Sorry to generalise (no offence to anyone in particular) and I too feel the frustration caused by the longgggg suspension, but I sense that most here have a very high expectation of this micro/nano cap. In my view, I won't expect a small/mid cap style reporting and operations from a micro cap. At the same time, I won't expect a business heavily focussed on chinese based operations to act similar to a business with aussie based operations.
What I get willingly taking this risk? A big reward or a big loss. I respect that everyone has their own investment rules and this is hard earned money we are talking about, but still I've never seen so many expectations on a $15mil micro/nano cap.
I'm going to leave this SCU forum for good...call me an ostrich for sticking my head in the sand or delusional, but the sentiment flipping here from good to bad and vice versa is a bit much for me. I enjoyed the banter very much, respect many who put in the hard work and throw both positive and negative angles...I won't name names as I'll miss someone, but you know who you are from all the past discussions.
Before I go, I want to share some of my personal views/my take on various things, read at your own peril
Recently released Q&A in the ASX Query letter:
Yes I agree it looks messy indeed, but I find most of them as harmless and a result of the way they operate (sure, you could call incompetence too) . Examples: We are very worried by the Lantene 3yr claw back stuff, but see how quickly that was taken off the table. ASX picked up delays in announcing the Lantene deal, but I haven't found any evidence in someone taking advantage i.e. a pre announcement pump...which happen way way way many times in the ASX spec land. Haven't you seen a spec miner releasing assays when they want?
Yes, ideally a well governed and perfect company means we can sleep well at night, but if I want that I'll invest in the blue chips to get 3% return, not in a spec micro cap operating with Chinese companies.
In my eyes, the questions look way OTT. If ASX has SCU on its radar for a while and now showing its power by digging every rabbit hole, howz that an impartial normal operation by the compliance team? I don't believe for one second that what we've seen are all the questions that they've asked...these were sent to the company on the 25th Jan, so I bet a lot more questions were sent and answered before that. As you can see in page 21 the ASX has the control on what it wants to release to the shareholders. If ASX wants to drag this out, they could compile another 1oo questions from the recent responses, and this loop will go on forever. I know ASX won't get anything out of this, but at the same time I don't feel based on the questions that ASX is looking after the shareholders either, it's simply following a compliance process and won't care how long it takes and there is no limit to the extent of questions they can ask.
Cap raise and 12.2 shock; Were they in distress and that's why engaged Tribeca?
We have been suspended for 6 months and at that time our cash balance was 3.95mil...and now 2.8mil. Of course the longer this drags on we'll burn more cash (like most other businesses + the legal fees answering all the queries) and we won't be able to raise money (at least efficiently) till we trade again.
I personally don't think they have been in distress. The cash pile is the biggest they ever had, the last two quarterlies have been very good and if you feel that the below half-yearly signals a business (worth $15mil mcap) in distress, I can't help but leave it at that!!
yes, yes the receivables has 50% provision for defaults, but that looks like the standard % they are using based on the last reports, rather than actual defaults
Were Tribeca engaged and given all the big "bonuses" because the company desperately in need of cash? I don't think so! Tribeca were engaged on 1st Oct, when the MJV TH was announced and when they had $4mil in the kitty...it's clear to me that the primary purpose of the cap raise was for MJV...again I'll leave it at that.
Then why ASX invoked 12.2? Again, in my view they looked at the re-listing checkbox of "is there enough cash in the company to re-list"...last 4c and half-yearly gross outgoings (not net) says this money would go out in 2 quarters (see section 8.5 in 4c, and 16 in half-yearly) and asked to raise more cash. Would ASX allow a new company to list with 2 quarters worth of money? Of course not...the re-compliance exercise is similar to new listing in my experience.
This easily would not have been an issue if this whole saga was not prolonged for ages.
Excessive Options
Sorry to be rude, but I have to laugh when people are thinking options are of value. In my view, they mean $hit! and I don't care about options (as long as they don't play a part in the control of the company). Why?
Let's look at various options granted.
