Responses 1. CHP had $116,291 as at 31 December 2018. The...

Responses
1. CHP had $116,291 as at 31 December 2018. The company does not believe that this amount
is negligible. The company has formed this view based on its opinion that any amount above
$100,000 is not considered negligible.
2. CHP does expect to continue its operations and to meet its business objectives. CHP will
achieve this via its continued focus on generating advisory and fee based revenue and
careful control of its costs. In addition, it is currently undertaking a sale of a number of its
investments in order to strengthen the balance sheet and cash reserves. Further to recent
discussions with the ASX, the Company is considering seeking shareholder approval to delist
from the ASX and to gain admission to the National Stock Exchange or the TSX Venture
exchange in Canada. The company considers this matter an important part of being able to
continue its operations and to meet its business objectives.
3. Since 30 September 2018, no funds have been advanced to any investee company.
Notwithstanding this, CHP advanced $28,000 to Syn Dynamics Australia Pty Ltd, which is a
consolidated entity of the CHP group (not treated as an investee company for accounting
purposes).
The current balance of loans to investee companies is zero. Please note that the loan
provided to 20Four Media Holdings Pty Ltd has been written off as a result of the company
recently being placed into liquidation.
4. The estimated operating cash outflows for the March 2019 quarter is approximately
$295,000. This consists of $95,000 in staff costs and $200,000 in administration costs
($100,000 in legal expenses, approximately $50,000 in audit, valuations and accountancy
fees and the balance of $50,000 in other administration expenses of the business). The
estimated investing cash outflows is $150,000 but this is subject to funds being available.
Chapmans Limited ABN 34 000 012 386 www.chapmanslimited.com
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5. (a) Capital Mining Limited
(b) 20Four Media Holdings Pty Ltd
(c) The difference, i.e. $206,250, $182,250 relating to transaction costs of the issue of shares
and options and approximately $24,000 relating to repayment of loan to an unrelated party.
6. The current carrying value of GPU One investment is $1.2M AUD ($1.1424M CAD x 1.05
exchange rate; current valuation of $10.5M CAD x 10.88% = $1.142M CAD).
7. The company is a minority shareholder in many of its investments and is also not represented
on the board. Therefore, we provide the following information in respect of Securrency Inc.,
GPU One, MJ Life Sciences Pty Ltd and 20Four Media Holdings Pty Ltd.
Securrency Inc. has raised at least $5.5M USD in convertible notes on similar terms to CHP
(we are not privy to all the terms and dates of every note issue). The pre-money valuation of
the notes was $50M USD, therefore the post money valuation on the basis that the notes
are converted is $55.5M USD. CHP invested $1M USD (therefore, based on full conversion
by these note holders), CHP would hold a 1.8% shareholding interest. This investment has
an implied value of $1.39M AUD ($1M USD @ 0.72 USD exchange rate conversion).
GPU One has not issued any further capital since the company’s share disposal. CHP’s sale
of shares and the founder conversion of debt into equity was done at a post money valuation
of $10.5M CAD. CHP holds 10.88% and the implied value of its holding is $1.2M AUD (CAD
1.05 exchange rate).
MJ Life Sciences Pty Ltd has not issued any capital since 1 January 2018. Based on CHP’s
investment of $500,000 USD and its ownership of 50% of MJ Life, the implied value of this
investment is $694,000 AUD (USD 0.72 exchange rate).
20Four Media Holdings Pty Ltd, did issue shares during this period, however, as it has been
placed into liquidation, the company does not have access to information required regarding
share issues. The value of the investment has been fully written off.
8. SDA has not completed the capital raise. The capital raise is ongoing and CHP is uncertain
if and when it will be completed.
9. CHP advises that $62,500 of advisory fees have been earned since 30 September 2018.
The $62,500 in fees are payable but are yet to be received. CHP expects to earn $325,000
in advisory fees in the next 3 months.
10. (a) The original amount to be issued as per AGM was up to $2,962,500. As per the amended
March Appendix 4c, the net proceeds from borrowings is $2,662,000 ($2,703,000 – item 3.5
less $41,000 – item 3.6). An amount of $300,000 repaid in cash in the June quarter is
reduced from the $2,962,500 which equals $2,662,500. The small difference of $500 is a
rounding amount.
(b) The $41,000 loan repayment was a loan to be repaid in cash and not shares.
(c) The repayment of $300,000 of Investor Loans repaid in cash rather than in equity was
primarily due to the delay in the shares to be issued.
(d) The item included in the cash flow statement under the heading “cash flow from financing
activities - proceeds from borrowings” of $423,607 is a net figure. Therefore, there is no
separate line item for the repayments of borrowings. The cash flow statement has been
reviewed and signed off by the company’s auditor.
Chapmans Limited ABN 34 000 012 386 www.chapmanslimited.com
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11. The proceeds from borrowings of $423,607 can be reconciled as follows. Note 6 – Loans
receivable opening balance of $545,095 less the closing balance of $141,168 = $403,927.
Note 10 – Borrowings closing balance of $30,000 less the opening balance of $10,320 =
$19,680. The sum of the two is $423,607. The cash flow statement and notes have been
reviewed and signed off by the company’s auditor.
12. Refer attached schedule.
13. CHP provides the following information that it considers relevant. The balance sheet of CHP
shows a net asset position of $3.46M as at 30 June 2018, (the last accounts reviewed by the
company’s auditors). In particular, the Securrency Inc, GPU One and MJ Life Science
investments have an implied value of in excess of $3M. In addition, CHP has demonstrated
the ability to access funds when required, (refer recent capital raises undertaken in the past
12 months).
Should be sued IMO