Kitchen Culture's AGM to review a turbulent FY2021

Singapore

WHEN Catalist-listed Kitchen Culture inked an agreement to acquire a 30 per cent stake in Ooway Technology for nearly S$24 million in August 2020, little would Lim Wee Li have imagined that it was the beginning of the end of his career at the kitchen systems vendor he founded.

In its quest to diversify into what the firm described as new areas of opportunities, Kitchen Culture took the stake from Ooway Group in Ooway Technology, which was introduced as a big data integrated solution provider with a mission to develop a global credit standard for digital trade transactions.

Kitchen Culture issued 90 million new shares or about 27 per cent of its capital before the issuance to Ooway Group as payment for the stake in Ooway Technology.

Then, Lim in his capacity as the executive chairman and chief executive officer of Kitchen Culture, commented: "We believe that this acquisition will allow the group to explore new areas of opportunities and alternate businesses, including the areas of artificial intelligence, machine learning and data science, whilst offering an opportunity for the group to leverage on the networks and capabilities of the target (Ooway Technology) and the Ooway Group. We have high hopes that this investment would deliver great value to our shareholders."

In less than a year after the agreement, however, Lim had his CEO position terminated while Kitchen Culture's key operating subsidiary KHL Marketing Asia-Pacific is staring at the fate of being wound up by its landlord or placed under judicial management.

Hearing of the judicial management application is scheduled today (Mar 16) and is likely to be opposed by the landlord claiming S$1.8 million in rental arrears that KHL disputes.

The "business opportunities in the burgeoning fintech industry" Kitchen Culture had sought in its diversification attempts have so far been elusive. And its ventures into fund management services and the healthcare space have also achieved little.

Ahead of the annual general meeting of Kitchen Culture on Friday (Mar 18), The Business Times looks at developments at the company in the past year.

Months after the redesignation of Lim from executive chairman to executive director with Ooway Group's Hao Dongting assuming the chairperson role in May 2021, Lim was accused of gross default or grave misconduct in connection with or affecting the business and was fired as CEO with immediate effect.

This came shortly after accounting firm Baker Tilly Consultancy (Singapore) appointed by the audit committee presented a draft interim report on the review of the management's re-allocation and utilisation of proceeds from the fundraising exercises in 2020.

Regulatory statements the company furnished stated that the summary findings of the draft interim report showed there was no written approval or business justification for some expenditures, transactions and fund transfers.

But Lim said he had not been given due inquiry and that his termination was unlawful, which 2 of the 3 members of the nominating committee have disputed.

What ensued was a web of lawsuits, with Kitchen Culture first filing a police report and then a writ claiming S$520,000 in alleged payroll irregularities from Lim and 2 former staff members of KHL. Separately, Lim is suing Kitchen Culture for alleged unlawful termination and the interim CEO Teo Choong Han and 2 independent directors for alleged defamatory statements made in relation to his firing.

He has also lodged a police report against Teo for a US$480,000 transaction and transfer that did not obtain prior board approval. The company has since unwound the transaction and transfer. Also, it would indemnify the trio for any financial liabilities and legal fees in their defence in the lawsuits from Lim.

Kitchen Culture, meanwhile, was furnished by the Singapore Exchange Regulation notices of compliance to have Baker Tilly and an independent special auditor look into areas, including the circumstances of any breaches of the Catalist Rules and internal control weaknesses noted in the interim report, as well as any unauthorised transactions in the past year and identify the parties responsible.

To cap it all, Kitchen Culture's statutory auditors have issued a disclaimer of opinion on its FY2021 financial statements, as there was not sufficient appropriate audit evidence to provide a basis for an audit opinion.

The auditors also flagged the absence of a purchase price allocation exercise on Kitchen Culture's acquisition of the 30 per cent stake in Ooway Technology. The exercise involves the determination of the fair value of the investment acquired and the recognition of goodwill or bargain purchase. Therefore, they are unable to determine the net book value of investment in Ooway as at the end of the financial year to June 2021. Kitchen Culture posted S$11.5 million in net loss and negative operating cash flows of S$6.6 million, but its current assets exceeded current liabilities.

Trading in Kitchen Culture has been suspended since Jul 12, 2021. Baker Tilly's review and the special audit have not been completed.