http://www.firstgroup.com.au/INFORMATION BULLETIN: 1 DATED 5...

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INFORMATION BULLETIN: 1 DATED 5 DECEMBER 2012
SUBJECT: CORETRACK LIMITED (“CKK”) REQUISITION FOR SHAREHOLDER MEETING
This Information Bulletin is to keep Coretrack Limited shareholders informed as to our intention and progress should shareholders move to mandate us in implementing the plan of resolving the Strange Investments litigation and then on to rebuilding CKK value for all shareholders.
We (being the new team proposed on pages 5 & 6 of this Bulletin) only agreed to take on the mission of striving to build value for all CKK shareholders as long as we were able to act in the best interest of ALL CKK shareholders and move the company into a rebuilding phase.
The following is the cover note to the meeting requisition penned by the requisitioners and delivered to CKK today (5 12 12) along with the S249D Notice:
We have requested the directors of Coretrack Limited (“CKK” or the “Company”) to call a meeting of shareholders to provide shareholders with the opportunity of appointing a new board team to start rebuilding value for all shareholders. We, the undersigned, have greater than 5% shareholding in the Company and we are facilitating the calling of the shareholder meeting to provide members with a choice – stay paralysed by legal actions on foot with no clear plan or strategy OR elect a new independent, motivated and experienced team with a clear plan and the ability to start the rebuilding process.
Some shareholders may think it is ironic that one of the requisitioners (Mr Warren Strange) is the one involved in the current litigation. Mr Strange, in the interest of all shareholders in moving on and rebuilding CKK value, wishes to see an amicable resolution of the current legal actions that can often paralyse a small company and lead to substantial legal fees with often no meaningful outcome. Mr Strange has lost confidence in the current board to resolve the issues. Mr Strange has met with the proposed new board team about their proactive and commercial thoughts on resolving the dispute. We believe the new team should be given the opportunity to rebuild CKK and focus on an expanded business within CKK. Mr Strange is confident that the new team will be the circuit breaker to resolving the litigation and the Company can once again focus on building its business base and is in the best interest of all shareholders. The attached statement from the proposed new CKK team outlines their thinking regarding settling the litigation and enlarging CKK by the introduction of profitable businesses into CKK as a first stage building of the Company into a successful company with a vibrant market for shares and good liquidity in the stock.
It is important to note that the proposed new team are not “puppets” of the requisitioners nor have they had any business dealings with the requisitioners. The new team consists of experienced, independent professionals with a clear plan and the integrity and transparency to take on the job and rebuild CKK value for all shareholders. Some shareholders may think that this is a grab by Mr Strange for control of the company and / or the board. We can assure you that this is NOT the case. The new team will not be adversely influenced by any shareholder faction within CKK – they have the utmost ethics and integrity. Mr Strange is not seeking a board position.
It is unusual in such S249D requisitions to have the requisitioners not wishing to join the board. We trust shareholders will elect a board that can resolve the litigation and implement their demonstrable plan of adding similar businesses to CKK and building the Company into a profitable and successful one. If shareholders do not give the new team the opportunity to rebuild value we would remain pessimistic about the future of CKK. The irreconcilable differences between the current board and Mr Strange makes it impossible for the current disputes to be resolved and hence the circuit breaker idea of the new team has been proposed and supported by the requisitioners to advance the interest of the Company for all its shareholders. If shareholders do not give the new team the opportunity then we believe it will be a missed opportunity to rebuild value. The new team realise the enormity of what is required to start the value enhancement process – they are prepared to give it a go and use their best endeavours without distraction, bias or any other agenda. You are most welcome to contact any one of the
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proposed new team directly and discuss any issues or thoughts you have. It is time to move on and rebuild. We trust you share our keenness to see this happen.
The above note was signed by the requisitioning parties holding in aggregate more than 5% of the shares on issue in CKK on 3 December 2012:
DR SURINDER SINGH GHAG;
STRANGE INVESTMENTS (WA) PTY LTD ACN 114 950 435 ; AND
KANTECH INTERNATIONAL SUPERANNUATION FUND PTY LTD ACN 094 749 710
We then attached an explanatory memorandum dated 3 December 2012 set out below and captioned as
Statement by proposed new directors of Coretrack Limited (“CKK”)
Dear Coretrack Limited shareholder
We have a clear plan to rebuild value in Coretrack Limited for all shareholders. In saying that, there is much work to be done but we are prepared to give it our best in the interest of all shareholders.
