Think Entertainment
Think Entertainment plc
Registered in England No.05121390 at: 3 The Court, Lanwades Business Park, Kentford, CB8 7PN
Contact: Mark Hardy – acting by Power of Attorney
Email: thinkplc@gmail.com
Update December 11th 2005
see also:http://justgroupandtheseriousfraudoffice.blogspot.com/
-------------------------------------------
Status report:
Due to the insufficiency of resources it has been impossible to (i) convene the Annual General Meeting before the statutory due date of November 5th and (ii) to file audited accounts with Companies House for the twelve month period since incorporation by the statutory due date of December 5th.
On November 4th all the directors and Company Secretary resigned from office.
Solely because of the complete lack of resources and inability to trade other than whilst insolvent, all the assets of the company had been transferred to Wastrels Limited in return for an indemnity by that company in respect of any and all claims that could “prove for dividend” in the liquidation of Think Entertainment if it had been liquidated at that date.
The claimants able to prove for dividend include the shareholders of Think other than those against whom counterclaims can be properly asserted.
Counterclaims for gross negligence, mismanagement and breaches of fiduciary duty exist against all shareholders who were directors of either Think or its predecessor Newscreen Media Group after the effective date of the Creditors Voluntary Arrangement, as well as Fourpoint Entertainment, and therefore they will be excluded from any eventual distribution as the claims far outway any amount that could otherwise conceivably be due to them in a liquidation.
It is to be regretted, but fully understandable due to lack of funds, that Capita will not maintain the share register. There are not even enough resources to meet the cost of having the data transferred to a simple PC based system, and therefore there will be no amendments to the Register post July 28th 2005 when Capita ceased there duties. Combined with there being no directors to authorise any changes to the Register, this will cause difficulties for anyone wishing to transfer their shares as no such transfer can take place, and will cause difficulties for those applying for probate upon the death of a shareholder.
Many shareholders have asked when the company will become worthless for the purposes of Capital Gains Tax. That is now only likely to be when the Registrar of Companies decides to “strike off” the company from his register, but that is unlikely to be within the next 12 months even though the company has not traded for many months, but it is now inevitable not least as there are ever increasing fines accruing daily for failing to file accounts, which fines cannot be paid.
So this time it really is “the end” for the “company that wouldn’t die”. Reality is that you were all stupid to rescue Just Group in the manner that you did, (why oh why did you not buy the IP rights that KPMG would have sold you?) and you compounded that by appointing directors who had little knowledge of either running a public company or of the media business other than in the realms of fantasy and “dreaming”, which they compounded by the dreadful Fourpoint acquisition as a “last roll of the dice” which anyone with an ounce of common sense could have seen was a fraud and a sham from the outset – if they had carried out proper due diligence – which they did not.
Solely as successor in title, Wastrels Limited (www.wastrels.co.uk) is now actively seeking secured non-recourse funding to pursue claims against the directors of Think and is hopeful that asset realisations will occur such that not only can Think’s creditors be paid but then payments eventually be made to the non-culpable shareholders of Think.
In this way those responsible for the Fourpoint losses can be made to pay. As I have said many times, you must contact the liquidator of Newscreen Media in relation to the dreadful mismanagement of that company (including when it was Just Group).
In January 2005 there really was hope that Think could be saved but that was based upon early realisation of monies held by KPMG from the administration of the old Just Group companies, which monies were overpayments from the rescue funds. The directors of Think were grossly negligent in their pursuit of those monies, and KPMG continue to improperly and negligently delay sorting out those funds, and have therefore directly and knowingly added to the problems of Think such as to have significantly contributed to the present position – they still refuse to apply for a hearing date at the High Court.
Wastrels Limited intends to pursue KPMG both for monies due and for damages.
In summary, the game is only just starting, but this time it does not have the baggage of the impossible costs associated with running a company with 55,000+ shareholders, nor does it have the impossible challenge of trying to develop any form of ongoing business. We are now solely about getting creditors paid and justice for the non-director shareholders.
For the sake of simplicity, I have reinstated all the prior updates below this one, and trust that those who believe they were improperly induced into buying shares in Just Group and/or Newscreen Media will now give their evidence to the liquidator of Newscreen, and if necessary fund his bringing of legal proceedings. Any surplus in the Newscreen estate will flow to Wastrels Limited and then to the non-culpable shareholders.
-------------------------------------------
UPDATE September 27th 2005
THE “FOURPOINT” LIBRARY
Matters go from bad to worse.
I have last week been back to Los Angeles and “discussed” the state of the outstanding dealings with the previous US distributor, the Peter Rogers Organization, and their lawyers and have now received some detailed accounting, albeit that it raises more questions than it answers in certain areas including a post-it note that says “Stephen is charging another $10,000 to expenses for his work outside sales”.
Accordingly I have retained the services of a US media industry expert, Mr. Rob Aft, to audit the accounting, collect outstanding monies and prepare a report of the state of the materials and IP rights; that report will form the basis of calculating the monetary consideration due on the sale of the library to Indigo Film & TV Ltd. Mr. Aft’s remuneration is on a contingency fee basis and entirely conditional on recoveries being made.
Excluding a heretofore unprofitable (except for the advertisers and distributor) “barter” deal for the Amazing America property, presently syndicated on some US stations, the very limited “accounting” shows:
TOTAL GROSS SALES since May 2003: US$790,811
Future monies due to THINK: US$144,363
(No monies have been received by Think since autumn 2004 and apparently almost none has been payable – a matter under dispute and being audited by Mr. Aft).
The equivalent non-US gross sales by Indigo amounts to less than $250,000, and given the expenses incurred in converting the materials to non-US standards, there has not yet been any significant net income to Think, and the present status of the accounting shows that monies are due to Indigo for unrecovered expenses.
I am sure you will agree that this is hardly the “very valuable – multi million dollar” library that Shukri still keeps telling anyone who will listen.
Given that most of this desultory income had arisen before the acquisition by your former directors, it brings into question in even starker light the well documented lack of due diligence performed ahead of the acquisition.
COMPANY DIRECTORS
I still have no nominations from anyone to become a director and take on the running of this company, so as previously advised unless nominations are received by October 3rd, I will act unilaterally and without further notice as the law requires me to do.
BUTT UGLY MARTIANS
I am receiving some enquiries, from shareholders and others, and the likely structure of any successful bid is most likely to reflect a cash down-payment and a share of both future income and collection of such past-due receivables as can be recovered.
JELLIES – JELLIKINS
This matter is not progressing as swiftly as hoped for, and it is clear that it will to a great extent revolve around the resolution of trade disputes with your former director, David Clements and his company Optical Imaging (of which Think directly owns 10%). The matter of the dispute between the liquidator of Newscreen Media and Mr. Clements is, I believe, unaffected by this matter.
Mark Hardy
For and on behalf of Think Entertainment plc.
UPDATE September 5th 2005
Share registration:
I have been asked to clarify why Capita have suspended their function as share registrars. It is because their bills remain unpaid, and whilst they are being very patient and as helpful as can be, they cannot reasonably be expected to provide further updating services until their bills are paid.
WHERE DID THE MONEY GO?
As you will know I had intended to provide you today with copies of the detailed accounting for the rescue monies culminating in the balance of £748,172 left on May 20th 2004 as disclosed to you in the Fourpoint circular dated July 19th 2004; but which consolidated amount already included more than £650,000 collected by THINK’s two subsidiary companies since the CVA, so for all practical purposes you can see that the rescue money had all been spent before the THINK/Fourpoint deal was put to you.
I advised your former director, Brian Downs, of my intention to publish the detailed analysis and he objected most vociferously and in no uncertain terms. I am aware that on September 1st Mr. Downs, and other former directors, were interviewed by the Joint Liquidators of Newscreen Media Group plc, who then wrote to me on September 2nd formally advising me that without express authority Think Entertainment plc has no power or standing to deal with the records of NSMG, “which includes posting them on the internet”. Such express authority was not given “at this stage”.
I do not agree with the liquidators’ position, as it is my firm opinion that the reorganisation that brought THINK into existence vested THINK with title to all NSMG assets, including its books and records in order to continue the business. Indeed that is supported by the acts of your previous directors, as they did not deliver the books and records to the liquidators upon their appointment in May 2004 before the Section 110 reorganisation. Since the conversion to a Creditors Voluntary liquidation, the liquidators have now asked for the books and records and accordingly I have arranged to have copies made so that the liquidator may carry out his investigative duties, whilst THINK can pursue its remedies by reference to what was, I contend, handed over to it in the reorganisation.
I contend that it is not up to the liquidators to determine how information belonging to THINK is used unless they can show that publication would be prejudicial to their own investigations, which are of course aimed at getting the loan note and other creditors of NSMG (not creditors of THINK) paid in full. I am of the opinion that the publication of a limited amount of information would not be prejudicial to those investigations, but in the meantime I am bound to acquiesce to the liquidators request as they are “officers of the court”, and the only remedy available is to apply to the High Court to overturn their decision, something that there are not sufficient funds on hand to do at the present time, particularly as THINK’s own creditors remain unpaid.
In any event a hearing before the High Court may be sooner rather than later, because, having previously consented to a payment on account from the more than £250,000 surplus “shareholder rescue” monies held by the KPMG administrators being paid to THINK, the Liquidators lawyers changed their advice over the course of a weekend, and on July 11th 2005 the Liquidators instructed KPMG that under no circumstances should any monies be paid to THINK when payment instructions had already been agreed and given, and creditors advised they were being paid the following day. Nice one!
If those monies had been paid to THINK, then all THINK’s own pressing creditors would have already been paid by now and the AGM be on track.
KPMG had no choice but to then ask the High Court to determine to whom the monies should be paid, and we are all hopeful that the matter will be set down for hearing in the very near future.
Whilst I believe that the liquidators and I continue to have a good working relationship, it is inevitable that there will be conflicts of interest in some areas and they must, in law, fall to be contested before and decided by a neutral High Court judge.
In their investigation of the affairs of Just Group plc (subsequently renamed Newscreen Media Group plc) and their subsequent compulsory report to the DTI on the conduct of all the directors since incorporation, there are many matters which many of you have told me you believe were improper and/or deceitful – or even worse, and it is for you to bring those to the attention of the liquidators whose contact details can be found at http://www.geoffreymartin.co.uk/contact.htm You will find them extremely professional and thorough, but please note the request that “whilst happy to receive information from shareholders (or anybody else) it must be relevant, factual and supported by evidence (they do not want gossip or unsubstantiated information) as this will only slow the investigation process down”. So do not burden them with the THINK/Fourpoint deal, or reprint the nonsensical and unsubstantiated claims from the ADVFN bulletin boards, as they will be largely unable to help you, not least as the Fourpoint deal is a matter of contract law for THINK alone.
I will continue to bring matters to their attention where there is a potentially positive gain for THINK, and I believe we will end up with some overlapping commonality of interest in the pursuit in the High Court of those directors appointed since the CVA who caused THINK to come into existence as a separate legal entity with new creditors and obligations, and on what I say was based upon -
knowingly false and gross misrepresentation
On June 21st 2004 Brian Downs and David Clement approved the accounts for Newscreen Entertainment Ltd and Newscreen Licensing Ltd for the 6 months ended July 31st 2003. The directors’ report was signed by Graham Calderbank, the then Company Secretary, and who appears to have prepared the financial statements.
Those accounts were audited by Deloitte & Touche, Leeds and have a “clean” audit opinion, and are filed at Companies House and are available to any member of the public.
