Lim & Tan Securities warns investors should “sell” or “avoid” social media and e-commerce company Yuuzoo Corporation despite its depressed SGX stock price.
In a daily review report on Thursday, Lim & Tan says concerns raised by Mak Yuen Teen, an associate professor of accounting at the NUS Business School, suggests that “all is not well at Yuuzoo Corp.”
Year to date, shares of Yuuzoo have plunged 46% from a high of 15 cents on Jan 3. As at 3.32pm on Thursday, shares of Yuuzoo are trading at 8.1 cents.
In a two-part commentary, Mak points out that Yuuzoo has had at least 15 departures of directors and key officers since its listing on the Mainboard of the Singapore Exchange (SGX) via a reverse take-over (RTO) in September 2014.
These include a chief executive officer, five chief financial officers, a head of legal, a chief revenue officer, and two audit committee (AC) chairs.
Its external auditors also did not stay around for long, Mak adds.
BDO LLP, Yuuzoo’s external auditor at the time of listing, decided not to seek re-appointment at the first post-listing annual general meeting (AGM) on May 29, 2015.
Singapore Stock Yuuzoo took more than five months to appoint the replacement auditor, Moore Stephens LLP, on Nov 11, 2015. The auditor issued a disclaimer of opinion for the FY2015 financial statements, before too deciding not to seek re-appointment at its AGM on May 27, 2016.
It would take more than seven months before Yuuzoo appointed its current auditor, RT LLP, on Jan 12, 2017. While it has been indicated that RT will be seeking re-appointment at Yuuzoo’s upcoming AGM on Friday, the auditor has an unmodified audit opinion with two emphasis-of-matter items.
Speaking of AGMs, Mak says YuuZoo has never been able to hold its AGM on time since its listing in 2014.
“Unfortunately, as YuuZoo is incorporated in Bermuda, the Singapore Companies Act requirement for listed companies to hold their AGM within four months of the financial year-end does not apply to the company,” say the corporate governance guru.
“Nevertheless, why is the company and its directors not held accountable for the repeated delays in holding its AGM on time when it is clearly a listing rule requirement?” he asks.
Non-compliance
In addition, Mak says Yuuzoo had failed to announce the cessation of Macquarie (Capital) as its compliance adviser.
“It was only when the company announced the appointment of RHT Capital (RHTC) as the new compliance adviser on Oct 23, 2015, that the market was informed about the change,” says Mak.
Less than three weeks later, RHTC affiliate RHT Corporate Advisory (RHTCA) was appointed as the replacement share transfer agent.
At the same time, Elizabeth Krishnan, an associate director at RHTCA, was installed as Yuuzoo’s new company secretary.
“It is surprising that there were no separate announcements for the appointment and cessation of the company secretary,” says Mak. “In my view, there is also a question of a possible self-review threat and conflict of interest in having the compliance adviser and the company secretary from the same firm or affiliated firms.”
Non-disclosure
According to Mak, YuuZoo has so far also failed to disclose, in any SGX announcement or in its annual report, a lawsuit filed in the US District Court of New York in July 2015 involving the purchase of shares by the plaintiffs and a loan of US$245,000.
The plaintiffs alleged a number of parties – including Yuuzoo and its executive chairman and co-founder, Thomas Zilliacus – had committed federal securities fraud, common law fraud, negligent misrepresentation, and breach of contract.
“Among the allegations was that the defendants failed to disclose that YuuZoo had been unable to engage in a public offering or merge with a public company in the United States because of accounting irregularities, that sales of YuuZoo had been grossly inflated to raise capital and to facilitate its listing on SGX, and that inquiries into the inflation of sales by SGX had caused serious delays and jeopardised its listing on SGX,” says Mak.
“Over the years, YuuZoo has had to issue responses to at least eight queries and follow-up queries from SGX and several other clarifications,” says Mak. “SGX had also issued two trade-with-caution warnings on YuuZoo’s stock.”
“While SGX has clearly been monitoring YuuZoo and has taken regulatory action, one must question whether enough has been done, given the multitude of governance issues in the company,” he adds.