Why are we interested in getting involved with CKK?
Our interest in helping Coretrack is premised on:
a) A clear alignment of businesses and objectives – building the business base
Part of our plan to revitalise Coretrack is to build the business base through acquisition of quality, profitable businesses in the same sector i.e. technical solutions to the drilling, geothermal and energy industries in the form of down hole tools, products and services.
Our appointment to the board is predicated on settling the current litigation and starting the business expansion by vending in all or some of the following businesses at conservative values. The vendors are agreeable to taking at least 75% of the consideration in CKK shares, thereby showing the faith in CKK and joining existing shareholders as we all put our shoulder to the wheel.
Intended acquisitions:
• 2iC Australia Pty Ltd (“2iC”) – a Perth based business built on inspiration, innovation and a drive for excellence in service, developing and distributing products for a range of industries covering mining, construction, geotechnical engineering and exploration.
It is this philosophy coupled with a genuine passion to strive for excellence in the areas of service, innovation and value for money that has seen 2iC successfully develop and market such products as the Ezy-Grease and Grout™ in-hole delivery system, the Ezy-Lock™ lockable overshot and the Ezy-Latch™ self centring spear point assembly for the global exploration and production drilling industries.
The geology, geotechnical engineering and construction industries have also benefited with the introduction of 2iC’s Ezy-Mark™ system setting the global standard in Core Orientation for accuracy, reliability and efficiency.
Further information on 2iC can be obtained by visiting www.2icaustralia.com.au
Mr Gavin McLeod is the Managing Director of 2iC Australia Pty Ltd and a shareholder. Mr Andrew Beach is also a director and shareholder of 2iC Australia Pty Ltd.
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2iC’s presence and knowledge in the market along with its extended contacts means 2iC personnel can strive to position the Core Level Recording System (CLRS) with the best group for market entry with the aim of deriving an economic return without further investment by CKK. In that regard, Gavin McLeod has had an initial meeting with a UK group that he believes could be an ideal commercialisation partner. A one product company or a one rig company is not where CKK should be in our opinion – it is too great a risk profile for CKK shareholders.
• Specialised Drilling Services (Pty) Ltd (“SDS”) – SDS has its head office in Midrand, South Africa with branches in Namibia and Zambia. SDS is owned by Mr Vince Starcevich. The company services the mineral exploration, water well and geotechnical sectors of the drilling industry. Mr Starcevich and his team have over 100 years combined experience in the drilling and exploration fields over four different continents.
The company supplies:
o Drill rigs for mineral exploration, water well and mud drilling
o Underground drilling equipment
o Drilling fluids, pipes, bits, hoses, adapters, filters, pumps, rods, trays, barrels
o Safety equipment
o Personal Protective Equipment (PPE)
2iC has entered into a Heads of Agreement SDS with the aim of conducting due diligence with a view of assessing a progressive equity interest in SDS, either direct by 2iC or in a joint venture style corporate structure. The SDS vendor is comfortable taking a majority of the consideration in shares in a listed company that 2iC is involved with.
With equity in SDS, the proposed parent entity – CKK – would also work with Mr Starcevich in progressing his plans to develop a new range of drilling products for the global market. 2iC and its distributors could provide an ideal distributor base.
• Other companies – Gavin McLeod and Andrew Beach have spoken with other businesses in the same industry sector that would look positively at joining the listed “family” led by them and be part of a larger (and global) service offering.
When we say “family” we truly adopt family style ethics and values in all our dealings. Businesses invited to join the CKK group will need to demonstrate their commitment to quality, leadership, and working together to further expand the group. The road ahead is not simply completing the initial planned
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acquisitions above, but to grow the company by careful acquisitions, to a listed company with a market capitalisation greater than $100 million, EBIT $20m to $25m pa and good depth of management and solid market for the shares.
It is worth noting that we approached the CKK chairman earlier this year to discuss 2iC joining the CKK group. We also had funding interest for such transaction. A review and site visit was undertaken by the CKK chairman but the opportunity was not progressed by CKK. At the 2012 AGM it was noted that CKK was pursuing a drilling services group in south east Asia but this did not eventuate.