HOWEVER the accounts for each company show at Note 14 and 15 respectively (my emphasis added in capital letters and underlining) that £15,000,000 previously due to Newscreen Media Group plc was written off as follows:
POST BALANCE SHEET EVENTS
On 20 May 2004 the Newscreen Media Group plc, the company’s parent undertaking on that date, approved the waiver of indebtedness due to it of £7,500,000 to restore the company’s asset base. On 21 May the shareholders of Newscreen Media Group plc approved a group reconstruction under Section 110 of the Insolvency Act. As part of this reconstruction agreement the remaining balance due to Newscreen Media Group plc was assigned to NSMG (2004) plc. IT WAS AGREED BY NSMG (2004) plc THAT THE AMOUNTS DUE WOULD NOT BE PAYABLE FOR A PERIOD OF AT LEAST ONE YEAR FROM THE DATE OF APPROVAL OF THESE ACCOUNTS.
The various drafts of the accounts show that such a note was intended for inclusion as early as February 2004.
The 19th July circular then showed you that the “estimated realisable value of assets” assigned to THINK was £4,145,160 and included “debtors” (i.e. monies due and not the value of the investment) of £2,951,755 due from the two subsidiaries, and would be realisable before May 20th 2005.
Now please bear in mind that by this stage the directors had since the CVA only managed to collect £677,969 of 3rd party royalties due, appear not to have not paid any outgoing royalties on those receipts, and yet would collect a further £2,952,755 within 12 months! And then they don’t tell you that the deal with the auditors is that no monies will be paid over before July 22nd 2005 anyway!
I have seen some things in my time, but this one takes the biscuit and in my judgment should be pursued by the shareholders, jointly or individually under the relevant Securities legislation because of the disclosure in a circular.
It is compounded even more because those 3rd parties that owed money to the subsidiaries had stated in many cases that monies would not be paid because Just Group had failed to comply with its obligations from the outset.
Do not misunderstand me; I have some sympathy with the directors you chose for the rescue bid. However when the game was up, they just failed to tell you what was going on – failed to admit defeat and then misrepresented the position to you and, most culpably, in the sworn declaration of solvency and to Fourpoint. That is now their personal liability, and I wish them good luck, as I would rather prosecute than defend their cause.
Today’s problem is that the Registrar of Companies is now threatening to strike off the two subsidiary companies for failing to file accounts, but I cannot file accounts unless they are audited (Deloittes are still the auditors) and I have no money to pay for an audit as required for all companies owned at any time in the financial year by a public company. The one person who, in my opinion, will be happy with that is David Clement who continues to promote Jellies on his website but refuses to hand over materials even though he has been paid in excess of £500,000 for the second series – and yes he was a director of THINK and claims he is owed yet more money! THINK does however own 10% of his company, Optical Imaging – any bidders?
In the event that the companies are struck off the remaining assets become the property of the Duchy of Cornwall, aka Prince Charles – and if they have not been previously sold, I will personally be writing to him wishing him the best of luck with BUM’s and Jellies!
Which brings me to -
THE FOURPOINT DEAL
Let me firstly say I have some sympathy with Fourpoint in that they should have known that the amounts being shown as assets were in reality not so, certainly on the time scale envisaged, but they carried out almost stupidly cursory and little due diligence in their haste to “do the deal”.
I have offered, as part of a compromise, to let them retain the 25% interest presently allotted but against which there are outstanding liens asserted by THINK for multi million damages, and then to Fourpoint’s own creditors for unpaid legal and other bills.
Your directors also contractually represented to Fourpoint that THINK had enough working capital for the next 12 months, but by the time the circular was sent to you, their financial advisers confirmed that the directors had been unable to satisfy themselves that this was actually the case, but this information was then not disclosed to you or Shukri.
It is clear to me that Shukri thought there was a lot of money and assets in THINK that would have enabled him to pursue his dream of building a bigger media group – the concept of which was prima facie wholly meritorious.
The only problem was there was insufficient cash in THINK; BUM and Jellies were producing next to nothing and few debts were collected or collectible; and Shukri had no cash in Fourpoint to consummate even the basic deals he had managed to drag in.
It then transpired that he had forged, or had caused and/or knew to be forged, the documents that permitted the assignment of the most high profile asset you were being asked to approve on the face of the circular- viz the SuperStars II series; but even worse was to be revealed, he had forged, or caused and/or knew to be forged, the signature of one of the Superstars giving personal consent to the use of the footage. Muppet or what?!? When Discovery Channel found out, they “hit the roof”.
In summary what happened, in my honestly held belief, was that grossly negligent directors, desperate to “do any deal”, met a fraudster and forger, and all you shareholders were conned. I am supported by the advice of the professional advisers to the deal that the directors must plan for it all going wrong and put in place proper management controls for such an event. When it went wrong, as it was destined to do, they had not put such controls in place, and did not then do so – they just resigned and left it all to Cathy Malatesta to deal with. She at least tried, brought in a couple of experts Peter Keefe and David Lawley, but they could achieve nothing so Cathy went back to the USA where she now resides and, I am assured, has nothing to do with any of the THINK/Fourpoint assets, not even the Suzy’s Zoo property contrary to some publicity that might otherwise indicate the contrary.
The forged consent to assignment document was so blatant an unacceptable legal document, that even the most recently recruited trainee accountant or solicitor would have spotted it, but not the directors or those others acting for THINK. This document was one of the very few “conditions precedent” to the closing – i.e. if it did not happen, the deal did not complete.
However, at the “closing” where Cobbetts (the well known Leeds law firm) were acting to ensure a successful completion (their words not mine), they seemingly failed to spot that the fax had been received from Shukri’s US fax number purporting to confirm that Discovery had agreed to the assignment of the Superstars II property. In this case the fax bears no letterhead, the salutation was to a person other than the addressee, and is frankly so amateurish as to strain credulity beyond breaking point. As it turns out the addressee had left the employment of Discovery many months before in any event so could not have signed it! If the directors had been awake and/or properly made aware of this so clearly false document before they signed to “complete” the deal, after being told all conditions precedent had been satisfied, surely even they would have stopped – well perhaps not given what seems to me, and many others, their desperation to do any deal whatsoever.
The most recent case of fraudulent faxes from persons other than the 3rd party aimed at deceiving professionals is the Italian multi-national Parmalat, and that cost investors and banks billions and billions of dollars.
In my opinion Cobbetts were so grossly negligent as to warrant the High Court awarding “exemplary” damages and the Law Society imposing penalties for gross professional negligence. That is what your company is pursuing.
The Fourpoint portfolio has turned out to be an absolute dog, contrary to my earlier hopes and reports to you.
Prior to the THINK/Fourpoint deal Shukri had negotiated a deal with Indigo Film & Television to distribute the library on a worldwide (ex USA) basis, but lo and behold the format was the US film standard that nowhere else accepts; so costs were incurred “converting” materials and other expenses authorised by Fourpoint/THINK. At the present time Indigo states it is owed close to $50,000 more than it has been able to achieve in sales – that is down from $120.000+, and yes that is being independently reviewed/audited.
The previous US distributor, the Peter Rogers Organisation, has failed to provide accounting or money since the beginning of the year and is now under independent investigation/review/audit and will be held to account.
Their claims that no monies are due are frankly unbelievable given that, in February, the CEO told me that there would be more than $500,000+ of gross revenues in 2005, and that one show was already in syndication at upto $5,000 per week. I sympathise with the problems they have had, including Shukri asking for monies in advance and one of the films having “property of ...........” across the entire footage and the missing name is not Fourpoint(!) but that is no excuse for not paying what is due and overdue, and then not submitting contractually required accounting in any event.
SO WHERE TO NOW?
Whatever the wastrels on the ADVFN bulletin board believe, the first obligation is to get the creditors of THINK paid – only if that happens is there any sort of future. And you still have to fend off demands, I say they are invalid, from the NSMG liquidator for damages for failure to honour the indemnity for the loan notes – anyone got £2.8 million to spare? – before the shareholders even get a sniff of anything.
To the sole end of getting the THINK creditors paid, and because the KPMG position is so uncertain, I have sold the Fourpoint portfolio, lock stock and barrel, to Indigo. The consideration is to be independently determined and is also to be based upon an independent experts opinion as to the state of the library, because even after 3 years the existing distributors are still finding false representations by Shukri. The consideration is then being ring fenced for the benefit of the THINK creditors in the first instance, with any surplus being handed over to THINK in due course.
The portfolio clearly needs people with media knowledge to make something of it, and THINK does not have, nor can it recruit, anybody as there is no money to pay salaries. Indigo have spent considerable time and money converting formats for distribution in the non-USA markets, and are as familiar with the portfolio as anybody is, and they seem to me to have the professional expertise and contacts to make the most of it to both their and THINK’s advantage. Shukri’s valuations and well-publicised cash flows are just so much rubbish – the figures he quotes from Indigo were based upon his own forecasts and on his representation that the media was ready for distribution, which it was not. I will be surprised if the library turns out to have any truly significant value, but I hope to be proved wrong.
Not one person, other than Shukri, has offered to become a director of this company, so what am I to do?
I have already said I will sell the three corporate directors to anybody who gets the creditors paid, and I repeat it here that if any of you disagree with what I am proposing, then I am quite willing to sell you the three “corporate directors” and let you get on with it – SO LONG AS ALL CREDITORS HAVE BEEN PAID. That is what I have offered Shukri but he says he will only get me paid and not the other creditors, and refuses to show he has the money to meet the commitment, which is a wholly reasonable request given the trail of unpaid Fourpoint bills and prior history of forgery.
As to Shukri’s suitability to be a director of THINK, if he comes up with the money – its all his as far as I am concerned, but he must put the money into escrow to pay the creditors first.
Shukri says he has asked THINK to convene an EGM to appoint his slate of directors – only one or two problems – none of them have signed a consent to act as required by law, and one of his proposed appointees has told me that he would never consider acting in any event. Accordingly Shukri’s request is invalid at even the first and most elementary hurdle he needs to cross, something accepted by his then solicitors, and even if THINK had the money it would be a waste of time and expense to convene an EGM as well as an AGM.
Given that the powers were vested in me by the previous directors under proper advice and authority, and that nobody else even wants to try and sort it out, I intend to do the following:
1. Gather in whatever cash I can.
2. Seek to collect the KPMG monies.
3. Sell the 10% interest in Optical Imaging Ltd. Any offers? David Clement and his wife have right of first refusal, but it might be an interesting way of getting Jellies sorted out.
4. Sell the BUM and Jellies assets of the two subsidiaries to the highest bidder, and to advertise them for sale on eBay so that there is total transparency.
5. If the subsidiary companies do not go with the IP rights sale, let the Registrar of Companies strike off the two subsidiaries and “kiss goodbye” to the £20+ million of tax losses.
6. The Suzy’s Zoo rights lapse next month unless extended for a further 6 months, and THINK does not have the money to even pay for that, let alone pay for the necessary development of the property, so they will probably lapse and I will try and sell the IP that has so far been developed for whatever can be realised.
7. I will sell the Merlin IP rights, such as they are, for whatever I can get for them.
8. Assign the residual legal rights against THINK’s former directors, professional advisers etc to a company connected with and under my control in return for THINK receiving a guaranteed 65% of all recoveries so long as that company pays all legal and other fees. Now here I would appreciate shareholders getting together to front up some money for professional legal help that will undoubtedly be needed at some stage, and they can participate parri-passu in the share of the 35%.
9. If nominees come forward to be directors of THINK, and there is enough money to convene an AGM, and all creditors have been paid BEFORE OCTOBER 1st 2005 , I will convene the AGM to be held on NOVEMBER 4th 2005.
10. If the AGM is not convened, I will place THINK into liquidation on NOVEMBER 4th 2005, not least because it cannot even afford the ongoing costs of maintaining the share register, and then have whatever monies are available distributed to the shareholders in due course by a liquidator.
