Kimly directors under CAD, MAS probe; calls off acquisition of drinks maker

Singapore

WHITE collar-crime investigators are probing coffeeshop operator Kimly's initial public offering and its acquisition of drinks maker Asian Story Corp (ASC), and have seized the passports of Kimly's executive directors, the company said late Thursday.

The company has also agreed with the seller of ASC to reverse the acquisition, following the latest events and a notification from food and drinks maker Pokka Corp (Singapore) of its intention to terminate a manufacturing agreement with ASC.

The Monetary Authority of Singapore and the the Commercial Affairs Department (CAD) of the Singapore Police on Nov 22 requested certain documents and equipment from Catalist-listed Kimly and ASC, Kimly said.

The request focused on documents pertaining to Kimly's initial public offering and its acquisition of ASC; IT equipment used by executive chairman Lim Hee Liat, executive director Chia Cher Khiang and former non-executive director Ong Eng Sing; and the corporate secretarial records of the company from Jan 1, 2016.

As for ASC, the request related to the production of its corporate secretarial and financial records and documents relating to its acquisition by Kimly. The requests were made in connection with an investigation into a possible offence under Chapter 289 of the Securities and Futures Act (SFA). ASC sells drinks in Asian flavours such as chrysanthemum, wintermelon, water chestnut and lychee.

Mr Lim and Mr Chia have also informed the board that they have received similar requests from the authorities in connection with an investigation into a possible offence under Section 199 of the SFA. They have been interviewed by and surrendered their travel documents to CAD.

Kimly separately received notification, also on Nov 22, from food and drinks maker Pokka of its intention to terminate the ASC manufacturing agreement with six months' notice.

Kimly completed the acquisition of ASC from Wang Chia Ye for S$16 million in cash on July 2. The transaction provided for Mr Wang to have an "earn-out payment", depending on the amount of pre-tax profit the company makes in 2018.

Following the latest revelation, the Kimly board and Mr Wang discussed the potential impact on ASC arising from the termination. Under the circumstances, they agreed on Nov 29 to a parting of ways by entering into a deed of rescission, which put the parties in a position as if no deal had taken place.

Mr Wang has repaid S$12 million to Kimly, with the balance to be repaid over the next three years. Kimly's subsidiary LHL Group has also called off a service agreement with Mr Wang.

The probes have prompted a reshuffling of Kimly's management but the affected directors remain. "The board is of the view that the executive directors should continue to discharge their responsibilities and duties," the firm said. It added that Ms Wong Kok Yoong, the current chief financial officer, has been appointed as finance director with immediate effect. The firm also intends to engage professionals to assist in the review and enhancement of its internal controls and governance.

Consequent to the recission, the financial results of ASC have not been consolidated into Kimly's financial statements released on Thursday. Kimly posted a fourth-quarter net profit of S$5.7 million, up from S$4.98 million.

Kimly has requested for the lifting of a trading suspension that was in force since Tuesday.