You've got to question how long this set-up has been in play. Here is the generic process/formula for extracting value from a 'managed' micro-cap through a manufactured outcome:
Step 1a: Stick a hook in (loan money to company)
Step 1b: Stick a hook in (services agreement which enables you to 'manage' fixed cost base)
Step 2: Draw consultancy fees wherever practicable
Step 3: Structure terms and dates, align with liquidity
Step 4a: Impair asset base to reduce accounting book value
Step 4b: Offload assets to mates at mates rates
Step 5: 'Manage' (bleed) cash to life-support levels
Step 6: Make opportunistic 'White Knight' offer
Step 7: Commission a sympathetic IER to legitimise/validate offer
Step 7a: Enlist the help of rubbery discount rates, discretionary 'alpha' risk and other biased assumptions
Step 8: Frame scheme vote as 'pass or perish' (i.e. gun to the head diplomacy)
Step 9: Profit
Most of these have happened with ORS, as several have with its close-cousin and shareholder AGS, along with countless other cases which make a mockery out of the market 'integrity' which the regulators are supposed to be protecting.
Here's a worked example of ORS as a plaything which shows the distribution of value and illustrates the transfer of value in the scheme:
First question: What gets left in the ORS shell after paying out the Gandel loan and scheme goes into effect?
> $6.00m of tax credits issuing from $20m in unutilised tax losses (AR Note 6)
> $2.96m of AYC shares (82,180,570 shares, valued at $0.036 each)
> $0.79m worth of AYC options (56,557,576 options, valued at $0.014 each per Black-Scholes model: $0.03 exercise
price, $0.036 stock price, 4 years until expiry, 35% volatility, 3% interest rate)
> $2.61m in capitalised exploration costs for WA tenements (of which ~90% has been written off)
> -$0.81m effective liability to pay out cash component of offer*
*By treating the cash component as a 'liability' that gets left in the shell, we don't need to mess with the denominator # of shares held by Abbotsleigh for the purposes of valuation.
From this we can answer the second question: How much is the effective value to Gandel?
Depends on which components are deemed:
A. $2.94m in net investments left in shell ($0.028 value per Gandel share)
B. $5.94m in net investments plus tax credits at 50% ($0.058 value per Gandel share)
C. $7.29m in net investments plus tax credits and exploration at 50% ($0.071 value per Gandel share)
Conclusion: How does it measure up to the scheme offer?
The range of $0.028 to $0.071 above compares to $0.0199 per share in value offered to 'outsider' shareholders at AYC's last traded price. Even on the most conservative basis (A.), Abbotsleigh comes out with 40% more value per share compared to outside shareholders.
If it looks like oppression of minority shareholders and quacks like oppression of minority shareholders, it's probably oppression of minority shareholders.
"The only driving force within him is the acquisitive instinct. It creaks out of his very bones directly anyone opens the door of his junkshop and buys something from his stock, paying gold: the obsession to hold on. The idea of possession eats into his very soul, and, if he were capable of forming any ideal whatsoever, it would all be summed up in sheer possession as an abstract concept." (Gustav Meyrink, The Golem, 1914)
Calculations:
169,672,726 AYC ordinary shares held by ORS 31.10.15
-28,980,556 AYC transferred to Gandel @$0.036 each to repay $1.0433m loan
-58,511,600 AYC distributed to non-Gandel ORS shareholders (2 for 5 scheme)
=82,180,570 AYC remaining in ORS shell
248,331,000 100.0% ORS Shares on issue
-102,052,000 41.1% ORS Shares held by Abbotsleigh (Gandel)
=146,279,000 58.9% ORS Shares held by everyone else**
** To pay out the offer's cash component to everyone else, ORS needs $804,535 in cash. Because ORS is effectively being run on life support, Abbotsleigh will exercise ~40,000,000 of its options to cover the cash component of the offer.
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