Whilst some of the proposed directors are related to 2iC, we are people who know the sector, know the products and understand the networks to tap to grow an enlarged CKK group. We are proud of what we have created over the past 10 years and given that we would be on the board of CKK and have substantial shareholdings in CKK as a result of the merger, we would not be suggesting this value building pathway if we were not 100% convinced that the building blocks of 2iC and SDS in CKK was a sound and responsible way to start to rebuild value in CKK for all shareholders.
We would be very happy to give any CKK shareholder a tour of our premises and warehouses in Perth at any time from now and please call our general manager, John Gelavis on 0413 561 111 or Gavin McLeod on 0419 923 962 to arrange this. For any corporate orientated questions regarding our corporate and capital market plan for CKK please contact Jeff Broun on 041 993 4623.
The current CKK board may be looking for another dimension for CKK but we have a plan to settle the litigation and move on with the rebuilding of CKK.
We are confident of building CKK into a successful global group in drilling solutions.
b) Same business / maximise the bottom line for dividends to shareholders by utilising tax losses
By bringing the companies mentioned above into CKK, and maintaining the same business test, we believe the tax losses of CKK (some or all) could be available to offset the profits derived by the incoming businesses and thus leave more net profit after tax to pay out as dividends to shareholders. There are other micro cap companies on ASX that we could look to add value to via our strategy, but CKK is ideal given the name of the company, industry sector and potential tax losses.
If the current directors were to turn CKK into something quite different to its current business, then such tax losses may not be utilised, thereby not necessarily optimising shareholder value outcomes in our opinion.
c) The name – Coretrack – we like the name and wish to continue this name!
The name to us has value as it closely aligns with our product suite for the drilling industry and particularly where a core sample is involved. If CKK (as is) was to vend in a business not in the same field, it would most likely mean a change of name, change of direction, change of board, share consolidation etc – i.e. in reality a corporate re-birthing. This may be good or bad for current shareholders but we are keen to see the same sector involvement maintained and strengthened. Our mission is to grow CKK, keep the name, avoid the necessity of a reconstruction of capital at this stage and drive value for shareholders over the long term.
d) The Core Level Recording System - we have industry contacts to advance a value outcome
We have considered the best way to capture economic returns from this technology and have already had informal talks with parties offshore about market entry possibilities leading to a royalty stream. With the CLRS being one tool in the expanded arsenal of similar sector products we are confident we can see the product placed to accrue value to shareholders. By utilising the 2iC in-house R&D facilities and team we can minimise the cost of any ongoing modifications, technical support or training.
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The proposed director team for CKK
We have a depth of technical, corporate and financial expertise and we believe the proposed directors named below (and alternate) provide the best blend of expertise and experience to steer the strategic direction of the expanded CKK group with management focusing on the profit engine:
Gavin McLeod (proposed director of CKK)
Prior to forming 2iC with Andrew Beach in 2000, Gavin McLeod managed First Technologies Pty Ltd, a technology project management company. Gavin is also the co-inventor of the RetractabitTM drilling system and co-inventor of many other products and concepts. Gavin has a proven track record as a developer of revolutionary technology with multiple patents that bear his name and has an in depth knowledge of world patenting processes as well as extensive experience in formulating very secure patent and intellectual property webbing strategies.
Gavin began his carrier in the mining and drilling industry in Western Australia in 1992 and has 18 years experience as a company director, CEO and project manager of companies.
Gavin understands the risks and often extended timelines and funding needed for new products development especially in what is an industry slow to change and embrace new products. Gavin and Andrew have a track record of identifying the need, developing a better product and gaining market entry within a carefully costed budget and managed risk environment.
Every dollar counts is the theme of the proposed new board and management. We are experienced in delivering new products to the market. We do not take on open ended projects with high technical risk – we know the importance of every dollar and we would be there to get value outcomes for shareholders.
Andrew Beach (proposed alternate director for Gavin McLeod on CKK)
Andrew Beach co-founded 2iC with Gavin McLeod. Andrew is an innovator and the inventor of the Wireline Injection System (Ezy-GreaseTM) as well as the co-inventor of the Ezy-MarkTM Core Orientation system and all other current and developing 2iC products and technology.
Andrew has a drilling industry background with ten years practical experience in the field as a Driller and Drillers Supervisor on exploration drill rigs and is proficient with 2D and 3D CAD applications, basic engineering and basic software development. Andrew is also well skilled in general project management, concept/design evaluation and product testing, troubleshooting and the training of new product end users; he therefore is a very valuable multi-skilled asset of the 2iC team.
