BPH undisputed debt to MEC

In reviewing the correspondence around the GBA/BPH debt transfer and the MEC Resources loan to BPH, I identified the following:

• 4/7/17 – BPH Energy announces that a debt transfer has occurred between Grandbridge and BPH equivalent to offset the loan between BPH and MEC Resources (ref 3)
• 31/8/17 - MEC Resources Announcement nominates legal proceedings to recover outstanding loan of $353,133.36 from BPH Energy (ref 2)
• 25/9/17 – MEC Resources annual report nominates this loan from MMR to BPH is accruing interest at 20.97% (ref 5 – see page 14)
• 2/10/17 - BPH Energy Announcement nominates BPH had issued a Notice of Demand for $225,486 to MEC Resources (ref 1) correcting the amount debt offset amount against the MEC Resources debt nominated in the BPH debt transfer notice (ref 3)

Based on the above BPH has:

1. Agreed that there is an undisputed debt of $127,647.36 due to MEC Resources ($353,133.36 (loan at 31 August 2017)- $225,486 (BPH nominated offset amount))
2. Not paid the undisputed debt and therefore allowed interest to continue to accrue at 20.97%, equating to an additional $11,651.45 (based on compounded interest to 31 January 2018)
3. Incurred further legal costs in defending its position

The BPH Energy Directors and Tom Fontaine (who was a director at the time) need to answer:

1. Why this undisputed debt to MEC Resources has not been paid
2. Why they allowed the interest on this undisputed debt to continue to accrue at the exorbitant penalty interest rate
3. How this is in the best interests of the BPH shareholders

Ref 1 (BPH MMR ASX Notice of Demand) - https://www.asx.com.au/asxpdf/20171002/pdf/43mwbgqmnyf0xp.pdf
Ref 2 (Recovery of Debt owed by BPH Energy Ltd) - https://www.asx.com.au/asxpdf/20170901/pdf/43m0c5ktdfjthh.pdf
Ref 3 (GBA Debt Transfer) - http://www.asx.com.au/asxpdf/20170704/pdf/43kdy0t6hk5r2y.pdf
Ref 4 (MEC response to BPH “Offset”) - https://www.asx.com.au/asxpdf/20170705/pdf/43kfyvnmxgw21c.pdf
Ref 5 (MEC 2017 Annual report) - https://www.asx.com.au/asxpdf/20170925/pdf/43mlr1nr1ntl7w.pdf