ISX is now almost 8 months in suspension by ASX. On 30/4/2020,...

ISX is now almost 8 months in suspension by ASX. On 30/4/2020, ASX published its "ASX Update on Suspension", attaching its "Final Reasons" Report (SOR). After an introduction and a bit of history that takes up 2.5 pages of the publication, the remaining 38.5 on the performance shares (the revenue, contracts, and materiality).

The SOR provides a link to the Notice of the General Meeting in 2014 (see https://www.asx.com.au/asxpdf/20141119/pdf/42ttr3xjzcnwfk.pdf) and also the link to the results of the general meeting (see https://www.asx.com.au/asxpdf/20141222/pdf/42vnfc58wjj46j.pdf) where the performance shares received 99% approval.

What is included at the back the Notice of the General Meeting, but is not pointed out by ASX in the SOR is the RSM Bird Cameron Independent Expert's report which points out the disadvantages to Otis Energy (OE) Shareholders of the reverse listing of ISX? Also not pointed out in the SOR was the fact that ASX approved the acquisition, including the terms of the performance shares. See ASX approval letter below.

This report says in one place "The Milestone shares are linked to turnover and not to profitability" and in another “TheMilestone shares are not linked to profitability. As such, the incentive to grow revenue could come at the expense of profits”.RSM’s Conclusion on Reasonableness was “In our opinion, the position of the Shareholders if the Proposed transaction is approved is more advantageous than the position if it is not approved. Therefore, in the absence of any other relevant information and/or a superior offer, we consider that the Proposed Transaction is reasonable for the Shareholders of Otis.”
This was considered an advantage for several reasons. One was that from Oct 2013 to October 2014 the share prices had oscillated between .001 to .004. The report also pointed out the OE revenue was projected to go down in 2015. The value of ISX was assessed in this report as being between $6.7m and $7.9m. Clearly, no matter how ISX eventually achieved its performance shares, this was a good deal.

In the approval letter below ASX states:
"1. Based solely on the information provided, in connection with the proposed acquisition by Otis Energy Limited (the “Company”) of 100% of the issued share capital of iSignthis Ltd (“iSignthis”)(“Acquisition”) ASX Limited (“ASX”) does the following:
1.1. Considers that the terms of the 112,222,222 Class A performance shares, 112,222,222 Class B performance shares, 112,222,222 Class C performance shares prepared to be issued to iSignthis (together, the “Performance Shares”) as part of the Acquisition are appropriate and equitable for the purposes of listing rule 6.1 subject to the following conditions:"

Nowhere in its conditions does ISX attempt to define revenue.

So the questions are these: Did ASX knowingly allow a vote to go through that gave explicit permission to ISX to earn performance shares at the expense of profitability when it was pointed out in the expert's report and just didn't care? Why if it was pointed out plainly that revenue was turnover would ASX only now wish to redefine that vote in 2014 to mean "core revenue" or "core turnover" when it was not specified in 2014? Why didn't ASX demand that it be called "core revenue" in 2014, it that was what it was should be? It is really beyond belief that ASX would have been just plain incompetent.

It is time for ASX to:
1. Declare its conflict of interest
2. Back away and hand the investigation over to ASIC
3. Reinstate ISX's shares to trading so that people who are doing it hard in COVID-19 have access to their cash

Personally, I would prefer that the shares remain suspended until after the threat to COVID-19 subsides, but then I am going to be in for the long run and it really does not matter to me. But there are some who may need this cash.