Since 2000, 2iC has invented, developed and commercialised ten products, taken seven to market itself, sold one product line to Boart Longyear, one of the three largest exploration products manufacturer and drilling contractors in the world today, and licensed another two products to Technidrill Eurofor Group (www.technidrill.com) a French based mid sized drilling equipment and distribution company.
2iC has two new products to be released to the market next year and CKK would benefit from such extensive portfolio and record of development and successful market entry.
Jeffrey Broun FCA MAICD (proposed director of CKK)
Mr. Broun is a Chartered Accountant with 15 years experience in corporate advisory matters including hands on roles in public listed companies as CEO, MD, company secretary and non-executive director positions.
Mr. Broun is CEO of First Corporate, as well as being the founder of the IPO Fund and Director PLUS. The IPO Fund was created to assist and better prepare IPO-aspirant companies as well as getting involved in recapitalisations of existing listed companies as part of an acquisition.
Director PLUS seeks to assist companies with board renewal matters, governance and investor relations.
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Mr Broun’s strong corporate, financial and governance background has benefited organisations through his leadership, development and implementation of strategic plans and value creation pathways, underpinned by best practice systems and processes with a high level of ethics and integrity.
He is experienced in corporate legislation, compliance requirements, and associated documentation, meeting procedures and results and would make the ideal chairman of CKK.
Kent Burwash (proposed director of CKK)
Mr Burwash, after completing his business degree in 1978, worked in the stock broking industry for nine years and a further three years with investment bank, Boston Australia Ltd. During this time, Mr Burwash gained comprehensive experience in the equities markets.
For the past ten years, Mr Burwash has been in senior positions of two corporate advisory organisations (one being First Corporate) that have raised in excess of $500 million for their clients.
Mr Burwash is skilled in capital raising matters and has worked closely with listed and unlisted companies. Mr Burwash was also the WA representative of Global Proxy Solicitation Pty Limited.
Kent is also Company Secretary of listed company, AACL Holdings Limited. Kent’s knowledge and engagement with the capital markets and compliance frameworks, provides a valuable added dimension for CKK.
We intend to keep the board small and focused and will regularly review the composition of the board in line with the expansion of the company and contemporary best practice methods.
Our philosophy is always that the board is there for shareholders. If people cannot contribute to adding value for shareholders then they should not be on the board. Also, as we have said, “every dollar counts” and where we can save money for shareholders we will.
We always strive to align value recognition for directors to be based on firstly creating value for shareholders. Shareholders are happy to recognise directors efforts where there has been a value increment to shareholders but too often these days the correlation between shareholder value add and board value add is not there. We are a prudent group of people appointed to do a job for CKK. If we can achieve what we are striving to achieve for CKK shareholders then at some point in the future we will look for the shareholders’ endorsement of some value sharing with the board.
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The litigation – settle it and move on with the rebuilding of CKK
We believe the litigation is an impediment to any rebuilding of CKK. What little cash resources are left in CKK need to be retained and devoted to shareholder value building. Any payments that do not add value or are not essential need to be stopped.
As third party observers to the litigation at CKK, we are not privy to the internal documents and legal advice to CKK. However from our discussions with Mr Warren Strange, who represents Strange Investments (WA) Pty Ltd (“SIPL”), we are confident of resolving all litigation between CKK and SIPL along the thoughts set out below.
You will appreciate that we are not in a position to resolve the litigation between CKK & SIPL until we are installed as directors of CKK but our willingness to engage with Mr Strange and his apparent reasonable and good faith intentions to resolve the litigation with a board not connected with the past, augers well for a positive and proactive environment to resolve the various matters. No guarantee can be given that the final negotiated outcome will be as contemplated below, but we will keep shareholders informed of our progress in relation to settlement of the litigation.