11. Give you finality on this most sad and disastrous of investments.
Many of the wastrels on the ADVFN bulletin board singly fail to understand that I was not brought in to “liquidate” THINK, I was brought in to try and salvage it and get the shareholders some recompense. That is what I have done and continue to do – most people would have just walked away, but I relish a challenge, including against those nameless posters who try and rubbish whatever anybody does as they do not have the courage to even “step up to the plate” but merely love to spout endless nonsense. Even after sparring with them it is still the case that not one of them volunteers to be a director and run THINK? If they don’t then into the tank it will go, and it will have been their fault that it was not saved as they “just” “think” it should be.
Mark Hardy
For and on behalf of Think Entertainment plc.
-------------------------------------------
UPDATE 21st JUNE 2005
To the Shareholders:
My apologies for the length and complexity of this update, but there is little choice if I am to keep you as informed as possible. Please read it and email me with any queries – I will not be able to respond to lengthy telephone enquiries.
For reasons that will become apparent as you read this update, I am not yet in a position to convene the AGM.
The last date by which the Companies Act requires the AGM to be held by 5th November 2005, and I fully expect to convene it before that date so long as adequate cash resources exist to meet the substantial costs involved of notifying more than 35,000 shareholders of record – such resources are not available to me at the moment - and before anybody asks my own fees remain unpaid as well.
On 9th June I attended the meeting of creditors convened by the liquidators of NewScreen Media Group plc., and they were confirmed in office. The meeting also passed a resolution to appoint a formal creditors committee under the provisions of the Insolvency Act.
The meeting was triggered by my formal notification to the liquidators that Think no longer considered itself bound by the terms of the indemnities given to NSMG in relation to the loan note holders, and also because Think had not, and would no longer, pay the other creditors it had assumed at the time of the reorganisation – and is claiming for repayment of monies it has already paid out to those creditors and note holders.
The principal ground for my decision to repudiate the indemnity was that, in my judgment and based upon evidence I have discovered since my appointment, but which was clearly known to and in the possession of the directors and officers at the time, Think had been induced into entering into the indemnity agreement by prior false utterances, negligence, and breaches of fiduciary duty by the then directors of both companies.
The directors vigorously deny any such impropriety, and have advised the liquidators that they relied upon the advice of professional advisers during the preparation of the declaration of solvency upon which you as shareholders relied. I have seen correspondence from the professional advisers in the months leading up to both the declaration and the FourPoint transaction, that gives me grave cause for concern as to the directors bone fides in carrying out their then continuing fiduciary duty. However, it now falls to the liquidators to investigate the matter, and they have statutory powers to compel attendance and the giving of evidence under oath in the preparation of their report to the DTI as to the conduct of the directors. I will be giving them any and all assistance as they may require.
Think has also made a claim as a creditor in the NSMG liquidation representing the shortfall in the value of the assets declared by the directors and for the costs of the transaction that should never have occurred in the first place because, in my judgment, the overvaluing and realisability of the assets within the terms of the statutory declaration was known to the directors at the time, but was not disclosed to you as shareholders when you were asked to vote on the proposal.
The duty of the liquidators is now to enquire into the affairs of the company, to gather in the assets, to distribute monies firstly to creditors and any surplus thereafter to the shareholders. I believe that the directors are personally liable for the consequences of what I say is a clearly and knowingly false and misleading declaration of solvency, and eventually there will not only be payment in full to all the loan note holders, but there will also be substantial sums paid to Think as both a creditor and sole shareholder of NSMG.
The liquidators are also obliged by law to report to the Department of Trade and Industry on the conduct of the directors. They also have the power to revisit the administration process and acts leading up to that event back to the very incorporation of Just Group if necessary.
The propriety of the expenditure of the £5,800,000 new share money will also fall to be investigated by the liquidators if they deem it appropriate, and they have authority to demand repayment of any monies that they may decide were improperly applied. I will however, and as promised, be including a detailed analysis of the monies spent with the notice convening the AGM, and you will be able to make representations to the liquidators as to areas you believe they should investigate.
So what does all this mean in simple English?
Subject to the liquidators determination that I have proper grounds for repudiation of the indemnities:
1. Think will have eliminated the majority of its debts, other than current payables.
2. Think’s remaining assets are:
a. The FourPoint library
b. 4 subsidiary companies:
i. Think Entertainment Ltd. – Merlin and Suzy’s Zoo
ii. NSMG Licensing: - B.U.M IP and tax losses
iii. NSMG Entertainment: - Jellies IP and tax losses
iv. Lime TV:- Worthless
c. Claims against the directors and professional advisers for negligence in the Fourpoint transaction. Ordinary Damages in excess of £1million, and exemplary damages against the professional advisers that will fall to be assessed by the Court.
d. Claims against Fourpoint for matters arising in the business asset acquisition agreement. This is unlikely to realise cash.
If the liquidators contest my repudiation of the indemnities, and were to assert claims against Think, then Think will immediately apply to the High Court to have any such claim adjudicated at an early hearing. If Think were not to prevail then it would almost certainly have to be placed in compulsory liquidation on the statutory grounds of “Public Interest” if nothing else. Members’ voluntary liquidation is not an option, not least as nobody in their right mind would sign a declaration of solvency, and it would be in everybody’s best interest to have a compulsory liquidation where another liquidator has further statutory powers of compulsion and investigation.
The dichotomy is now to evaluate whether Think’s asset base is capable of forming the basis of any ongoing business that could continue to trade, or whether it should voluntarily cease trading and ask the High Court to wind it up anyway.
At this stage I should inform you that last week I was approached by a trade purchaser asking to carry out due diligence on the IP rights –other than the Fourpoint library – with a view to making an offer to acquire the rights in return for a share of future income, if any, and a percentage (to be agreed) of any collectible debts relating to prior invoices. Many of you are aware that the many millions of pounds of uncollected invoiced debts on the books of the subsidiaries prior to administration are properly regarded as largely uncollectible, and have knowingly been so for many years.
I believe the trade purchaser is genuine in their expression of interest, and I have reviewed their reputation and credibility to perform if we move to a deal, and it is beyond doubt. Should this proposal come to a conditional contract being agreed, then, whether or not required by statute or best practice, I will seek prior shareholder approval to the transaction at a General Meeting.
It has been made clear to me that the offer will not involve significant cash on signature, but will be cash flow against future sales and collections if and when made.
I have also asked professional advisers to solicit offers for the two tax loss subsidiaries, and if such a buyer could be found, this may influence the attractiveness or structure of any trade purchaser transaction.
I also continue to explore options on the Suzy’s Zoo and Merlin matters, but am constrained by lack of cash and production resources as well as others understandable reluctance to deal with Think.
So far as the FourPoint library is concerned, it continues to disappoint. Contrary to earlier expectations and hopes, it is still not producing any cash flow whatsoever at the present time. I am hopeful that this will be reversed and I am insisting that estimated sales volumes be included in the two distribution contracts that I am presently renegotiating.
One option that I am exploring at the moment is to sell the FourPoint library to a special purpose vehicle that would form the core of a much larger “library” that might just prove to be capable of being profitably run.
I have met, and continue to meet, with the principals of FourPoint and have reached a tentative deal to resolve disputes, but it remains to be finalised.
If all these matters were to conclude, then Think would end up as a dormant company with some cash in the bank and some future cash flow streams. In my judgment even if this happy state were to occur, the costs of running and maintaining the very large public company shareholder base would not be justifiable, so something has to be proposed to eliminate the majority of your holdings – a take-over or liquidation are the only options that would satisfy the need to act in the interests of all, but a take over would be a brave and costly act.
In my judgment, there is no possibility that the shares could ever be listed for trading on any recognised exchange and at least 95% of the shareholders will never receive any meaningful value as the vast number of shares in issue are unlikely to be worth more than small fractions of a penny per share.
So as shareholders you have some interesting decisions to take, and you should fully recognise that it is only the repudiation of the debt indemnity as a result of the improper acts of your then directors, that has left you with any value whatsoever. It is fair to say that whatever the improper acts of the FourPoint principals, they have lost more than the original shareholders of JUST/NSMG who took on shares in Think that were of negative value at the outset. FourPoint started with 100% of the library, and now have only a 25% interest in it, and have given you 75%.
Given that nobody has put their name forward to be a director of Think, and the existing directors will resign at the AGM at the conclusion of which my power of attorney will also lapse, the best solution is probably to ask you all to exchange your shares for an interest in a trust or special purpose vehicle. This would collect any cash and distribute it to you or a charity of your choice after a fixed period of, say, 10 years, but in the meantime it would not have the excessive costs of maintaining the shareholder administration costs (£100,000 per annum is the minimum) and would avoid the costs of liquidation.
Hindsight has shown that the rescue of Just Group was the most misguided way to approach salvaging value, if any, from Butt Ugly Martians etc. As somebody said to me the other day, “this is the company that just will not die” – well perhaps it is time to do so, and in the absence of viable proposals for salvage and going forward, it will be for you to decide at the AGM when I will table appropriate motions for you to vote on.
Mark Hardy
For and on behalf of Think Entertainment plc
-------------------------------------------
Update May 27th 2005
In a letter dated 26 May 2005 one of the Joint Liquidators of NEWSCREEN MEDIA GROUP plc (formerly JUST GROUP plc) wrote to the creditors and directors of that company.
Some salient extracts are:
· The liquidators were appointed by the shareholders at the EGM held on 21 May 2004
· This was a members Voluntary Liquidation and its purpose was to enable the transfer of all the Company’s business, assets and liabilities to a new company (THINK ENTERTAINMENT plc) pursuant to a Section 110 (of the Insolvency Act 1986) agreement approved by the shareholders.
· NSMG entered into the agreement in consideration of:
o THINK issuing a new share in THINK for every share in NSMG
o THINK providing a full indemnity to meet NSMG’s liabilities.
· On Thursday 19 May 2005, the liquidator “formed the opinion that NSMG will be unable to pay its debts (at the date of liquidation) in full within the relevant timescales laid down by the Insolvency Act” and accordingly he is obliged to convene a meeting of creditors
· That meeting will be held at 11.00am on Wednesday 8 June 2005 for the purpose of (among other things):
o Receiving the liquidators report on the conduct of the liquidation and the events giving rise to their opinion that NSMG will be unable to pay its debts
Many of you will realise that some of the creditors and former directors of NSMG are also shareholders in THINK, and I regard it as right and proper that you, as a class of shareholders, have as full an understanding of the position as any single shareholder who just happens to be a creditor or former director. However please understand that the law provides that the meeting is for creditors only and shareholders are not able to attend.
The liquidator’s concluding paragraph includes the phrase “I appreciate that these are unusual circumstances …”, that applies equally to my position at THINK and I ask that you bear with me and understand that I will not be commenting further on this matter until after that meeting has been held, and at which time I will provide a more detailed analysis of where your company is presently positioned.
Mark Hardy
Company Secretary
-------------------------------------------
Update April 16th, 2005
To the shareholders
I have decided to try to maintain the simplicity of the website by keeping it to one page and retaining the previous updates in sequence for ease of reference. It will make it a long document but that should help new visitors place things in context, and will hopefully provide an evidentiary trail for all of you leading up to the AGM. So I hope you have scroll wheels on your mouse.
A little bit of housekeeping first:
My apologies to those shareholders who have left phone messages but have not yet had a reply, I will try and get back to you over the next couple of weeks. Emails inevitably get a swifter reply and I do recommend that route if possible.
I am getting many shareholder requests for address changes, lost certificates etc. All enquiries are handled by the Company’s Registrars, Capita, to whom any letters are forwarded. They can be reached readily via their own web site using the reference number on your share certificates: http://www.capitaregistrars.com/shareholder/index.asp
There are also many requests to provide share values for probate purposes, as well as endless requests for knowledge of when the company’s shares are going to be listed on a recognised investment exchange. My answer to the first question is: the shares should presently be deemed to have nil value; and to the second the answer is: not in the foreseeable future.
