Is it true that WellDog Australia was “voluntarily” placed into administration?
Throughout the second half of 2016 and the first quarter of 2017, Simon Ashton stated verbally to the company and to the court that he would appoint a receiver as soon as he was allowed to do so. On 20 March 2017, the Western Australia court stopped restraining him, and he moved to appoint a receiver. The directors of WellDog Australia (WDPL) placed the company into administration at the close of business in an attempt to protect its employees, suppliers and shareholders. Within a few hours that evening, Mr. Ashton appointed a receiver and took control of the company’s offices and operations.
The decision to appoint an Administrator was not because the company was insolvent. To the contrary, WellDog holds expert reports stating the Australian subsidiary was solvent.
Its declared insolvency was the result of 18 months of financial and operational interference from former directors and employees of WellDog. The evidence shows, and the lawsuit claims, that interference supported a hostile takeover by parties that had fiduciary duties and obligations to GSTC and WDPL. Laws were broken, ethical rules were violated, and WellDog has therefore turned to the courts for restitution.
We are still investigating what happened and how Ashton et. al. was able to force WellDog to divest its valuable subsidiary at such a steep discount. The more we investigate, the more we uncover. At present, it appears there was a multi-year plan to steal the company that we all invested in and worked so hard to build.
Their plan was to starve WellDog of capital in any manner possible, including illegal means, and then call all debts owed by the subsidiary to various noteholders and partners in default at the same time. As a consequence, WellDog was forced to spend large amounts of capital to prevent hostile parties from taking control.
Throughout the process, Mr. Ashton publicly and privately told suppliers, financiers, and shareholders that his intention and ultimate aim was to appoint a receiver over WDPL and force its sale to himself and his associates. He even drafted a press release describing that outcome – in August 2016, seven months before it occurred.
Since that time, the hostile parties have been attempting to justify their actions and rewrite history so that they are the righteous party in the transaction.
Will GSTC shareholders see any dividend from the sale of the subsidiary?
Unfortunately, we do not believe the subsidiary was sold at market value. If it had been, that sale should have returned a dividend to GSTC, and thereby value to shareholders. While we do believe that all members of what we call the “take over group” are now shareholders and employees of the new company, the Receivers and Mr. Ashton have refused to tell GSTC, as the sole shareholder, how much the subsidiary was sold for. It is our understanding through various press releases made on behalf of the takeover group, that the company was sold for less than 10% of its annual revenue.
Is it true that GSTC “siphoned” capital out of WDPL?
Contrary to claims made by the takeover group, GSTC advanced more than US$10 million into the subsidiary as well as providing another US$14 million in services at below market rates. GSTC recovered much less than that US$24 million intercompany loan. GSTC still holds a creditor’s claim against WDPL for more than AU$2 million.
The administrators issued a creditors report that searches for potential reasons for the administration and future funding. The report was only based on an internal financial audit and did not externally audit claims made by GSTC, including breaches of fiduciary duties and supply chain issues. As a result, the report only considers the amounts paid from WDPL to GSTC, not the other direction.
In this fashion, the takeover group has cherry picked small details in a 118-page document. The story, when read in its entirety is completely different than has been represented by the takeover group. The report also states that ProX’s (Mr. Ashton’s alter egos) security agreement was likely obtained through false pretenses and likely voidable (making the appointment of receivers illegal). It also states that Graeme Linklater personally has millions of dollars in liability for his role as a director (in addition to his considerable liability to GSTC, of course).
Was WDPL able to pay its payroll immediately following the appointment of receivers?
Payroll had just been made when the receivers were appointed. Payroll was made on 17 March 2017 and Mr. Ashton appointed the receiver on 20 March 2017.
The last financial action GSTC took was to protect the WDPL employees and suppliers. That included John Pope providing a personal guarantee for WDPL’s accounts receivable factoring so that funds would be released and WDPL’s employees and key suppliers paid on 17 May 2017.
At the time Mr. Ashton appointed the receiver, WDPL held a $4 million order from its main customer. If it had been allowed to fulfill that order, the company’s financial obligations – including those to Mr. Ashton – would have been satisfied.
Within a week after appointment, Mr. Ashton and his receivers lost that supply chain and the order.
Did WDPL overtrade and thereby put the company in jeopardy?
No. Until the company was financially stressed by Mr. Ashton and his partners, GSTC and WDPL had been very successful for more than six years in raising external capital to support its incredible growth. When Mr. Ashton diverted WellDog’s capital raising efforts into selling his own stock in 2015, that success was disrupted.
Despite that setback, WellDog was working with a major investment bank to conduct a large equity placement in 2016. When Mr. Ashton and his partners disrupted those plans by calling debts due that had not yet matured, the company sought angel investment at a pre-money value of $100 million so that it could pay those debts. When Mr. Ashton and his partners disrupted the company’s efforts to raise that angel financing, it accepted investment from existing shareholders at a US$10 million pre-money value in order to slow Mr. Ashton’s foreclosure efforts.
It should be noted that members of the takeover group included directors and executives of GSTC and WDPL until September 2016. The company’s financial conditions were intimately known to them. The company’s trading decisions were made with their formal consent and encouragement.
Did WDPL leave Baker Hughes with an AU$3 million unpaid bill?
WDPL had significant supply and warranty issues with a Baker-supplied product. The supply agreement indemnified WDPL for those issues. When Baker Hughes refused to remedy the problem, WDPL objected to the related accounts payable. Baker Hughes issued a statutory demand and the company’s law firm, Squire Patton Boggs, failed to respond by the legislated deadline despite receiving information in a timely manner from WDPL that was sufficient to negate the statutory demand.
Coincidentally, Mr. Ashton claims to have talked with Baker Hughes to discuss WellDog three times during the time period when Baker Hughes decided to refuse to negotiate in good faith. These meetings were not authorized by, nor disclosed to, the company or its Board of Directors, despite Mr. Ashton’s role at the time as a director of your company.
WDPL was pursuing the Baker Hughes contractual legal claim when the Receivers were appointed. The claim now belongs to the Receivers and Mr. Ashton, neither of which has attempted to follow up to our knowledge.