Our observations / thoughts are as follows:
a) CKK should not be an operator of one drill rig (the GT3000) - for CKK to get the rig fully operational and fit for contract drilling, could cost CKK a substantial sum in comparison to CKK’s dwindling cash reserves. Integral support items appear to have been sold by CKK at the auction earlier this year and thus we may need to buy similar items at full cost. To then mobilise the rig with operators etc would in our opinion be beyond the resources of CKK and therefore not be in the best interest of shareholders. Spending more money on the rig is not, in our opinion, an effective use of funds.
b) We may progress a proposal whereby if a group wished to dry hire the rig and agree to spend the capex required to get the rig fully operational, then we could structure such arrangement via a special purpose joint venture / company whereby CKK’s interest equated to the current value of the rig and the other party earned a JV ownership interest based on the quantum of capex invested by that party. Then the net lease or hire fees could be split in proportion to the JV interest. This would mean CKK retained an interest in the rig via its JV or shareholding and derived an economic return. The JV partner / lessee would have an interest in safeguarding the rig and ensuring it was in good order and deriving revenue. We would also need to consider the IP attaching to the GT3000 rig in this scenario.
c) The thinking above could dovetail into the litigation settlement with SIPL as one needs to be cognizant of the IP related or integral to the GT3000 rig specifically. As part of settling the litigation, we would be amenable to the GT3000 rig and associated SIPL IP being contained in a special purpose JV or company with SIPL. It is likely that SIPL (or nominee) would need to spend a substantial amount on the GT3000 and hence CKK’s interest in such special purpose company or JV may be of a minority interest. The attraction of this line of thought is that CKK gets recognised for the current value of the rig via its interest in the JV or company without having to commit further funding to reinstatement of the rig or operating the rig itself. It also means CKK could wind up or close down Globe Drill Pty Ltd.
d) We could look at spending money to get the rig to an operational status and then deal with the rig in today’s market. Spending more money on the rig though for an indeterminate outcome and possibly inflaming the litigation with SIPL and escalating potential damages is not a preferred option for us.
e) Our preference not be a one rig company also extends to the Intellectual Property associated with the GT3000 rig – such IP license from Strange Investments Pty Ltd has been terminated by that party.
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f) CKK and Strange Investments Pty Ltd commenced reciprocal legal proceedings against each other for loss of earnings and damages in relation to the termination of the Intellectual Property agreement associated with the GT300 drill rig.
g) CKK then wound down Globe Drill Pty Ltd (CKK’s wholly owned entity), owner of the rig, making all employees redundant and selling or impairing all assets for a considerable loss.
h) To us then there is no prospect of reinstating Globe Drill Pty Ltd to its former self and there is a view that Strange Investments damages claim could exceed CKK’s claim to a large extent.
i) Whether this is the case or not, shareholders’ best interest, in our opinion, is served by either dealing with the rig as contemplated in b) or c) above or other solution that may see CKK’s shares in Globe Drill Pty Ltd vested to Strange Investments Pty Ltd (or nominee) in consideration of a full and final settlement of all litigation between SIPL and CKK. The rig is on the books of Globe Drill Pty Ltd. Any of the pathways contemplated should not create substantial or adverse profit and losses to CKK as the rig has been fully written down / provided for in CKK group’s books. The acquirer of the Globe Drill Pty Ltd shares would take over all liabilities in that company under any transfer of ownership deed. Likewise any related party loans would be dealt with.
j) The above thoughts, in general terms, could create a solution to CKK’s current paralysis and of course the detail of any Settlement Deed will need to be worked through to ensure an equitable outcome in relation to any unfair dismissal claims that may be current, vehicles on hire to CKK need to be returned in good order (if they have not already been) to the owners and other consequential matters.
k) If shareholders elect us as the new team with this settlement mandate it also means certain CKK liabilities such as that owing by CKK to Strangeland Pty Ltd (a company related to Mr Warren Strange) will aim to be extinguished by way of a combination of cash and shares in CKK, thereby facilitating further savings to CKK.
In the scheme of the bigger picture intention of expanding CKK to a large profitable company in the drilling / mining services sector, we believe it is best to settle the litigation along the above lines and move on with real value adding.
The current board are predicting mid 2013 before the litigation matters gets to court. Our objective is to deal with the matters now and move on with business acquisitions and start the rebuilding process. If shareholders wish to remain as shareholders in a company paralysed by litigation, paying legal fees and other outflows without anything definitive until mid 2013 then that is the shareholders’ call, to which they of course quite entitled. By mid 2013 CKK may have minimal funds and its destiny may be as a shell at best or if Strange Investments Pty Ltd were to win their case, then CKK could end up being wound up for a total loss of shareholder funds. Our mission is to avoid this fate for CKK.