DATE OF THE AGM
I am not yet able to give any definitive indication of when I will be able to send out the notice to convene the meeting, but I am working with the liquidators of the old Just/Newscreen, who have a critical date of May 21st 2005: the first anniversary of the Members Voluntary Liquidation.
At the present time there is considerable uncertainty that all the debts/obligations of that liquidation will have been paid/settled within the twelve month prescribed statutory period: if they are not, then the liquidation will automatically convert into an insolvent creditors liquidation, and I am presently, and carefully, considering the implications.
The notice convening the AGM cannot reasonably be sent until there is certainty on this matter.
NOMINATIONS TO BE ELECTED A DIRECTOR
I have been asked to confirm how proposals for new directors should be presented.
The present directors, three newly incorporated English Limited Liability companies, will cease to hold office at the AGM. The Articles of Association require that there be a minimum of three directors of the company, all of whom will be elected at the AGM.
It is therefore essential that individuals who wish to put their names forward for election should do so on the basis that all the shareholders must have complete knowledge of their credentials and eligibility for office, as well as their skill base. The nominee should also set out a relatively detailed plan of the direction in which they propose to take the company, and how they propose to run the affairs of the company.
I appreciate the difficulties of doing a business plan in the absence of accounts, but so far as practicable I will share financial data and other corporate data via this web site. I have received some requests for access to the entirety of the companies records on a “due diligence” basis, but I will not permit this unless I am satisfied as to the bone fides of the request, and in receipt of third party confirmation of funds or other commitments that would clearly drive the business forward. Any such proposal would most likely require approval by the shareholders as a Special Resolution in any event.
For those who wish to put their names forward, in my capacity as Company Secretary I require submission of a hard copy CV from each proposed nominee to arrive at the Registered Office no later than May 21st 2005, and the document must include a signed affirmation by the nominee that the document contains all matters which should properly be considered by the shareholders, including details of all law suits within the last five years to which the applicant is, or has been, a party as well as any criminal proceedings which are current, pending or threatened against the nominee.
In particular the CV should reference any and all dealings, other than as a shareholder of record (which should be disclosed), that the nominee or any company in which he/she holds (has held) more than 5% of the issued shares, has had with this company, its subsidiary, associated or predecessor entities.
The CV should also include a signed affirmation that the nominee is agreeable to the document being circulated to shareholders with the notice convening the AGM.
I am happy to consider draft CV’s on a wholly confidential basis prior to actual submission, and to give any guidance/comments that I can.
I will then review the final/submitted CV and respond within 14 days asking for permission to disclose such other information and/or disclosures that I consider should be presented to the shareholders when considering the appointment. If the nominee then affirms that they want their name to go forward, they will then be required to sign the formal consent to act required by the Companies Acts, and to provide a certified copy of their passport.
All nominees should be aware of the prospect that they may be assuming civil and/or criminal liability for their acts or omissions as directors, and should take their own legal advice.
CURRENT NEWS
DEMANDS FOR DAMAGES
Many of you are aware that certain critical documents relating to last summer’s acquisition of the assets of Four Point have proved to be forgeries. I am aware that others have reported the matter to the relevant authorities. The consequences, and damages suffered as a result, of those forgeries are still being mitigated and quantified. I am confident that the matter will be fully quantified before the AGM notice is circulated.
In the meantime I have notified the former directors and secretary of your company that I consider they are liable to make good certain financial losses and/or other obligations arising from both the forged documents and other matters contained in the circular seeking your approval for the Four Point acquisition. I have also asserted a claim for gross professional negligence against one of the professional advisers to the company in connection with the Four Point transaction
The Civil Procedure Rules require certain protocols to be complied with, so far as practicable, and the matter is presently in the pre-litigation paper swap and investigation phase in an attempt to avoid litigation.
I would wish you to know that the former directors and secretary against whom I have asserted claims, have threatened me personally with an action for defamation should I publish any of the allegations. Rest assured I will not be cowed by threats designed to suppress clear evidence, and should the matter proceed to litigation, the law provides - as a matter of public policy - that the Statement of Claim is available to any member of the public from the issuing office at the High Court in London.
This coming week I am meeting with Shukri Ghalayini and Rafic Saadeh, two of the principals of Four Point, with a view to resolution of disputes without resorting to litigation.
HISTORICAL EVENTS
Given the critical nature of the May 21st deadline, I do not propose to go into detail about the matters I have discovered concerning matters arising prior to the formation of Think. At the moment all rights in respect of those matters are vested in Think, but if the Just/Newscreen solvent liquidation were to convert into an insolvent liquidation, then many of the rights would revert to the liquidators who would have statutory powers to investigate further – indeed back to the very inception of the Just Group entities – including powers to compel testimony from all former directors and officers. The liquidators are then required to submit a report to the DTI on the conduct of those persons.
Suffice it to say I am very concerned at some of the matters that have come to light, and am confident that any recovery of monies would flow through to Think in due course and in any event.
FINANCIAL STATUS
It is hardly a secret I was brought into the Think scenario because the company was struggling to meet its obligations. That position has now stabilised, with no small thanks to the help and forbearance offered by the many suppliers to the company. I am reasonably confident that the position is now stable, and we can move forward.
When evaluating the financial position of Think, you should assume a Nil liquid asset starting point and a yet to be determined asset value to be ascribed to the Four Point library.
Since Wilf Shorrocks confirmed that neither he nor Peak Entertainment had any present interest in acquiring the BUM rights, I have approached a ‘trade buyer’ to see if they want to acquire the two former Just Group subsidiaries for a sum based upon their value as tax loss companies, together with an amount to be agreed for any amounts actually recovered from the many millions of pounds of previously unrecovered royalties, and a share of any future income from the BUM and Jellies properties. I am awaiting a response.
On the Suzy Zoo property, I am awaiting confirmation from the ‘broadcaster’ as to how they wish to deal with Think’s inevitable breach of contract that will occur as a result of failure to deliver the 26 completed episodes due by June 15th 2005.
The Merlin property is a speculative pre-production situation without any guarantees of there being a final production contract. I am soliciting monies on a non-recourse £100,000 secured debenture basis from interested parties, in order to maintain a ‘seat at the table’ during the development phase, but there would still be no guarantee that production would ensue. Your company would retain the rights to the property, subject only to repayment of the debt.
The Four Point portfolio continues to disappoint in that, contrary to my earlier hopes and expectation, whilst it is profitable in accounting terms it is no longer cash flow generative. The problems lie in the dealings with historic inadequacy of IP rights/title, which the distributors are having to face and cure to meet their and our contractual commitments. The costs of the cure are being deducted, with my agreement, from the sums otherwise currently due in order to secure and enhance the future value of the properties. I am hopeful that the cash flow will be positive from June 2005 onwards.
I am negotiating new distribution agreements with the present US and UK distributors as the inherited US distributor contract expires on May 1st 2005, and I believe it is in the best interests of the company to have common agreements with common expiry dates. The commission rates and other terms will be industry standard.
The work of the administrators of the old Just Group companies is nearly complete, and there is likely to be a surplus from the monies given to KPMG from the proceeds of the share issue in 2002. The amount and timing of the receipt may be affected by the judgment of the House of Lords in an unrelated case to be heard before the end of this month but in which judgment is not expected before end July. I am hopeful that the amount can be accrued in the financial data to be presented at the AGM.
Regards
Mark Hardy
-----------------------------------------
Update March 4th, 2005
To the shareholders
I have now been appointed for little more than one month, but in that time I have had the opportunity to review the 'big picture' financial and legal position of the company and its subsidiaries. The matters I have uncovered give considerable cause for concern in relation to the 2004 transaction relating to the acquisition of the assets of Four Point Entertainment LLC that was approved by shareholders at an Extraordinary Meeting on August 12th 2004. I am taking advice, without incurring substantial legal fees, and expect to be able to report in detail by the end of the month as to what action I propose to take to recover monies properly due to the company for damage suffered. I appreciate that many will be disappointed not to be told more at this time, but it is essential that all pre-trial settlement opportunities are explored before litigation is commenced. For those who are interested, the TES group have helpfully posted pdf copies of the Los Angeles Court filings for download at http://investoraction.co.uk/modules.php?name=Forums&file=viewtopic&t=9 which will tell you more than I ever could in this short statement.
I have set in train a review of the company's IP rights, without cost, and will be sharing the details, item by item, with you when the process is complete. It does however seem to me that many of the rights relating to the Butt Ugly Martians and Jellies are not as complete as many would wish or had previously thought to be the case and are generating very limited revenue, with little prospect for future substantial revenue even if the properties are 'rested' for a few years.
The Four Point portfolio is best described as B/C grade but is at least generating revenue to meet current payables, and I am optimistic that it will generate surplus cash flow in the near term for at least a year or so. The Suzy's Zoo IP (see www.suzyszoo.com ) is merely an option to create an animation and associated short term merchandising rights related to the animation, and requires the successful sourcing of considerable deficit finance if the undoubted potential is to be exploited. The Merlin concept is just that, a concept, and is presently under co-production discussions with interested parties.
I am actively seeking to appoint agents to collect such prior receivables as may actually be recoverable. As the company has no employees, any agents will be retained on a contingency fee basis only.
At the moment no IP rights are being sold, although I am open to all reasonable cash only offers for the residual value of the Butt Ugly Martians property, including the 7ft tall costumes and inflatable space ship!
I must express my gratitude to the considerable (expenses only) voluntary help I am receiving in trying to create a report to shareholders as to "what happened to the money", particularly as the administration and subsequent liquidation mean that you have not been presented with any accounts since the 2000 year end. That report will also present an overview of the major business transactions and management thereof since the fateful Mediakey acquisition, and the contents will be my responsibility alone.
relevant dates leading to the AGM:
The old Just Group plc is the subject of a declaration as to it being a solvent Members Voluntary liquidation, and so long as all the costs and creditors have been paid by the first anniversary of the liquidation, i.e. May 21st 2005, then the final meeting of shareholders of that company (substantially the same as the shareholders of Think) must be held within 3 months of that date, i.e. by August 21st, 2005. The supervisors of the CVA also wish to circulate their final report to shareholders.
It is illogical, and not in the company's best interest, to incur the costs associated with circularising more than 35,000 shareholders of record more than once if it can be avoided, so I have discussed the principal of sending the notices convening all three meetings as one mailing. I presently anticipate that the notice to shareholders will be sent no later than the first half of June to convene the AGM in July. The law requires the AGM to be held on or before November 5th and audited accounts for the period ended July 31st 2005 to be lodged with the Registrar of Companies shortly thereafter - you should be aware that the company has not appointed auditors since it was incorporated, and nobody that I have approached seems to want the job at the moment, so I would expect the AGM to appoint auditors with such indemnities as are reasonable in this difficult situation.
The precise date of the AGM is uncertain as I will need to propose new directors for the company as the existing 3 new corporate bodies retire automatically and will not be seeking re-election. Accordingly I will be asking for nominees to the Board in due course, and I have already been placed on notice that some of the existing body of shareholders will be offering themselves for election. I have indicated that I will put forward all persons as may be properly elected subject to prior receipt of all the requirements of the Companies Acts legislation and the Articles of Association of the company. I will, after Easter, provide details of the requirements that I shall require, and I have told those that have already expressed interest that I deem it essential that they provide an outline business plan that they wish to adopt if elected.
Therefore I presently anticipate convening the meeting for mid-late July to give enough time for resolutions to be put forward for my proper evaluation and consideration as being properly put to the meeting. For the avoidance of all doubt, I will be acting as Chairman of the meeting and at the conclusion of the meeting my Power of Attorney is automatically revoked.
Regards
Mark Hardy
This site has been set up to provide information to the shareholders of Think Entertainment plc about the AGM. It is not, and will not be, a bulletin board but it will be the source of detailed and verified information about the affairs of your company for consideration at the meeting.
