Epicentre Holdings executive chairman and acting chief executive officer Kenneth Lim Tiong Hian has been uncontactable since May 24, the Catalist-listed former Apple reseller said on Thursday, after requesting a trading suspension that morning.
Even as creditors are knocking on the former Apple reseller's doors, the Catalist-listed company said its proposed placement of up to 79.7 million new ordinary shares has fallen through as Mr Lim "has been key and instrumental to the proposed placement", according to a report in The Business Times.
It noted that it does not have any monies held in escrow.
"In order to repay the existing liabilities of the company, the company is currently trying to come up with a workout plan to facilitate repayment to creditors," said Epicentre. Having received statutory demands dated May 21 and May 27 from three creditors, Epicentre "is seeking legal advice and assessing the potential impact on the group".
"This potentially raises issues in terms of the group's and the company's ability to continue as a going concern," it added.
Last year, Epicentre Holdings sold all four of its Epicentre stores to Elush (T3), which runs Apple reseller iStudio. It also granted Elush (T3) the licence to use its trademarks "Epicentre" and "Live Out Loud by Epicentre". Epicentre Holdings also owns 51 per cent of hair removal business Japan IPL, which has 10 outlets in Singapore.
Epicentre said: "In the absence of Mr Lim, the company remains under the leadership of the independent directors, who are considering all possible options in the best interests of the company."
Separately, an independent review of Epicentre Holdings' 2017 financial year accounts has found "governance and internal control issues" regarding consultancy services agreements and a supply agreement in which Mr Lim was involved, as well as a breach of internal policy relating to a $1.76 million loan, which might have amounted to breaches of listing rules.
After market close on Thursday, Epicentre provided an executive summary of the findings, noting that they were unrelated to the voluntary suspension of trading that day. "The company has since taken steps to improve its internal controls and will keep shareholders updated on this via a further announcement in due course," it said.
On Oct 9, 2017, Epicentre announced that its auditor BDO had withheld its opinion on several matters in the company's FY2017 accounts, noting that it had not been given "sufficient appropriate audit evidence regarding the veracity of the purported transactions".
Epicentre appointed Deloitte & Touche to conduct an independent review. One area of review related to the three agreements under which Epicentre provided consultancy services: one $1.4 million contract with LaVita (Thailand), later raised to $1.45 million; and two contracts with KT Pacific Group for a total value of $2.5 million.
Both firms were "personal contacts" of Mr Lim. The review noted a Mr Sy Meng Meng who is a director of KT Pacific and son of its controlling shareholder, and who also held a 6.42 per cent stake in Epicentre as at Oct 2, 2017.
Deloitte & Touche said there "have clearly been governance and internal control issues" regarding these agreements. It noted that Epicentre's core business was in running IT retail outlets, and providing consultancy advisory was not part of its ordinary business.
A second area of review was a supply agreement with Shenzhen Blueway Technologies, for an original contract value of $5.33 million with a discount of $888,000 if Epicentre made an advance payment of $4.44 million.
The advance was paid into two escrow agents, one of which was beneficially owned by Epicentre shareholder Leow Kok Meng, and the other by Mr Lim. The escrow agents, Mr Leow and Mr Lim also issued a performance guarantee for the benefit of Epicentre.
Here, Deloitte & Touche also found "governance issues and internal control issues". The conduct of the supply agreement was "irregular and unusual", as Epicentre's funds were transmitted via Mr Lim and a shareholder.
The third and final area of review was a $1.76 million bridging loan taken on Sept 7, 2016, from Encore Investment Group, with a contracted interest rate of 24 per cent per annum, in order to meet payment obligations to Apple.
On Oct 27 that year, Epicentre entered a novation agreement to novate the loan to Mr Lim, with the only change being that the loan was now interest free.
Deloitte & Touche said there was no formal consultation with the board prior to the loan's execution, amounting to a breach of internal policy.
• Additional reporting by Melissa Heng