It is unfortunate that the breakdown between the current board and Mr Strange has caused such value decline to shareholders. It appears impossible for the current board and Mr Strange to mediate an outcome, given Mr Strange’s lack of confidence in the current board and hence our circuit breaking proposal outlined in this paper. We would be quite happy to have an additional director nominated from existing shareholders to join the board – someone who is aligned to our vision. We would be simply doing a job for shareholders within a clear and deliverable plan.
If shareholders don’t like the proposed settlement pathways proposed by us they can express such sentiment in their proxy. If shareholders are prepared to back the above planned settlement options and mandate us to implement them then such a mandate will provide us the confidence of taking on the CKK board positions proposed, and ending the litigation as set out above.
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We are mindful of the dwindling cash reserves in CKK and it would be prudent of us to review the financial position of CKK prior to the shareholder meeting seeking our appointment. We would need to ensure that CKK has sufficient funds to meets its debts as and when they fall due. It would be unproductive of us to be appointed to the board, only to find the company is unable to meet its commitments and have to appoint an administrator or wind up the company in the absence of any other funding sources to keep the company solvent. Our interest in taking on the job at CKK is to rebuild it not see its demise.
We would hope the current board would allow us the opportunity of performing a pre-appointment review of CKK to be comfortable in taking over from the current board. If we were refused access to perform such review or inspection we would communicate this to the requisitioners and they would need to assess other options in order to determine CKK’s current state of financial health.
Our First 100 days in office
To provide shareholders with clarity about our objectives for the first 100 days from taking office as directors, we would aim to achieve the following in the first 100 days:
a) Settle all litigation between CKK and Strange Investments (WA) Pty Ltd
b) Complete due diligence, independently assess value of 2iC and subject to all acquisition parameters being acceptable to the independent board members and investment committee, enter into an agreement to acquire 2iC. This will most likely require a shareholder approval given the scale of the transaction and is not intended to trigger a reconstruction or re-compliance requirement from ASX
c) Complete due diligence on Specialised Drilling Services (Pty) Ltd with a view to entering into a share accumulation or option to purchase agreement
d) Shore up funding for the acquisitions and we shall also invite current shareholders to participate in this opportunity
e) Position the CLRS with a group that can add value to the device with a view of a market entry strategy where CKK does not expend any money but accrues an entitlement by way of royalty / carried interest etc
f) Engage with our preferred stock broker/s to work with us as we proceed with the revitalisation strategy
g) Deal with any costs that are not necessary to the core business units – “every dollar counts” – we would review current board fees, chairman fees, company secretarial fees, accounting fees, audit costs, legal fees etc and look to reduce costs – a company that is semi-dormant should trim its sails accordingly
h) Prepare and dispatch a report for shareholders on our review of CKK, its cost structures, agreements, liabilities, other disputes, running costs and any other matter that we feel shareholders should be made aware of from the last published statements (30 June 12) to 31 December 2012
i) Overlay our corporate governance regime and investor relations engagement
j) Prepare and dispatch the shareholder Notice of Meeting for the acquisitions planned
Whilst this is an ambitious program for the first 100 days we are motivated and passionate about rebuilding CKK.
Questions and Answers
Whenever there is movement for a new team, shareholders will try to determine which is the best pathway to go. Shareholders are aware that the current board’s plan is restricted to that of a litigant and it is unlikely any new dimension can be added to CKK until the litigation is resolved which on current estimates will be mid to late next year at the earliest.
In an effort to pre-empt shareholders questions about this proposal, the following Q&A’s are designed to assist shareholders with the likely questions you may have.
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Q: this looks like a Warren Strange initiated move to take over control of CKK by stealth?
A: Not at all – as incoming directors we have a fiduciary duty to act for all shareholders’ best interest. We have had no past business dealings with the requisitioners nor have we made any “deal” or have any arrangement other than our sincere quest to settle the litigation for the best of all shareholders and rebuild the company. Mr Strange is not looking to a board seat.
Q: what happens if you cannot settle the litigation?
A: From our discussion with Mr Strange we are confident of settling the litigation along the lines outlined above. Step 2 i.e. the intended vend in of 2iC cannot occur until step 1 i.e. the settlement of litigation is achieved. By a new team coming in without the history, baggage or emotion weighing them down we provide a circuit breaker to conclude the best deal we can for shareholders so the company can move on. Damages claims always come with high risk levels and ultimately the financial capacity to pay is also a matter that needs consideration. IF for some reason, we as a board could not settle the litigation to our satisfaction, and along the options described above, we would need to further cut all costs other than those that are absolutely necessary and continue with our mission to conclude the litigation as quickly as possible and preferably via mediation rather than spending shareholders money on legal fees and experts.