Registered in England No.05121390 at: 3 The Court, Lanwades Business Park, Kentford, CB8 7PN
Contact: Mark Hardy – acting by Power of Attorney
Email: thinkplc@gmail.com
Update December 11th 2005
see also:http://justgroupandtheseriousfraudoffice.blogspot.com/
-------------------------------------------
Status report:
Due to the insufficiency of resources it has been impossible to (i) convene the Annual General Meeting before the statutory due date of November 5th and (ii) to file audited accounts with Companies House for the twelve month period since incorporation by the statutory due date of December 5th.
On November 4th all the directors and Company Secretary resigned from office.
Solely because of the complete lack of resources and inability to trade other than whilst insolvent, all the assets of the company had been transferred to Wastrels Limited in return for an indemnity by that company in respect of any and all claims that could “prove for dividend” in the liquidation of Think Entertainment if it had been liquidated at that date.
The claimants able to prove for dividend include the shareholders of Think other than those against whom counterclaims can be properly asserted.
Counterclaims for gross negligence, mismanagement and breaches of fiduciary duty exist against all shareholders who were directors of either Think or its predecessor Newscreen Media Group after the effective date of the Creditors Voluntary Arrangement, as well as Fourpoint Entertainment, and therefore they will be excluded from any eventual distribution as the claims far outway any amount that could otherwise conceivably be due to them in a liquidation.
It is to be regretted, but fully understandable due to lack of funds, that Capita will not maintain the share register. There are not even enough resources to meet the cost of having the data transferred to a simple PC based system, and therefore there will be no amendments to the Register post July 28th 2005 when Capita ceased there duties. Combined with there being no directors to authorise any changes to the Register, this will cause difficulties for anyone wishing to transfer their shares as no such transfer can take place, and will cause difficulties for those applying for probate upon the death of a shareholder.
Many shareholders have asked when the company will become worthless for the purposes of Capital Gains Tax. That is now only likely to be when the Registrar of Companies decides to “strike off” the company from his register, but that is unlikely to be within the next 12 months even though the company has not traded for many months, but it is now inevitable not least as there are ever increasing fines accruing daily for failing to file accounts, which fines cannot be paid.
So this time it really is “the end” for the “company that wouldn’t die”. Reality is that you were all stupid to rescue Just Group in the manner that you did, (why oh why did you not buy the IP rights that KPMG would have sold you?) and you compounded that by appointing directors who had little knowledge of either running a public company or of the media business other than in the realms of fantasy and “dreaming”, which they compounded by the dreadful Fourpoint acquisition as a “last roll of the dice” which anyone with an ounce of common sense could have seen was a fraud and a sham from the outset – if they had carried out proper due diligence – which they did not.
Solely as successor in title, Wastrels Limited (www.wastrels.co.uk) is now actively seeking secured non-recourse funding to pursue claims against the directors of Think and is hopeful that asset realisations will occur such that not only can Think’s creditors be paid but then payments eventually be made to the non-culpable shareholders of Think.
In this way those responsible for the Fourpoint losses can be made to pay. As I have said many times, you must contact the liquidator of Newscreen Media in relation to the dreadful mismanagement of that company (including when it was Just Group).
In January 2005 there really was hope that Think could be saved but that was based upon early realisation of monies held by KPMG from the administration of the old Just Group companies, which monies were overpayments from the rescue funds. The directors of Think were grossly negligent in their pursuit of those monies, and KPMG continue to improperly and negligently delay sorting out those funds, and have therefore directly and knowingly added to the problems of Think such as to have significantly contributed to the present position – they still refuse to apply for a hearing date at the High Court.
Wastrels Limited intends to pursue KPMG both for monies due and for damages.
In summary, the game is only just starting, but this time it does not have the baggage of the impossible costs associated with running a company with 55,000+ shareholders, nor does it have the impossible challenge of trying to develop any form of ongoing business. We are now solely about getting creditors paid and justice for the non-director shareholders.
For the sake of simplicity, I have reinstated all the prior updates below this one, and trust that those who believe they were improperly induced into buying shares in Just Group and/or Newscreen Media will now give their evidence to the liquidator of Newscreen, and if necessary fund his bringing of legal proceedings. Any surplus in the Newscreen estate will flow to Wastrels Limited and then to the non-culpable shareholders.
-------------------------------------------
UPDATE September 27th 2005
THE “FOURPOINT” LIBRARY
Matters go from bad to worse.
I have last week been back to Los Angeles and “discussed” the state of the outstanding dealings with the previous US distributor, the Peter Rogers Organization, and their lawyers and have now received some detailed accounting, albeit that it raises more questions than it answers in certain areas including a post-it note that says “Stephen is charging another $10,000 to expenses for his work outside sales”.
Accordingly I have retained the services of a US media industry expert, Mr. Rob Aft, to audit the accounting, collect outstanding monies and prepare a report of the state of the materials and IP rights; that report will form the basis of calculating the monetary consideration due on the sale of the library to Indigo Film & TV Ltd. Mr. Aft’s remuneration is on a contingency fee basis and entirely conditional on recoveries being made.
Excluding a heretofore unprofitable (except for the advertisers and distributor) “barter” deal for the Amazing America property, presently syndicated on some US stations, the very limited “accounting” shows:
TOTAL GROSS SALES since May 2003: US$790,811
Future monies due to THINK: US$144,363
(No monies have been received by Think since autumn 2004 and apparently almost none has been payable – a matter under dispute and being audited by Mr. Aft).
The equivalent non-US gross sales by Indigo amounts to less than $250,000, and given the expenses incurred in converting the materials to non-US standards, there has not yet been any significant net income to Think, and the present status of the accounting shows that monies are due to Indigo for unrecovered expenses.
I am sure you will agree that this is hardly the “very valuable – multi million dollar” library that Shukri still keeps telling anyone who will listen.
Given that most of this desultory income had arisen before the acquisition by your former directors, it brings into question in even starker light the well documented lack of due diligence performed ahead of the acquisition.
COMPANY DIRECTORS
I still have no nominations from anyone to become a director and take on the running of this company, so as previously advised unless nominations are received by October 3rd, I will act unilaterally and without further notice as the law requires me to do.
BUTT UGLY MARTIANS
I am receiving some enquiries, from shareholders and others, and the likely structure of any successful bid is most likely to reflect a cash down-payment and a share of both future income and collection of such past-due receivables as can be recovered.
JELLIES – JELLIKINS
This matter is not progressing as swiftly as hoped for, and it is clear that it will to a great extent revolve around the resolution of trade disputes with your former director, David Clements and his company Optical Imaging (of which Think directly owns 10%). The matter of the dispute between the liquidator of Newscreen Media and Mr. Clements is, I believe, unaffected by this matter.
Mark Hardy
For and on behalf of Think Entertainment plc.
UPDATE September 5th 2005
Share registration:
I have been asked to clarify why Capita have suspended their function as share registrars. It is because their bills remain unpaid, and whilst they are being very patient and as helpful as can be, they cannot reasonably be expected to provide further updating services until their bills are paid.
WHERE DID THE MONEY GO?
As you will know I had intended to provide you today with copies of the detailed accounting for the rescue monies culminating in the balance of £748,172 left on May 20th 2004 as disclosed to you in the Fourpoint circular dated July 19th 2004; but which consolidated amount already included more than £650,000 collected by THINK’s two subsidiary companies since the CVA, so for all practical purposes you can see that the rescue money had all been spent before the THINK/Fourpoint deal was put to you.
I advised your former director, Brian Downs, of my intention to publish the detailed analysis and he objected most vociferously and in no uncertain terms. I am aware that on September 1st Mr. Downs, and other former directors, were interviewed by the Joint Liquidators of Newscreen Media Group plc, who then wrote to me on September 2nd formally advising me that without express authority Think Entertainment plc has no power or standing to deal with the records of NSMG, “which includes posting them on the internet”. Such express authority was not given “at this stage”.
I do not agree with the liquidators’ position, as it is my firm opinion that the reorganisation that brought THINK into existence vested THINK with title to all NSMG assets, including its books and records in order to continue the business. Indeed that is supported by the acts of your previous directors, as they did not deliver the books and records to the liquidators upon their appointment in May 2004 before the Section 110 reorganisation. Since the conversion to a Creditors Voluntary liquidation, the liquidators have now asked for the books and records and accordingly I have arranged to have copies made so that the liquidator may carry out his investigative duties, whilst THINK can pursue its remedies by reference to what was, I contend, handed over to it in the reorganisation.
I contend that it is not up to the liquidators to determine how information belonging to THINK is used unless they can show that publication would be prejudicial to their own investigations, which are of course aimed at getting the loan note and other creditors of NSMG (not creditors of THINK) paid in full. I am of the opinion that the publication of a limited amount of information would not be prejudicial to those investigations, but in the meantime I am bound to acquiesce to the liquidators request as they are “officers of the court”, and the only remedy available is to apply to the High Court to overturn their decision, something that there are not sufficient funds on hand to do at the present time, particularly as THINK’s own creditors remain unpaid.
In any event a hearing before the High Court may be sooner rather than later, because, having previously consented to a payment on account from the more than £250,000 surplus “shareholder rescue” monies held by the KPMG administrators being paid to THINK, the Liquidators lawyers changed their advice over the course of a weekend, and on July 11th 2005 the Liquidators instructed KPMG that under no circumstances should any monies be paid to THINK when payment instructions had already been agreed and given, and creditors advised they were being paid the following day. Nice one!
If those monies had been paid to THINK, then all THINK’s own pressing creditors would have already been paid by now and the AGM be on track.
KPMG had no choice but to then ask the High Court to determine to whom the monies should be paid, and we are all hopeful that the matter will be set down for hearing in the very near future.
Whilst I believe that the liquidators and I continue to have a good working relationship, it is inevitable that there will be conflicts of interest in some areas and they must, in law, fall to be contested before and decided by a neutral High Court judge.
In their investigation of the affairs of Just Group plc (subsequently renamed Newscreen Media Group plc) and their subsequent compulsory report to the DTI on the conduct of all the directors since incorporation, there are many matters which many of you have told me you believe were improper and/or deceitful – or even worse, and it is for you to bring those to the attention of the liquidators whose contact details can be found at http://www.geoffreymartin.co.uk/contact.htm You will find them extremely professional and thorough, but please note the request that “whilst happy to receive information from shareholders (or anybody else) it must be relevant, factual and supported by evidence (they do not want gossip or unsubstantiated information) as this will only slow the investigation process down”. So do not burden them with the THINK/Fourpoint deal, or reprint the nonsensical and unsubstantiated claims from the ADVFN bulletin boards, as they will be largely unable to help you, not least as the Fourpoint deal is a matter of contract law for THINK alone.
I will continue to bring matters to their attention where there is a potentially positive gain for THINK, and I believe we will end up with some overlapping commonality of interest in the pursuit in the High Court of those directors appointed since the CVA who caused THINK to come into existence as a separate legal entity with new creditors and obligations, and on what I say was based upon -
knowingly false and gross misrepresentation
On June 21st 2004 Brian Downs and David Clement approved the accounts for Newscreen Entertainment Ltd and Newscreen Licensing Ltd for the 6 months ended July 31st 2003. The directors’ report was signed by Graham Calderbank, the then Company Secretary, and who appears to have prepared the financial statements.
Those accounts were audited by Deloitte & Touche, Leeds and have a “clean” audit opinion, and are filed at Companies House and are available to any member of the public.
