underwriting fiasco

Here are some facts/opinion about the recent underwriting fiasco.

The 20c options expired on Jan 12. QRS raised $2.2mill from the exericse of these options. Although the SP was only trading at around 20-21c at this time, and was looking fragile, a large percentage of option holders decided to exercise their options anyway because (i) KR had been telling everyone (although not officially) that "serious licensing revenue" would start to flow in the second 1/4 of the 05CY, and (ii) Ord Min were underwriting the options. Option holders would have rightly thought that Ord Min wouldn't fork out a couple of million bucks unless they had done their research on QRS. And Ord Min seemed to be supporting KR claims about serious licensing revenue (see their 'analyst' reports at the time). Thus, Ord Min gave option holders the confidence to believe KR and exercise their options even though they were not really in the money.

Then, on Feb 7, nearly a month AFTER the options had expired, KR tells us that Ord Min and QRSH have mutually decided that Ord Min will not underwrite the options. True to form, KR "mentioned" this bombshell in a single sentence tucked in to the back of a takeover update. No explanation was given as to why Ord Min changed their mind. Had Ord Min discovered some new information about QRS' revenue prospects (or lack thereof)?

Even prima facie, the whole thing stinks. But my question is: 'Did KR know that Ord Min will pull out from underwriting on or before Jan 12?' If so, it looks like KR concealed bad (but relevant) news in an effort raise capital (and hence secure his wage, given that it now looks like no licensing revenue is on the horizon). Almost certainly there would have been virtually no options conversion if there had been an ASX ann prior to Jan 12 that Ord Min had changed its mind about QRS underwriting — such news would have caused an almighty fall in the SP, well below the exercise price.

The ASX are investigating all of this at present. When I contacted the ASX, I was told that they had made an initial contact with KR about the issue, but that he is refusing to release any further information to the market. The ASX informed me that their inquiries were continuing.

Apart from the fact that KR has been behaving like a used car salesman, QRS shareholders should also be concerned about the possibility of the 20c option holders (exercised) asking for their money back. I suspect that they would be legally entitled to a return on their funds since they exercised their options under false and misleading pretence. If this occurs en mass, QRS would have only about 5-6 months before needing another sigificant capital raising.

For shareholders who have concerns about this underwriting issue, I suggest that you telephone the ASX or ASIC and ask for more information/clarification/advice.