Q: you have not said anything about the current board?
A: this is not about the current board – it is about us striving to rebuild value for shareholders. We have a clear plan, the right team and support for the transactions proposed. For some reason the positions of the board and Mr Strange are too far apart to enable a settlement and thus we are the conduit to such settlement in the first instance with the follow on plan outlined. It is your choice whether you wish to back the new team with a mission of resolving the litigation and adding businesses to CKK in the same business space and see Coretrack achieve what it deserves to achieve.
Q: With new businesses vending in, we will be diluted – to what extent?
A: our philosophy is that it is better to have a smaller slice of a bigger pie that results in greater liquidity and depth of market in the shares with earnings underpinning the operations and enabling a good dividend yield to be paid.
Currently CKK has a market capitalisation of approx $1.2 million (i.e. 228.5m shares @ half a cent). The first acquisition ( 2iC) is estimated to have an enterprise value in the range $4m to $6 million and if based on $6m 75% of the consideration was in CKK shares issued at say a premium of 100% to the current share price, it could result in approx 450 million shares being issued making total issued capital of approx 678.5 million shares and if they traded around 1 cent it would give a market cap of approx$6.8m.
Also the intention would be to source capital from blue chip sources (including offering to existing shareholders) and see the market cap around $10m+. From such solid base we would then look to other acquisitions and head towards a market cap of $20m in the midterm.
Another positive from such strategy is it evens out the share register and starts to position CKK as a mainstream earnings driven company – the board is there for all shareholders and does not represent specific groups.
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Q: how can we be sure that the related party interests in the proposed acquisition of 2iC does not get in the way of a good deal?
A: the decision to acquire 2iC - the value and other transaction terms - would be led by the independent directors and the company’s investment committee. If for some reason agreement could not be reached on the acquisition of 2iC (which we feel would be a remote chance), the board has other target acquisitions it would look to complete. At the end of the day the idea is to weld all people involved together so there is 100% alignment and commitment to the day to day operations. We are here to get the job done – that of rebuilding value in CKK with quality businesses in its arsenal. If 2iC was not the first acquisition, we would look to other acquisitions that would reflect best value upside for all shareholders.
Q: when do we judge the new directors?
A: At the relevant future shareholder meetings you will have your opportunity to re-elect us or not. Also it is most likely a shareholder meeting will be needed to complete the acquisition of 2iC (or any other acquisition) so again, shareholders will hold the key to CKK’s destiny.
Q: will the new team be accessible to shareholders?
A: yes – our philosophy is one of we are here for shareholders and we can be contacted anytime on the contact numbers or email addresses set out below. Also you are most welcome in the meantime to come to the 2iC premises and have a tour. Also we would centralise all operations to 2iC’s offices at O’Connor thereby saving the rent on what CKK currently pays. Also the accounting, administration, financial and company secretarial functions can easily be accommodated by the 2iC team leading to further savings for CKK.
Every dollar counts in our world.
Conclusion
We have a clear strategy and plan aimed at commencing the rebuilding of value for CKK. We are passionate about the industry sector CKK is in and we are confident that with the litigation cleared, 2iC joining CKK as the first building block and a regime of governance, investor relations and market engagement, we can bring the change required for and on behalf of all shareholders.
CKK is our preferred vehicle to add these dimensions to given continuity of business, the company name and tax losses available. If shareholders do not wish to endorse us or the plan, we will proceed with the other public pathways and opportunities available to us.
As a catalyst to settling the legal actions and building the business we are prepared to give it our full attention. We look forward to acting for you over the long term,
Yours sincerely
Gavin McLeod
MD 2iC Australia Pty Ltd mob: 0419 923 962 email: [email protected]
Andrew Beach
Director 2iC Australia Pty Ltd mob: 0428 917 308 email: [email protected]
Jeffrey Broun FCA MAICD
CEO First Corporate Pty Ltd mob: 0419 934 623 email: [email protected]
Kent Burwash
Compliance Officer
First Corporate Pty Ltd mob: 0419 915 928 email: [email protected]
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We look forward to keeping you up to date via these Information Bulletins on this web site and please contact anyone of the above people should you have any questions.