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INDEPENDENT auditor Foo Kon Tan has highlighted that material uncertainties relating to Lereno Bio-Chem cast significant doubt on the group's and the company's ability to continue as a going concern.
This was in the light of the group incurring losses and total comprehensive loss of S$1.237 million and S$1.238 million respectively, and net operating cash outflows of S$800,000 for the financial year ended March 2016. In addition, the group's current liabilities exceed the group's and the company assets by S$5.62 million and S$5.54 million respectively.
In addition, the company has become a cash company following the disposal of Lereno Sdn Bhd on Aug 17, 2015. According to Catalist Rules, Singapore Exchange may remove the company from the official list if it is unable to meet the requirements for a new listing within 12 months from the time it becomes a cash company. The company may however apply for a six-month to 12-month period extension if it has already signed a definitive agreement for the acquisition of a new business.
Lereno Bio-Chem has in the meantime announced the termination of the sales and purchase agreement entered with the vendors of HTwo Holdings in June 2015 to acquire 60 per cent interest in HTwo. It is currently into a conditional sale and purchase agreement to buy 100 per cent of the issued and paid-up share capital of Kenyalang Property (S) Pte Ltd from Kenyalang Property Development Sdn Bhd for RM70 million (S$23.6 million). The proposed acquisition constitutes a reverse takeover (RTO) transaction.
Foo Kon Tan in its independent auditor's report qualified that Lereno Bio-Chem's directors believe that the company will be able to obtain approval to obtain an extension and complete the RTO within the stipulated timeline.
The directors also believe that the group and the company will be able to meet their obligations as and when they fall due in the coming year, based on continuing financial support from one of the company's substantial shareholders to meet its liabilities and its normal operating expenses to be incurred.
In the event the company is unable to lift its "cash company" status and/or obtain continuing financial support, it may not be able to continue its operational existence and the group and the company may be unable to discharge its liabilities in the normal course of business.