Proposed Shareholder Class Action, page-5

Thanks Funun2 and fellow posters

Disappointing, but perhaps a good education to be found here.
Can fellow posters indicate what were the main red flags here to warn investors of the upcoming collapse.

From their metrics (Low Market Cap $10.3m - not high cash reserves, Very High Debt/Equity Ratio 84.7%, High volatility Beta 2.0, and negative EPS of -0.428) there were some red flags.

From the administrators report Jan 2024.
Armour Energy Group’s balance sheet indicates increasing levels of debtand equity capital required to fund operating losses and ongoingexploration activities.
=====
Management has indicated operations were constrained by suppliersrefusing to supply goods and services due to unpaid invoices andstretched payment terms, which impacted the restart timeline for theunplanned outage of the Kincora Gas Plant in September 2023.
In December 2022, Armour Energy Group defaulted on the SecuredAmortising Notes. It then failed to meet a $3.1 million payment in June2023.
In March 2023, AEL commenced a capital raising program targeting $32million. It ultimately failed to deliver the target funding, raising only$12.6 million.
The Armour Energy Group negotiated a payment plan with the ATO forGoods and Services Tax (GST) and Pay As You Go Tax Withholding(PAYG) liabilities in October 2021. This plan was defaulted on andrenegotiated in January 2022.Several delayed payments and renegotiations followed, with a renewedpayment plan being agreed in June 2022. The Armour Energy Groupdefaulted on the renegotiated payment plan in January 2023.As at the Appointment Date, liabilities owed for other taxes andsuperannuation (many of which were overdue) included:
$47k owed to employees for unpaid superannuation for the monthof October 2023;
Maranoa Regional Council for unpaid rates and charges relating tothe period up 14 November 2023 totaling c.$6.8 million;
Queensland Revenue Office (QRO) for unpaid royalties and latepayment penalties owed by AE Surat from 2017 to October 2023totaling c.$907k, and payroll tax owed by AEL and AE Surat for theperiod from July 2023 to October 2023 totaling c.$118k.

I divested most of my AJQ holdings before the crash, but for what I retained I'll join the class action. Can a fellow poster provide a link if a class action has been organised.

From my understanding retail shareholders sit below unsecured shareholders.
In my reading of the administrators report any return is "dependent on the outcome of recoveries arising from a liquidation of AEL" ___ after all secured and unsecured liabilities and entitlements are paid.

Definitions
Unsecured creditors may be "supplier which had issued an invoice for services but was yet to be paid"
"A non-trade receivable would be when someone owes the company money not related to providing a service or selling a product. For example, when a company borrows money from another company.

From AJQ administrators report 12 Jan 2024:
"Return to unsecuredcreditors"
"In addition to assuming secured creditor debt, priority employee entitlements andcertain other creditor claims, the proposed ADZ Transaction provides fundingwhich is expected to provide:
▪ 100 c/$ return to Class A creditors of AE Surat (being claims that are lessthan $5,000);
▪ 100 c/$ return to Class B creditors of AE Surat (being trade creditors); and
▪ c.10-30 c/$ return to Class C creditors for AE Surat (being non-trade andother creditors).
The ADZ Transaction also proposes:
▪ payment of c.$305k to certain AEL unsecured trade creditors; and
▪ an assumption of amounts owing to Excluded Creditors of AE Surat (c.$9.1million in statutory and regulatory creditors).

The Deed Contribution is to be distributedin order based upon the following classes ofcreditors, being:▪
Class A: trade creditors with claim ofless than $5,000 (total: c.$42,796);
Class B: ongoing and critical tradecreditors (c.$1.4 million); and
Class C: other creditors (c.$4.2 million).

The ADZ Transaction involves a pooledDOCA.
Other than AE Surat, theAdministrators are not aware of any thirdpartyunsecured creditor claims in theremaining ADZ Deed Companies.
As such, itis unlikely that pooling will have an impacton the return to AE Surat creditors.

"There is no direct funding for any return to residual AEL unsecured creditors fromthe ADZ Transaction (and there are no trade creditors in entities other than AELand AE Surat). Therefore, any return to those creditors would be dependent onthe outcome of recoveries arising from a liquidation of AEL".

ASIC
As a shareholder of an insolvent company, you can realise a capital loss if:
A liquidator or administrator makes a written declaration that they have reasonable grounds to believe there is no likelihood of shareholders receiving any distribution in the course of the company being wound up; or
No declaration is made, then the deregistration of a company at the end of the liquidation also allows shareholders to realise a capital loss.

Does the Jan 2023 administrator report declare "reasonable grounds to believe there is no likelihood of shareholders receiving any distribution in the course of the company being wound up"?

Merc Out

https://mcgrathnicol.sharepoint.com/sites/sps00003/_layouts/15/download.aspx

https://www.commbank.com.au/articles/investing/shareholders-insolvent-company.html#:~:text=An%20example%20of%20an%20unsecured,sit%20below%20all%20of%20these.

The cash forecast in the report predicted a complete collapse of cash balance and new cash movement. With $9.8 million provided by AZD but no more.