HOWEVER the accounts for each company show at Note 14 and 15 respectively (my emphasis added in capital letters and underlining) that £15,000,000 previously due to Newscreen Media Group plc was written off as follows:
POST BALANCE SHEET EVENTS
On 20 May 2004 the Newscreen Media Group plc, the company’s parent undertaking on that date, approved the waiver of indebtedness due to it of £7,500,000 to restore the company’s asset base. On 21 May the shareholders of Newscreen Media Group plc approved a group reconstruction under Section 110 of the Insolvency Act. As part of this reconstruction agreement the remaining balance due to Newscreen Media Group plc was assigned to NSMG (2004) plc. IT WAS AGREED BY NSMG (2004) plc THAT THE AMOUNTS DUE WOULD NOT BE PAYABLE FOR A PERIOD OF AT LEAST ONE YEAR FROM THE DATE OF APPROVAL OF THESE ACCOUNTS.
The various drafts of the accounts show that such a note was intended for inclusion as early as February 2004.
The 19th July circular then showed you that the “estimated realisable value of assets” assigned to THINK was £4,145,160 and included “debtors” (i.e. monies due and not the value of the investment) of £2,951,755 due from the two subsidiaries, and would be realisable before May 20th 2005.
Now please bear in mind that by this stage the directors had since the CVA only managed to collect £677,969 of 3rd party royalties due, appear not to have not paid any outgoing royalties on those receipts, and yet would collect a further £2,952,755 within 12 months! And then they don’t tell you that the deal with the auditors is that no monies will be paid over before July 22nd 2005 anyway!
I have seen some things in my time, but this one takes the biscuit and in my judgment should be pursued by the shareholders, jointly or individually under the relevant Securities legislation because of the disclosure in a circular.
It is compounded even more because those 3rd parties that owed money to the subsidiaries had stated in many cases that monies would not be paid because Just Group had failed to comply with its obligations from the outset.
Do not misunderstand me; I have some sympathy with the directors you chose for the rescue bid. However when the game was up, they just failed to tell you what was going on – failed to admit defeat and then misrepresented the position to you and, most culpably, in the sworn declaration of solvency and to Fourpoint. That is now their personal liability, and I wish them good luck, as I would rather prosecute than defend their cause.
Today’s problem is that the Registrar of Companies is now threatening to strike off the two subsidiary companies for failing to file accounts, but I cannot file accounts unless they are audited (Deloittes are still the auditors) and I have no money to pay for an audit as required for all companies owned at any time in the financial year by a public company. The one person who, in my opinion, will be happy with that is David Clement who continues to promote Jellies on his website but refuses to hand over materials even though he has been paid in excess of £500,000 for the second series – and yes he was a director of THINK and claims he is owed yet more money! THINK does however own 10% of his company, Optical Imaging – any bidders?
In the event that the companies are struck off the remaining assets become the property of the Duchy of Cornwall, aka Prince Charles – and if they have not been previously sold, I will personally be writing to him wishing him the best of luck with BUM’s and Jellies!
Which brings me to -
THE FOURPOINT DEAL
Let me firstly say I have some sympathy with Fourpoint in that they should have known that the amounts being shown as assets were in reality not so, certainly on the time scale envisaged, but they carried out almost stupidly cursory and little due diligence in their haste to “do the deal”.
I have offered, as part of a compromise, to let them retain the 25% interest presently allotted but against which there are outstanding liens asserted by THINK for multi million damages, and then to Fourpoint’s own creditors for unpaid legal and other bills.
Your directors also contractually represented to Fourpoint that THINK had enough working capital for the next 12 months, but by the time the circular was sent to you, their financial advisers confirmed that the directors had been unable to satisfy themselves that this was actually the case, but this information was then not disclosed to you or Shukri.
It is clear to me that Shukri thought there was a lot of money and assets in THINK that would have enabled him to pursue his dream of building a bigger media group – the concept of which was prima facie wholly meritorious.
The only problem was there was insufficient cash in THINK; BUM and Jellies were producing next to nothing and few debts were collected or collectible; and Shukri had no cash in Fourpoint to consummate even the basic deals he had managed to drag in.
It then transpired that he had forged, or had caused and/or knew to be forged, the documents that permitted the assignment of the most high profile asset you were being asked to approve on the face of the circular- viz the SuperStars II series; but even worse was to be revealed, he had forged, or caused and/or knew to be forged, the signature of one of the Superstars giving personal consent to the use of the footage. Muppet or what?!? When Discovery Channel found out, they “hit the roof”.
In summary what happened, in my honestly held belief, was that grossly negligent directors, desperate to “do any deal”, met a fraudster and forger, and all you shareholders were conned. I am supported by the advice of the professional advisers to the deal that the directors must plan for it all going wrong and put in place proper management controls for such an event. When it went wrong, as it was destined to do, they had not put such controls in place, and did not then do so – they just resigned and left it all to Cathy Malatesta to deal with. She at least tried, brought in a couple of experts Peter Keefe and David Lawley, but they could achieve nothing so Cathy went back to the USA where she now resides and, I am assured, has nothing to do with any of the THINK/Fourpoint assets, not even the Suzy’s Zoo property contrary to some publicity that might otherwise indicate the contrary.
The forged consent to assignment document was so blatant an unacceptable legal document, that even the most recently recruited trainee accountant or solicitor would have spotted it, but not the directors or those others acting for THINK. This document was one of the very few “conditions precedent” to the closing – i.e. if it did not happen, the deal did not complete.
However, at the “closing” where Cobbetts (the well known Leeds law firm) were acting to ensure a successful completion (their words not mine), they seemingly failed to spot that the fax had been received from Shukri’s US fax number purporting to confirm that Discovery had agreed to the assignment of the Superstars II property. In this case the fax bears no letterhead, the salutation was to a person other than the addressee, and is frankly so amateurish as to strain credulity beyond breaking point. As it turns out the addressee had left the employment of Discovery many months before in any event so could not have signed it! If the directors had been awake and/or properly made aware of this so clearly false document before they signed to “complete” the deal, after being told all conditions precedent had been satisfied, surely even they would have stopped – well perhaps not given what seems to me, and many others, their desperation to do any deal whatsoever.
The most recent case of fraudulent faxes from persons other than the 3rd party aimed at deceiving professionals is the Italian multi-national Parmalat, and that cost investors and banks billions and billions of dollars.
In my opinion Cobbetts were so grossly negligent as to warrant the High Court awarding “exemplary” damages and the Law Society imposing penalties for gross professional negligence. That is what your company is pursuing.
The Fourpoint portfolio has turned out to be an absolute dog, contrary to my earlier hopes and reports to you.
Prior to the THINK/Fourpoint deal Shukri had negotiated a deal with Indigo Film & Television to distribute the library on a worldwide (ex USA) basis, but lo and behold the format was the US film standard that nowhere else accepts; so costs were incurred “converting” materials and other expenses authorised by Fourpoint/THINK. At the present time Indigo states it is owed close to $50,000 more than it has been able to achieve in sales – that is down from $120.000+, and yes that is being independently reviewed/audited.
The previous US distributor, the Peter Rogers Organisation, has failed to provide accounting or money since the beginning of the year and is now under independent investigation/review/audit and will be held to account.
Their claims that no monies are due are frankly unbelievable given that, in February, the CEO told me that there would be more than $500,000+ of gross revenues in 2005, and that one show was already in syndication at upto $5,000 per week. I sympathise with the problems they have had, including Shukri asking for monies in advance and one of the films having “property of ...........” across the entire footage and the missing name is not Fourpoint(!) but that is no excuse for not paying what is due and overdue, and then not submitting contractually required accounting in any event.
SO WHERE TO NOW?
Whatever the wastrels on the ADVFN bulletin board believe, the first obligation is to get the creditors of THINK paid – only if that happens is there any sort of future. And you still have to fend off demands, I say they are invalid, from the NSMG liquidator for damages for failure to honour the indemnity for the loan notes – anyone got £2.8 million to spare? – before the shareholders even get a sniff of anything.
To the sole end of getting the THINK creditors paid, and because the KPMG position is so uncertain, I have sold the Fourpoint portfolio, lock stock and barrel, to Indigo. The consideration is to be independently determined and is also to be based upon an independent experts opinion as to the state of the library, because even after 3 years the existing distributors are still finding false representations by Shukri. The consideration is then being ring fenced for the benefit of the THINK creditors in the first instance, with any surplus being handed over to THINK in due course.
The portfolio clearly needs people with media knowledge to make something of it, and THINK does not have, nor can it recruit, anybody as there is no money to pay salaries. Indigo have spent considerable time and money converting formats for distribution in the non-USA markets, and are as familiar with the portfolio as anybody is, and they seem to me to have the professional expertise and contacts to make the most of it to both their and THINK’s advantage. Shukri’s valuations and well-publicised cash flows are just so much rubbish – the figures he quotes from Indigo were based upon his own forecasts and on his representation that the media was ready for distribution, which it was not. I will be surprised if the library turns out to have any truly significant value, but I hope to be proved wrong.
Not one person, other than Shukri, has offered to become a director of this company, so what am I to do?
I have already said I will sell the three corporate directors to anybody who gets the creditors paid, and I repeat it here that if any of you disagree with what I am proposing, then I am quite willing to sell you the three “corporate directors” and let you get on with it – SO LONG AS ALL CREDITORS HAVE BEEN PAID. That is what I have offered Shukri but he says he will only get me paid and not the other creditors, and refuses to show he has the money to meet the commitment, which is a wholly reasonable request given the trail of unpaid Fourpoint bills and prior history of forgery.
As to Shukri’s suitability to be a director of THINK, if he comes up with the money – its all his as far as I am concerned, but he must put the money into escrow to pay the creditors first.
Shukri says he has asked THINK to convene an EGM to appoint his slate of directors – only one or two problems – none of them have signed a consent to act as required by law, and one of his proposed appointees has told me that he would never consider acting in any event. Accordingly Shukri’s request is invalid at even the first and most elementary hurdle he needs to cross, something accepted by his then solicitors, and even if THINK had the money it would be a waste of time and expense to convene an EGM as well as an AGM.
Given that the powers were vested in me by the previous directors under proper advice and authority, and that nobody else even wants to try and sort it out, I intend to do the following:
1. Gather in whatever cash I can.
2. Seek to collect the KPMG monies.
3. Sell the 10% interest in Optical Imaging Ltd. Any offers? David Clement and his wife have right of first refusal, but it might be an interesting way of getting Jellies sorted out.
4. Sell the BUM and Jellies assets of the two subsidiaries to the highest bidder, and to advertise them for sale on eBay so that there is total transparency.
5. If the subsidiary companies do not go with the IP rights sale, let the Registrar of Companies strike off the two subsidiaries and “kiss goodbye” to the £20+ million of tax losses.
6. The Suzy’s Zoo rights lapse next month unless extended for a further 6 months, and THINK does not have the money to even pay for that, let alone pay for the necessary development of the property, so they will probably lapse and I will try and sell the IP that has so far been developed for whatever can be realised.
7. I will sell the Merlin IP rights, such as they are, for whatever I can get for them.
8. Assign the residual legal rights against THINK’s former directors, professional advisers etc to a company connected with and under my control in return for THINK receiving a guaranteed 65% of all recoveries so long as that company pays all legal and other fees. Now here I would appreciate shareholders getting together to front up some money for professional legal help that will undoubtedly be needed at some stage, and they can participate parri-passu in the share of the 35%.
9. If nominees come forward to be directors of THINK, and there is enough money to convene an AGM, and all creditors have been paid BEFORE OCTOBER 1st 2005 , I will convene the AGM to be held on NOVEMBER 4th 2005.
10. If the AGM is not convened, I will place THINK into liquidation on NOVEMBER 4th 2005, not least because it cannot even afford the ongoing costs of maintaining the share register, and then have whatever monies are available distributed to the shareholders in due course by a liquidator.
