KTL Global says independent review may take 3-5 months; shares to stay suspended

KTL stated that it expects cash flow generated by the diamond business to improve the group's current working capital.
KTL stated that it expects cash flow generated by the diamond business to improve the group's current working capital.PHOTO: ST FILE

SINGAPORE (THE BUSINESS TIMES) - Watch-listed KTL Global on Friday (Sept 24) said it expects the ongoing independent review of the company to take between three and five months, as it appointed its independent reviewer Deloitte & Touche Advisory Services only on Aug 14 this year.

This was in response to several queries it received from the Securities Investors Association (Singapore) regarding the group's FY2020 annual report.

The mainboard-listed group's shares have been under voluntary suspension since Aug 17, and it does not intend to resume trading until the review is complete.

To recap, KTL's independent auditors in August this year issued a disclaimer of opinion in relation to the transactions of its subsidiary Bluegas with four branding, operation and procurement (BOP) customers in China.

Among other findings, the auditors highlighted irregularities in the accounting treatment of receipts by Bluegas from Lawrence Group amounting to US$700,000 (S$944,000).

In its response to Sias' queries, KTL said it has ceased and not taken any business through Bluegas since the group's BOP business was suspended from January this year due to Covid-19 and disruptions in China.

The group's board and management remain in possession of Bluegas's company seals and all its legal documents.

Asked about the nature of BOP services provided by Bluegas and the level of oversight by the board, KTL described the company as an "asset-light" type of business with no capital expenditure, inventory or other assets considered to be "heavy". Bluegas's former chief executive Liu Changsheng provided quarterly updates of the company's business to KTL's board, which communicated with the management of Bluegas on an ad-hoc basis through e-mails and telephone conferences.

KTL said that since Mr Liu resigned effective July 31 this year, there has been no employment relationship between him and the group - although Mr Liu has expressed willingness to extend assistance to the group regarding matters relating to Bluegas, if required.

As previously stated in a June 9, 2021 response to queries from the Singapore Exchange, the group reiterated that its board has assessed there is an "urgent need to raise funds and look for opportunities to inject new revenue-generating businesses into the group".

It also said it has taken actions to operate as a going concern and meet its short-term obligations. This includes the recent incorporation of a new subsidiary in the business of other investment holdings and value-added logistics providers; a loan convertible agreement with a loan facility of up to S$2 million; plans to acquire a fresh vegetable and fruit producer and exporter; and a proposed placement to raise up to $3.1 million from investors.

When queried by Sias on the due diligence carried out by KTL's management in light of several agreements signed over the past three months with various partners in different areas, the group said it intends to acquire experienced staff to manage its fresh vegetable and fruit business.

"The various agreements and memoranda of understanding entered into by the company are all related to the sale and distribution of fresh produce and are intended to capitalise the company's partners' strengths to further grow and develop the businesses," added KTL.

The group said it expects the food produce chain and logistics business - a new key business area - to become its main source of business headed by its chief executive.

Said KTL: "An advisor with vast experience, expertise and business connections in the food industry, both in Singapore and China, was appointed to bring to the company a host of business opportunities and connections hence supporting the growth of the company as a whole… The new businesses are expected to help the group to capitalise growth opportunities and in turn bring longer-term value and returns to the shareholders."

In August this year, KTL announced it was looking to enter the lab-grown diamond business, and has separately inked a deal to import fish and seafood into Singapore.

KTL stated that it expects cash flow generated by the diamond business to improve the group's current working capital.

Its shares last closed flat at 11.6 cents on Aug 6, before the counter went into a trading halt. It subsequently applied for the trading halt to be converted into a voluntary suspension.