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China Sports: Factory's operations still unclear

INDEPENDENT directors of China Sports International on Wednesday said they are unable to comment on whether its factory is operating normally as they have yet to receive updates from the company's chief executive Lin Shaoxiong.

Responding to the Singapore Exchange's (SGX) query on whether its independent directors are able to gain access to the factory as they were unable to do so previously, the directors mentioned that Mr Lin had on Dec 15 invited them to conduct a site visit from Dec 26 onwards to have a clearer understanding of the firm's operations.

According to an SGX filing by independent directors, Ang Wei Chuan and Leow Yong Kin, a request has been made for Mr Lin to arrange air tickets and accommodation for them, or to transfer the funds for them to arrange a site visit. However, as they have not received any updates, they cannot verify if the factory is accessible and functioning as per usual. The company last said that Mr Leow visited the factory in June and July 2017, and saw that the factory was operating.

China Sports added that its board will continue to maintain contact with Mr Lin via all possible communication channels. In the event that this is no longer effective, directors of the company will discuss with relevant professionals for their next course of action, Mr Ang and Mr Leow said.

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Earlier this month, the mainboard-listed firm said that it had received a statutory demand from its legal advisers, RHT Corporate Advisory, regarding S$50,839.25 in outstanding professional fees owed. If China Sports fails to repay the amount within three weeks from Dec 15, RHT would be entitled to commence winding-up proceedings against the company.

In November this year, it was revealed that the group has yet to begin its annual audit almost five months after its fiscal year-end on June 30, and that its independent directors have not been able to ascertain the company's state of affairs. As at November, a cash audit had not begun either as Mr Lin was away on a business trip to Suzhou, thus preventing auditors from making the observations required for the audit.

In addition, the company failed to convene its annual general meeting (AGM) for fiscal 2017, which led to concerns from independent directors - it had sought, but failed in October to get an extension to hold the AGM.

Shares of China Sports have been suspended since Dec 4 after the firm requested a voluntary suspension until the start of an audit process, and when directors and auditors are "clear on the company's state of affairs". The company has been placed on SGX's watch list in June this year for failing the bourse's minimum trading price criteria of maintaining a market cap of S$40 million and a share price of at least S$0.20.

The counter last traded at S$0.011 apiece on Nov 27.

China Sports is an investment holding company which designs, manufactures, and sells sports fashion footwear as part of its business. According to its latest financial statement, operations of the company and its subsidiaries are principally conducted in China.

The company's unaudited net loss widened to 12.2 million yuan (S$2.5 million) for the first quarter ended Sept 30, 2017, from a net loss of 4.5 million yuan for the year-ago period.