11. Give you finality on this most sad and disastrous of investments.
Many of the wastrels on the ADVFN bulletin board singly fail to understand that I was not brought in to “liquidate” THINK, I was brought in to try and salvage it and get the shareholders some recompense. That is what I have done and continue to do – most people would have just walked away, but I relish a challenge, including against those nameless posters who try and rubbish whatever anybody does as they do not have the courage to even “step up to the plate” but merely love to spout endless nonsense. Even after sparring with them it is still the case that not one of them volunteers to be a director and run THINK? If they don’t then into the tank it will go, and it will have been their fault that it was not saved as they “just” “think” it should be.
Mark Hardy
For and on behalf of Think Entertainment plc.
-------------------------------------------
UPDATE 21st JUNE 2005
To the Shareholders:
My apologies for the length and complexity of this update, but there is little choice if I am to keep you as informed as possible. Please read it and email me with any queries – I will not be able to respond to lengthy telephone enquiries.
For reasons that will become apparent as you read this update, I am not yet in a position to convene the AGM.
The last date by which the Companies Act requires the AGM to be held by 5th November 2005, and I fully expect to convene it before that date so long as adequate cash resources exist to meet the substantial costs involved of notifying more than 35,000 shareholders of record – such resources are not available to me at the moment - and before anybody asks my own fees remain unpaid as well.
On 9th June I attended the meeting of creditors convened by the liquidators of NewScreen Media Group plc., and they were confirmed in office. The meeting also passed a resolution to appoint a formal creditors committee under the provisions of the Insolvency Act.
The meeting was triggered by my formal notification to the liquidators that Think no longer considered itself bound by the terms of the indemnities given to NSMG in relation to the loan note holders, and also because Think had not, and would no longer, pay the other creditors it had assumed at the time of the reorganisation – and is claiming for repayment of monies it has already paid out to those creditors and note holders.
The principal ground for my decision to repudiate the indemnity was that, in my judgment and based upon evidence I have discovered since my appointment, but which was clearly known to and in the possession of the directors and officers at the time, Think had been induced into entering into the indemnity agreement by prior false utterances, negligence, and breaches of fiduciary duty by the then directors of both companies.
The directors vigorously deny any such impropriety, and have advised the liquidators that they relied upon the advice of professional advisers during the preparation of the declaration of solvency upon which you as shareholders relied. I have seen correspondence from the professional advisers in the months leading up to both the declaration and the FourPoint transaction, that gives me grave cause for concern as to the directors bone fides in carrying out their then continuing fiduciary duty. However, it now falls to the liquidators to investigate the matter, and they have statutory powers to compel attendance and the giving of evidence under oath in the preparation of their report to the DTI as to the conduct of the directors. I will be giving them any and all assistance as they may require.
Think has also made a claim as a creditor in the NSMG liquidation representing the shortfall in the value of the assets declared by the directors and for the costs of the transaction that should never have occurred in the first place because, in my judgment, the overvaluing and realisability of the assets within the terms of the statutory declaration was known to the directors at the time, but was not disclosed to you as shareholders when you were asked to vote on the proposal.
The duty of the liquidators is now to enquire into the affairs of the company, to gather in the assets, to distribute monies firstly to creditors and any surplus thereafter to the shareholders. I believe that the directors are personally liable for the consequences of what I say is a clearly and knowingly false and misleading declaration of solvency, and eventually there will not only be payment in full to all the loan note holders, but there will also be substantial sums paid to Think as both a creditor and sole shareholder of NSMG.
The liquidators are also obliged by law to report to the Department of Trade and Industry on the conduct of the directors. They also have the power to revisit the administration process and acts leading up to that event back to the very incorporation of Just Group if necessary.
The propriety of the expenditure of the £5,800,000 new share money will also fall to be investigated by the liquidators if they deem it appropriate, and they have authority to demand repayment of any monies that they may decide were improperly applied. I will however, and as promised, be including a detailed analysis of the monies spent with the notice convening the AGM, and you will be able to make representations to the liquidators as to areas you believe they should investigate.
So what does all this mean in simple English?
Subject to the liquidators determination that I have proper grounds for repudiation of the indemnities:
1. Think will have eliminated the majority of its debts, other than current payables.
2. Think’s remaining assets are:
a. The FourPoint library
b. 4 subsidiary companies:
i. Think Entertainment Ltd. – Merlin and Suzy’s Zoo
ii. NSMG Licensing: - B.U.M IP and tax losses
iii. NSMG Entertainment: - Jellies IP and tax losses
iv. Lime TV:- Worthless
c. Claims against the directors and professional advisers for negligence in the Fourpoint transaction. Ordinary Damages in excess of £1million, and exemplary damages against the professional advisers that will fall to be assessed by the Court.
d. Claims against Fourpoint for matters arising in the business asset acquisition agreement. This is unlikely to realise cash.
If the liquidators contest my repudiation of the indemnities, and were to assert claims against Think, then Think will immediately apply to the High Court to have any such claim adjudicated at an early hearing. If Think were not to prevail then it would almost certainly have to be placed in compulsory liquidation on the statutory grounds of “Public Interest” if nothing else. Members’ voluntary liquidation is not an option, not least as nobody in their right mind would sign a declaration of solvency, and it would be in everybody’s best interest to have a compulsory liquidation where another liquidator has further statutory powers of compulsion and investigation.
The dichotomy is now to evaluate whether Think’s asset base is capable of forming the basis of any ongoing business that could continue to trade, or whether it should voluntarily cease trading and ask the High Court to wind it up anyway.
At this stage I should inform you that last week I was approached by a trade purchaser asking to carry out due diligence on the IP rights –other than the Fourpoint library – with a view to making an offer to acquire the rights in return for a share of future income, if any, and a percentage (to be agreed) of any collectible debts relating to prior invoices. Many of you are aware that the many millions of pounds of uncollected invoiced debts on the books of the subsidiaries prior to administration are properly regarded as largely uncollectible, and have knowingly been so for many years.
I believe the trade purchaser is genuine in their expression of interest, and I have reviewed their reputation and credibility to perform if we move to a deal, and it is beyond doubt. Should this proposal come to a conditional contract being agreed, then, whether or not required by statute or best practice, I will seek prior shareholder approval to the transaction at a General Meeting.
It has been made clear to me that the offer will not involve significant cash on signature, but will be cash flow against future sales and collections if and when made.
I have also asked professional advisers to solicit offers for the two tax loss subsidiaries, and if such a buyer could be found, this may influence the attractiveness or structure of any trade purchaser transaction.
I also continue to explore options on the Suzy’s Zoo and Merlin matters, but am constrained by lack of cash and production resources as well as others understandable reluctance to deal with Think.
So far as the FourPoint library is concerned, it continues to disappoint. Contrary to earlier expectations and hopes, it is still not producing any cash flow whatsoever at the present time. I am hopeful that this will be reversed and I am insisting that estimated sales volumes be included in the two distribution contracts that I am presently renegotiating.
One option that I am exploring at the moment is to sell the FourPoint library to a special purpose vehicle that would form the core of a much larger “library” that might just prove to be capable of being profitably run.
I have met, and continue to meet, with the principals of FourPoint and have reached a tentative deal to resolve disputes, but it remains to be finalised.
If all these matters were to conclude, then Think would end up as a dormant company with some cash in the bank and some future cash flow streams. In my judgment even if this happy state were to occur, the costs of running and maintaining the very large public company shareholder base would not be justifiable, so something has to be proposed to eliminate the majority of your holdings – a take-over or liquidation are the only options that would satisfy the need to act in the interests of all, but a take over would be a brave and costly act.
In my judgment, there is no possibility that the shares could ever be listed for trading on any recognised exchange and at least 95% of the shareholders will never receive any meaningful value as the vast number of shares in issue are unlikely to be worth more than small fractions of a penny per share.
So as shareholders you have some interesting decisions to take, and you should fully recognise that it is only the repudiation of the debt indemnity as a result of the improper acts of your then directors, that has left you with any value whatsoever. It is fair to say that whatever the improper acts of the FourPoint principals, they have lost more than the original shareholders of JUST/NSMG who took on shares in Think that were of negative value at the outset. FourPoint started with 100% of the library, and now have only a 25% interest in it, and have given you 75%.
Given that nobody has put their name forward to be a director of Think, and the existing directors will resign at the AGM at the conclusion of which my power of attorney will also lapse, the best solution is probably to ask you all to exchange your shares for an interest in a trust or special purpose vehicle. This would collect any cash and distribute it to you or a charity of your choice after a fixed period of, say, 10 years, but in the meantime it would not have the excessive costs of maintaining the shareholder administration costs (£100,000 per annum is the minimum) and would avoid the costs of liquidation.
Hindsight has shown that the rescue of Just Group was the most misguided way to approach salvaging value, if any, from Butt Ugly Martians etc. As somebody said to me the other day, “this is the company that just will not die” – well perhaps it is time to do so, and in the absence of viable proposals for salvage and going forward, it will be for you to decide at the AGM when I will table appropriate motions for you to vote on.
Mark Hardy
For and on behalf of Think Entertainment plc
-------------------------------------------
Update May 27th 2005
In a letter dated 26 May 2005 one of the Joint Liquidators of NEWSCREEN MEDIA GROUP plc (formerly JUST GROUP plc) wrote to the creditors and directors of that company.
Some salient extracts are:
· The liquidators were appointed by the shareholders at the EGM held on 21 May 2004
· This was a members Voluntary Liquidation and its purpose was to enable the transfer of all the Company’s business, assets and liabilities to a new company (THINK ENTERTAINMENT plc) pursuant to a Section 110 (of the Insolvency Act 1986) agreement approved by the shareholders.
· NSMG entered into the agreement in consideration of:
o THINK issuing a new share in THINK for every share in NSMG
o THINK providing a full indemnity to meet NSMG’s liabilities.
· On Thursday 19 May 2005, the liquidator “formed the opinion that NSMG will be unable to pay its debts (at the date of liquidation) in full within the relevant timescales laid down by the Insolvency Act” and accordingly he is obliged to convene a meeting of creditors
· That meeting will be held at 11.00am on Wednesday 8 June 2005 for the purpose of (among other things):
o Receiving the liquidators report on the conduct of the liquidation and the events giving rise to their opinion that NSMG will be unable to pay its debts
Many of you will realise that some of the creditors and former directors of NSMG are also shareholders in THINK, and I regard it as right and proper that you, as a class of shareholders, have as full an understanding of the position as any single shareholder who just happens to be a creditor or former director. However please understand that the law provides that the meeting is for creditors only and shareholders are not able to attend.
The liquidator’s concluding paragraph includes the phrase “I appreciate that these are unusual circumstances …”, that applies equally to my position at THINK and I ask that you bear with me and understand that I will not be commenting further on this matter until after that meeting has been held, and at which time I will provide a more detailed analysis of where your company is presently positioned.
Mark Hardy
Company Secretary
-------------------------------------------
Update April 16th, 2005
To the shareholders
I have decided to try to maintain the simplicity of the website by keeping it to one page and retaining the previous updates in sequence for ease of reference. It will make it a long document but that should help new visitors place things in context, and will hopefully provide an evidentiary trail for all of you leading up to the AGM. So I hope you have scroll wheels on your mouse.
A little bit of housekeeping first:
My apologies to those shareholders who have left phone messages but have not yet had a reply, I will try and get back to you over the next couple of weeks. Emails inevitably get a swifter reply and I do recommend that route if possible.
I am getting many shareholder requests for address changes, lost certificates etc. All enquiries are handled by the Company’s Registrars, Capita, to whom any letters are forwarded. They can be reached readily via their own web site using the reference number on your share certificates: http://www.capitaregistrars.com/shareholder/index.asp
There are also many requests to provide share values for probate purposes, as well as endless requests for knowledge of when the company’s shares are going to be listed on a recognised investment exchange. My answer to the first question is: the shares should presently be deemed to have nil value; and to the second the answer is: not in the foreseeable future.
DATE OF THE AGM
I am not yet able to give any definitive indication of when I will be able to send out the notice to convene the meeting, but I am working with the liquidators of the old Just/Newscreen, who have a critical date of May 21st 2005: the first anniversary of the Members Voluntary Liquidation.
