Ann: Response to Aware Letter, page-102

Pretty important and relevant words –

1) "Prior professional services to the Company Prior to our appointment as Voluntary Administrators, we were engaged by the Company on 17 February 2016 to provide a report on:"

It clearly implies that as of Wednesday 17^th Feb, Ferrier were engaged.
I tried to analyse the timeline recently, looking into the volume to see if there was anything “strange”.
https://au.finance.yahoo.com/echarts?s=TON.AX#symbol=TON.AX;range=1d
http://hotcopper.com.au/threads/is-...entitlements.2674389/page-75?post_id=17197877

Ferrier Hodgson is described as a firm specialising in Corporate Recovery, Corporate Advisory, Forensic Accounting and Forensic IT. Ferrier Hodgson is now one of the largest specialist corporate turnaround and insolvency management firms in the Asia Pacific.
https://en.wikipedia.org/wiki/Ferrier_Hodgson

Their own site mentions they provide specialist accounting services like corporate recovery, corporate advisory, forensic accounting, forensic IT
http://www.ferrierhodgson.com/au/

Suffice to say, if TON contacted them, it would be mainly for corporate advisory / corporate turnaround / insolvency.

A rational guess would be that TON suspected that they were possibly going to go insolvent soon.

Was this the reason why Jenks and Baxter both resigned a week earlier? Note that Baxter always gave a lot of importance to cash. If so, then shouldn’t TON have disclosed the weak cash flow position to us? Interesting that Jenks dumped a lot of shares that month? Did any other top 20 dump shares at the same time? Meanwhile some of us sheep were buying or close to buying, thinking what a good deal we were getting.

2) “Assessing the Company’s financial position;”

Clearly mentioned that Ferrier were already assessing the financial position on 17^th itself

3) “Preliminary views and recommendation regarding the Company’s short term funding requirements; and…”

Short term funding was already a prime consideration to the extent where Ferrier were being engaged.

Was the possibility of administration already being contemplated? Surely, this is a valid question considering that insolvency specialists were being engaged.

4) “Recommendation to the Company on other key matters we considered that should be brought to the Company’s attention.”

This could be advice in matters of insolvency / turnaround, etc. So hard to comment on what that means . But it also implies that Ferrier were already making a detailed study.

5) "The engagement occurred over a one week period and included discussions and attendance at the Company’s board meeting held on 19 February 2016 to discuss the report."

They started work on Wed 17^th and continued for a week – let us assume Wed 24^th approx. or Tue 23^rd.
But then it says that the report was discussed on Feb 19^th, which is odd. Ideally, the report would be discussed at the end or towards the end? So, I’m confused as to whether informal work started one week earlier.

Either way, the work done by them was material enough to warrant a Board meeting and discussion at the board meeting.
Again, absolutely nothing informed to shareholders that a cash crunch situation was going on.

6) Ferrier Hodgson was not paid for the services provided.

I find this one of the most disturbing parts.
Highly unlikely that Ferrier Hodgson would work for free.
The first question would be whether there was already the possibility of further work being planned involving Hodgson, namely Administration.
I can’t otherwise imagine why they would work for free, unless further work related to the same was a strong possibility.

So the most obvious question is why was still nothing informed to shareholders?
Instead we were informed that a strategic update is going to come about, and some were buying while people in the know were probably selling, explaining TON's continuing downtrend.

7) It really seems that no steps were being taken to preserve cash and consider the importance of cash management at all.

I’ve read some comments about how we have landed in voluntary administration to clean up past mess, etc. No, we’ve landed in admin just due to a cash crunch, and no steps taken to assess cash against liabilities towards the end. And that is all there is to it.
And very little to no steps were taken all through the last few months to preserve cash.

Over the weekend, I discussed in detail about the BB saga and how that affected cash raising by damaging confidence in the middle of the CR, thus affecting cash inflow
http://hotcopper.com.au/threads/mitchell-drilling.2719108/page-33?post_id=17200813
I also mentioned, how his new company has welcomed him with open arms and shareholders, instos etc. do not seem to have any issue with him as we were told. That new new company has again risen 21% in just the past 2 days at a new 1 year high (again) confirming what I said, while we still languish in admin.

I’ve explained several other stuff there how we now have extra cash liability of 0.6 million payable to BB, while was incurred by TON due to TON’s rush to get rid of BB. We now have another 0.2 million payable to Ferrier Hodgson, which continues to affect us, even as we are in the midst of a terrible cash crunch. In other words, almost 1 million lost just in the last 2 months – liabilities that did not even exist earlier, and absolutely no steps taken to preserve our cash, landing us into admin, which might have not happened otherwise. Think of it - 0.8 million is 20% of the new amount raised. Unbelievable!

Of course, this is not taking into account the chaos during the CR, which probably damaged confidence and gave us much less cash from retail investors than we otherwise might have had.

And no steps seem to be taken to preserve relationships with the only insto supporting our capital raisings, GMP. I'm sorry but none of this is making sense to me. If it is making sense to other shareholders, that is just great, but it is not making sense to me.

And a full team was employed which means further cash outflow. I'm not sure how many will be paid now, while we are in admin.

Poor relations with the only broker supporting our capital raisings, getting rid of BB in the middle of a CR, hiding the top 20, not getting the CR underwritten to the full amount, not raising more cash at that time itself and actually incurring other liabilities inthe midst of a terrible cash crunch…….I can’t see how any steps were taken to ensure that the capital raising goes through well, and that shareholders were appropriately informed. Meanwhile top 20 never ever was published and like I’ve said since long, I believe top 20 have long left the building while we sheep are left holding the bag! Even when shareholders asked for it the end, they were shooed away and TON promptly went into admin 1-2 days later.

I'm not making any accusations here, and once more, like all my earlier questions, these are really logical and basic common sense questions that should be asked and investigated as soon as one takes a deeper look, and I hope all truth comes out in time. I've already raised some of these questions multiple times as they were happening at the time, warning that none of that is going to end well.

They never made sense to me then, and sure don't now. I can understand a few lapses but almost everything seems to be a lapse - how can that be.