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Lim & Tan Securities warns investors should “sell” or “avoid” social media and e-commerce company Yuuzoo Corporation despite its depressed stock price. In a daily review report on Thursday, Lim & Tan says concerns raised by Mak Yuen Teen, an associate professor of accounting at the NUS Business School, suggests that “all is not well at Yuuzoo Corp.” Year to date, shares of Yuuzoo have plunged 46% from a high of 15 cents on Jan 3. As at 3.32pm on Thursday, Singapore shares of Yuuzoo are trading at 8.1 cents.
Advertisement In a two-part commentary, Mak points out that Yuuzoo has had at least 15 departures of directors and key officers since its listing on the Mainboard of the Singapore Exchange (SGX) via a reverse take-over (RTO) in September 2014. These include a chief executive officer, five chief financial officers, a head of legal, a chief revenue officer, and two audit committee (AC) chairs. Its external auditors also did not stay around for long, Mak adds. BDO LLP, Yuuzoo’s external auditor at the time of listing, decided not to seek re-appointment at the first post-listing annual general meeting (AGM) on May 29, 2015. Yuuzoo took more than five months to appoint the replacement auditor, Moore Stephens LLP, on Nov 11, 2015.
The auditor issued a disclaimer of opinion for the FY2015 financial statements, before too deciding not to seek re-appointment at its AGM on May 27, 2016. It would take more than seven months before Yuuzoo appointed its current auditor, RT LLP, on Jan 12, 2017. While it has been indicated that RT will be seeking re-appointment at Yuuzoo’s upcoming AGM on Friday, the auditor has an unmodified audit opinion with two emphasis-of-matter items. Speaking of AGMs, Mak says YuuZoo has never been able to hold its AGM on time since its listing in 2014. “Unfortunately, as YuuZoo is incorporated in Bermuda, the Singapore Companies Act requirement for listed companies to hold their AGM within four months of the financial year-end does not apply to the company,” say the corporate governance guru.
“Nevertheless, why is the company and its directors not held accountable for the repeated delays in holding its AGM on time when it is clearly a listing rule requirement?” he asks. Non-compliance In addition, Mak says Yuuzoo had failed to announce the cessation of Macquarie (Capital) as its compliance adviser. “It was only when the company announced the appointment of RHT Capital (RHTC) as the new compliance adviser on Oct 23, 2015, that the market was informed about the change,” says Mak. Less than three weeks later, RHTC affiliate RHT Corporate Advisory (RHTCA) was appointed as the replacement share transfer agent. At the same time, Elizabeth Krishnan, an associate director at RHTCA, was installed as Yuuzoo’s new company secretary.
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“It is surprising that there were no separate announcements for the appointment and cessation of the company secretary,” says Mak. “In my view, there is also a question of a possible self-review threat and conflict of interest in having the compliance adviser and the company secretary from the same firm or affiliated firms.” Non-disclosure According to Mak, YuuZoo has so far also failed to disclose, in any SGX announcement or in its annual report, a lawsuit filed in the US District Court of New York in July 2015 involving the purchase of shares by the plaintiffs and a loan of US$245,000.
The plaintiffs alleged a number of parties – including Yuuzoo and its executive chairman and co-founder, Thomas Zilliacus – had committed federal securities fraud, common law fraud, negligent misrepresentation, and breach of contract. “Among the allegations was that the defendants failed to disclose that YuuZoo had been unable to engage in a public offering or merge with a public company in the United States because of accounting irregularities, that sales of YuuZoo had been grossly inflated to raise capital and to facilitate its listing on SGX, and that inquiries into the inflation of sales by SGX had caused serious delays and jeopardised its listing on SGX Shares” says Mak.
“Over the years, YuuZoo has had to issue responses to at least eight queries and follow-up queries from SGX and several other clarifications,” says Mak. “SGX had also issued two trade-with-caution warnings on YuuZoo’s stock.” “While SGX has clearly been monitoring YuuZoo and has taken regulatory action, one must question whether enough has been done, given the multitude of governance issues in the company,” he adds.