At the present time there is considerable uncertainty that all the debts/obligations of that liquidation will have been paid/settled within the twelve month prescribed statutory period: if they are not, then the liquidation will automatically convert into an insolvent creditors liquidation, and I am presently, and carefully, considering the implications.
The notice convening the AGM cannot reasonably be sent until there is certainty on this matter.
NOMINATIONS TO BE ELECTED A DIRECTOR
I have been asked to confirm how proposals for new directors should be presented.
The present directors, three newly incorporated English Limited Liability companies, will cease to hold office at the AGM. The Articles of Association require that there be a minimum of three directors of the company, all of whom will be elected at the AGM.
It is therefore essential that individuals who wish to put their names forward for election should do so on the basis that all the shareholders must have complete knowledge of their credentials and eligibility for office, as well as their skill base. The nominee should also set out a relatively detailed plan of the direction in which they propose to take the company, and how they propose to run the affairs of the company.
I appreciate the difficulties of doing a business plan in the absence of accounts, but so far as practicable I will share financial data and other corporate data via this web site. I have received some requests for access to the entirety of the companies records on a “due diligence” basis, but I will not permit this unless I am satisfied as to the bone fides of the request, and in receipt of third party confirmation of funds or other commitments that would clearly drive the business forward. Any such proposal would most likely require approval by the shareholders as a Special Resolution in any event.
For those who wish to put their names forward, in my capacity as Company Secretary I require submission of a hard copy CV from each proposed nominee to arrive at the Registered Office no later than May 21st 2005, and the document must include a signed affirmation by the nominee that the document contains all matters which should properly be considered by the shareholders, including details of all law suits within the last five years to which the applicant is, or has been, a party as well as any criminal proceedings which are current, pending or threatened against the nominee.
In particular the CV should reference any and all dealings, other than as a shareholder of record (which should be disclosed), that the nominee or any company in which he/she holds (has held) more than 5% of the issued shares, has had with this company, its subsidiary, associated or predecessor entities.
The CV should also include a signed affirmation that the nominee is agreeable to the document being circulated to shareholders with the notice convening the AGM.
I am happy to consider draft CV’s on a wholly confidential basis prior to actual submission, and to give any guidance/comments that I can.
I will then review the final/submitted CV and respond within 14 days asking for permission to disclose such other information and/or disclosures that I consider should be presented to the shareholders when considering the appointment. If the nominee then affirms that they want their name to go forward, they will then be required to sign the formal consent to act required by the Companies Acts, and to provide a certified copy of their passport.
All nominees should be aware of the prospect that they may be assuming civil and/or criminal liability for their acts or omissions as directors, and should take their own legal advice.
CURRENT NEWS
DEMANDS FOR DAMAGES
Many of you are aware that certain critical documents relating to last summer’s acquisition of the assets of Four Point have proved to be forgeries. I am aware that others have reported the matter to the relevant authorities. The consequences, and damages suffered as a result, of those forgeries are still being mitigated and quantified. I am confident that the matter will be fully quantified before the AGM notice is circulated.
In the meantime I have notified the former directors and secretary of your company that I consider they are liable to make good certain financial losses and/or other obligations arising from both the forged documents and other matters contained in the circular seeking your approval for the Four Point acquisition. I have also asserted a claim for gross professional negligence against one of the professional advisers to the company in connection with the Four Point transaction
The Civil Procedure Rules require certain protocols to be complied with, so far as practicable, and the matter is presently in the pre-litigation paper swap and investigation phase in an attempt to avoid litigation.
I would wish you to know that the former directors and secretary against whom I have asserted claims, have threatened me personally with an action for defamation should I publish any of the allegations. Rest assured I will not be cowed by threats designed to suppress clear evidence, and should the matter proceed to litigation, the law provides - as a matter of public policy - that the Statement of Claim is available to any member of the public from the issuing office at the High Court in London.
This coming week I am meeting with Shukri Ghalayini and Rafic Saadeh, two of the principals of Four Point, with a view to resolution of disputes without resorting to litigation.
HISTORICAL EVENTS
Given the critical nature of the May 21st deadline, I do not propose to go into detail about the matters I have discovered concerning matters arising prior to the formation of Think. At the moment all rights in respect of those matters are vested in Think, but if the Just/Newscreen solvent liquidation were to convert into an insolvent liquidation, then many of the rights would revert to the liquidators who would have statutory powers to investigate further – indeed back to the very inception of the Just Group entities – including powers to compel testimony from all former directors and officers. The liquidators are then required to submit a report to the DTI on the conduct of those persons.
Suffice it to say I am very concerned at some of the matters that have come to light, and am confident that any recovery of monies would flow through to Think in due course and in any event.
FINANCIAL STATUS
It is hardly a secret I was brought into the Think scenario because the company was struggling to meet its obligations. That position has now stabilised, with no small thanks to the help and forbearance offered by the many suppliers to the company. I am reasonably confident that the position is now stable, and we can move forward.
When evaluating the financial position of Think, you should assume a Nil liquid asset starting point and a yet to be determined asset value to be ascribed to the Four Point library.
Since Wilf Shorrocks confirmed that neither he nor Peak Entertainment had any present interest in acquiring the BUM rights, I have approached a ‘trade buyer’ to see if they want to acquire the two former Just Group subsidiaries for a sum based upon their value as tax loss companies, together with an amount to be agreed for any amounts actually recovered from the many millions of pounds of previously unrecovered royalties, and a share of any future income from the BUM and Jellies properties. I am awaiting a response.
On the Suzy Zoo property, I am awaiting confirmation from the ‘broadcaster’ as to how they wish to deal with Think’s inevitable breach of contract that will occur as a result of failure to deliver the 26 completed episodes due by June 15th 2005.
The Merlin property is a speculative pre-production situation without any guarantees of there being a final production contract. I am soliciting monies on a non-recourse £100,000 secured debenture basis from interested parties, in order to maintain a ‘seat at the table’ during the development phase, but there would still be no guarantee that production would ensue. Your company would retain the rights to the property, subject only to repayment of the debt.
The Four Point portfolio continues to disappoint in that, contrary to my earlier hopes and expectation, whilst it is profitable in accounting terms it is no longer cash flow generative. The problems lie in the dealings with historic inadequacy of IP rights/title, which the distributors are having to face and cure to meet their and our contractual commitments. The costs of the cure are being deducted, with my agreement, from the sums otherwise currently due in order to secure and enhance the future value of the properties. I am hopeful that the cash flow will be positive from June 2005 onwards.
I am negotiating new distribution agreements with the present US and UK distributors as the inherited US distributor contract expires on May 1st 2005, and I believe it is in the best interests of the company to have common agreements with common expiry dates. The commission rates and other terms will be industry standard.
The work of the administrators of the old Just Group companies is nearly complete, and there is likely to be a surplus from the monies given to KPMG from the proceeds of the share issue in 2002. The amount and timing of the receipt may be affected by the judgment of the House of Lords in an unrelated case to be heard before the end of this month but in which judgment is not expected before end July. I am hopeful that the amount can be accrued in the financial data to be presented at the AGM.
Regards
Mark Hardy
-----------------------------------------
Update March 4th, 2005
To the shareholders
I have now been appointed for little more than one month, but in that time I have had the opportunity to review the 'big picture' financial and legal position of the company and its subsidiaries. The matters I have uncovered give considerable cause for concern in relation to the 2004 transaction relating to the acquisition of the assets of Four Point Entertainment LLC that was approved by shareholders at an Extraordinary Meeting on August 12th 2004. I am taking advice, without incurring substantial legal fees, and expect to be able to report in detail by the end of the month as to what action I propose to take to recover monies properly due to the company for damage suffered. I appreciate that many will be disappointed not to be told more at this time, but it is essential that all pre-trial settlement opportunities are explored before litigation is commenced. For those who are interested, the TES group have helpfully posted pdf copies of the Los Angeles Court filings for download at http://investoraction.co.uk/modules.php?name=Forums&file=viewtopic&t=9 which will tell you more than I ever could in this short statement.
I have set in train a review of the company's IP rights, without cost, and will be sharing the details, item by item, with you when the process is complete. It does however seem to me that many of the rights relating to the Butt Ugly Martians and Jellies are not as complete as many would wish or had previously thought to be the case and are generating very limited revenue, with little prospect for future substantial revenue even if the properties are 'rested' for a few years.
The Four Point portfolio is best described as B/C grade but is at least generating revenue to meet current payables, and I am optimistic that it will generate surplus cash flow in the near term for at least a year or so. The Suzy's Zoo IP (see www.suzyszoo.com ) is merely an option to create an animation and associated short term merchandising rights related to the animation, and requires the successful sourcing of considerable deficit finance if the undoubted potential is to be exploited. The Merlin concept is just that, a concept, and is presently under co-production discussions with interested parties.
I am actively seeking to appoint agents to collect such prior receivables as may actually be recoverable. As the company has no employees, any agents will be retained on a contingency fee basis only.
At the moment no IP rights are being sold, although I am open to all reasonable cash only offers for the residual value of the Butt Ugly Martians property, including the 7ft tall costumes and inflatable space ship!
I must express my gratitude to the considerable (expenses only) voluntary help I am receiving in trying to create a report to shareholders as to "what happened to the money", particularly as the administration and subsequent liquidation mean that you have not been presented with any accounts since the 2000 year end. That report will also present an overview of the major business transactions and management thereof since the fateful Mediakey acquisition, and the contents will be my responsibility alone.
relevant dates leading to the AGM:
The old Just Group plc is the subject of a declaration as to it being a solvent Members Voluntary liquidation, and so long as all the costs and creditors have been paid by the first anniversary of the liquidation, i.e. May 21st 2005, then the final meeting of shareholders of that company (substantially the same as the shareholders of Think) must be held within 3 months of that date, i.e. by August 21st, 2005. The supervisors of the CVA also wish to circulate their final report to shareholders.
It is illogical, and not in the company's best interest, to incur the costs associated with circularising more than 35,000 shareholders of record more than once if it can be avoided, so I have discussed the principal of sending the notices convening all three meetings as one mailing. I presently anticipate that the notice to shareholders will be sent no later than the first half of June to convene the AGM in July. The law requires the AGM to be held on or before November 5th and audited accounts for the period ended July 31st 2005 to be lodged with the Registrar of Companies shortly thereafter - you should be aware that the company has not appointed auditors since it was incorporated, and nobody that I have approached seems to want the job at the moment, so I would expect the AGM to appoint auditors with such indemnities as are reasonable in this difficult situation.
The precise date of the AGM is uncertain as I will need to propose new directors for the company as the existing 3 new corporate bodies retire automatically and will not be seeking re-election. Accordingly I will be asking for nominees to the Board in due course, and I have already been placed on notice that some of the existing body of shareholders will be offering themselves for election. I have indicated that I will put forward all persons as may be properly elected subject to prior receipt of all the requirements of the Companies Acts legislation and the Articles of Association of the company. I will, after Easter, provide details of the requirements that I shall require, and I have told those that have already expressed interest that I deem it essential that they provide an outline business plan that they wish to adopt if elected.
Therefore I presently anticipate convening the meeting for mid-late July to give enough time for resolutions to be put forward for my proper evaluation and consideration as being properly put to the meeting. For the avoidance of all doubt, I will be acting as Chairman of the meeting and at the conclusion of the meeting my Power of Attorney is automatically revoked.
Regards
Mark Hardy
This site has been set up to provide information to the shareholders of Think Entertainment plc about the AGM. It is not, and will not be, a bulletin board but it will be the source of detailed and verified information about the affairs of your company for consideration at the meeting.
posted by Mark G. Hardy at 1:40 AM
0 Comments:
Post a Comment
<< Home