1) I note that you have issued a convertible note with a conversion rate of 0.25c per share. I can appreciate that Lion is in need of short term funds simply to operate day to day, but am concerned at this low conversion rate.
The sale of Bula assets is to raise US$ 4.85m. This equates to AUD 6.467m using a US$ 0.75 conversion rate. With 2.262m issued shares the cash backing of Lion will be 0.286c. Therefore the holder of the convertible note will obtain shares at below cash backing. This ignores the non-Bula assets, receipts from the November lifting, and stock of Bula oil. This dilution seems to be very disadvantageous to existing shareholders.
I would have thought that once the proceeds from the November lifting are received in December, Lion's cashflow problems will have ended. Therefore, what was required was a short term loan just to get through to December. To issue 600m ($1.5m/0.25c) shares and further cripple Lion's share price does not appear necessary or prudent. In fact, if you had offered shares to existing shareholders on these terms I would think there would be no shortage of takers (myself included).
2) The Statement of Financial Performance issued with the 30.06.05 Preliminary Report cites "Other operating costs" as $1,871,029. Given that this is about three times the next specified item and in fact more than Lion's entire revenue, can you be more specific? Surely this is not made up of hundreds of individual items. There must be one or more "lumpy" items in here.
3) An expense specified in the 2005 Preliminary Report is "Loss on write off of coal project loan" of $578,836. The Fourth Quarter Activities Report says "The Indonesian company has agreed to provide further security to Lion for the additional money advanced". What proportion of loan monies are irrecoverable, was any security given, and what steps have been taken to recover the loan? Also, has the coal project been terminated?
4) The 2005 Cashflow Report includes "Investment in joint venture" of $1,254,070. Which project does this relate to and what assets has Lion received in return?
5) The Notice of General Meeting issued 20.10.05 states that shareholder approval will be sought for shares issued pursuant to the purchase of 20% of Petro Real Main Pass. Given that an announcement of 29.12.04 stated that this acquisition was not to proceed, what has happened to the almost $3m proceeds from this share issue.
6) Note 7 from the 2005 Preliminary Report has Receivables of $5,958,540 with only $132,176 provided as doubtful. Given that this represented 50% of shareholder funds at 30.06.05, have these monies been received or is a large writedown to be made? Also, does this amount represent trade debtors (oil sales) or non trade debtors?
7) Your First Quarter Activities report (issued 31.10.05) makes no mention of the suspension of Lion shares from the ASX, nor of any irregularities or actions for recovery of monies. When do you propose to appraise shareholders of the current situation and what, in your opinion, led the the current sorry state of affairs. Also, is a cashflow report going to be issued for the last quarter as (I believe) is required by the ASX?
I'm sorry there are so many queries but I'm sure you would agree that shareholders deserve an explanation for some of the transactions that have and perhaps are yet to take place.
regards
I'll let you know of any reply I get. I'm particularly annoyed about the convertible note. 600m shares issued so cheap, geez. There's alot of explaining to be done, albiet (mostly) not the fault of current management. Still, it's their job to get to the bottom of it-comes with the territory.
I read that Mercorella won't front court on health grounds. I imagine the health grounds are that he won't make it home. A few disgruntled Lion shareholders, etc would be nothing compared to the Gypsy Jokers.
cosmos
LIO Price at posting:
0.0¢ Sentiment: None Disclosure: Held
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