Tribeca options 15mil @0.025, [email protected], [email protected]. Firstly, all are out of the money options i.e. in order for these to be of any value the share price should be way more than the exercise price. Plus, when they execute the options, they need to pay the company to get them converted to shares. Won't you be happy if Tribeca buys 15mil shares on market @0.025 (which is > 75% appreciation of share price) ? Would a company like Tribeca be frothing over for these useless options? They are incentive measures to align interests...if we feel that Tribeca got these for a steal, we would have made heaaaaaps of money on our shares by then.
Stephenson options [email protected] out of the money, and same logic as above. Plus he is a director, which means even if he converts them to shares (by paying the company 1.7c), he can't sell them easily without proper disclosures
Employee options [email protected] are the only in-the-money options out of the whole lot where I'd pay some attention. Stephenson - 5mil, Chow yee - 5mil, Gu - 10mil, Huang - 5mil, Rosen - 5mil. None of these guys come across as who'd benefit from these "huge" free options...even if all of them collectively convert these options and dump them on the market at 1.4c, they'll pocket a "massive" $120k collectively....daylight robbery isn't it?
I think I made my view clear.. in my books these options are useless and nothing but incentive mechanisms!! Most of them are out of money, peeps have to pay to convert them, and by the time they are cream to the holders you'd already be laughing to the bank
Excessive Salaries
Chow Yee - 90k to 140k increase - I think Rosen explained this guy got more responsibilities after Lantene, hence stepped away from the company secretary role to focus as CFO. Plus a related company of his is also providing accounting services to SCU. As per the annual report, page 6, reg Chow Yee's salary - *Included in the cash salary and fees are professional fees of $104,000 (2020: $54,750) paid to director related companies. Don't you think the extra accounting (paid to his related company) as a result of Lantene coming onboard would not cost extra 50k/yr? I'd imagine the audits of offshore based companies is not a walk in the park. As per the annual report, Man Judd's auditing cost went up from 60k to 166k after acquiring Lantene - should we say this is outrageous and Man Judd should not charge more than 60k even though the business has changed?
Paul Stephenson - Upto 390k in FY22. He was charging legal fees of $60k/yr (as per AGM Resolution 16), but increased them to 120k/yr-180k/yr (based on hours spent) since October...which is when the queries from ASX started. If we want ASX to ask these endless loop of questions so that the company is "perfect", then we pay the price indirectly because each of these documents, including the Q&A are legal documents. Note that he took shares @1.4c in-lieu of some fees per the AGM resolution.
Cannavo - Upto 390k in FY22. Again on similar lines, charging 60k/yr till November and then "potentially" 120k/yr-180k/yr (based on hours spent). Also, took shares in-lieu of fees. This I agree is questionable, till I see what he brought to the table in terms of this MJV and cap raise.
In both these cases, the 390k is upto rather than a salary and the real figure is based on the services they actually provide to the company, which is either 120k/yr-180k/yr but I think going upto 390k (based on hours spent) + the nominal directors fee (2k/month each). On balance, I do agree that the fees are excessive, but based on what I read that's because of the ASX dramas and/or the new deals, which are temporary. I don't think Rosen/board would take any such exploitation easily.
GU
I am not saying that SCU is a gold star company, and Gu is a saint....far from it, but for the size of the company, I am personally happy with how it is operating and how Gu is leading it. Yes, he might have comms issues and might not have cared about retail shareholders like us...but hoping that he gets booted out because we don't like him could very well mean we are saying goodbye to our investments. Majority of the progress that has been made so far by the company I believe is because of Gu and his aspirations. I don't know Gu from a bar of soap, but at the same time I don't feel happy that he is in a mess....because that means my money is in the mess!
Quick fact....all the negativity from us retailers meant max 22mil shares (2% if the company)....that's it! Of course not all unhappy voters might've voted, but you get the gist!
Comms
Btw, credit where it's due, they managed to deliver the fully audited half-year report and the last 4c on-time, and with good numbers. And in-line with Rosen's first attempt after the AGM, we got another market update as well detailing what's happening, I am happy with the step-up on the comms side, especially considering ASX is in full control of what goes out while in suspension.
Finally, take whatever I said with a pinch of salt and DYOR. A very good probability that my read is total $hite and others' are spot on. I don't know any more information than you guys, I'm just giving my take on what I am seeing atm. Of course, there are many negatives too with this company as I've stated many times in the past, and I might not see even a dollar out from this stock, but such is life in specs.
(20min delay)