VAT’s Operating cash outflows of $1.43million included $0.9 million of Staff cost. Use of funds update from the IPO, under Listing Rule 4.7C, is as follows:

Use of Funds as per Prospectus	Estimated expenditure ($ Thousands)	Actual expenditure ($ Thousands)	Comment
Sales and Marketing	343	468	New Staff and service providers to support growth
Research and development	198	462	Costs related to finalising commercial version of the new product: Smart Spending Card including third party’s platform costs to be gradually offset during the next year through receipt of government grants
Compliance and security	18	76	Additional accounting costs
Customer fulfilment and support	103	112
Patent applications	3	2
General & Administration	85	518	Professional services; New recruits to finance team; Timing up front legal, accounting and ASX costs
Working capital	45	(208)	Mainly adjustments related to customers

Costs of the Offer	–	–
Total	796	1,430

The above table also reflects the expenditure incurred during the quarter

Outlook

Way2VAT Founder & CEO, Amos Simantov, said, “Market conditions continue to improve in all markets with business, international and domestic travel and foreign Accounts Payable returning to more normal levels of activity.

“We expect momentum to increase across all product lines as we harness the ability of our technology platform to scale through an increased focus on marketing and sales of current products and the introduction of complementary products.

“We will roll out the world’s first debit card with a VAT/GST embedded engine, our new Smart Spend Debit Mastercard, initially across our growing customer base and partner network as it will enable companies to improve their expense management and payment solution while saving costs as well as boosting their bottom line.

“To complement this, we will also expand the product suite with a new product based on our patented AIA (Automated Invoice Analysis) technology that also incorporates the latest in AI and computer vision technology and keep us at the forefront of the accelerating trend as companies look to automate and digitise their tax and compliance-related processes.”