WINHA COMMERCE AND TRADE INTERNATIONAL LIMITED ACN 605 884 848 24 May 2018 ASX Announcement UPDATE ON CONTINUED SUSPENSION ASX makes initial decision to delist WQW on Tuesday 22 May 2018 WQW obtains urgent injunction from the Federal Court of Australia preventing the ASX from delisting WQW Sydney, NSW, 24 May 2018 Winha Commerce and Trade International Ltd ( WQW ) received notice from ASX Limited ( ASX ) (copy attached) last Friday 18 May 2018 that it intended to remove WQW from the official list prior to the commencement of trading on Tuesday 22 May 2018. WQW disputes the reasons given by the ASX for its proposed action. WQW filed an urgent interlocutory application in the Federal Court of Australia on Monday, 21 May 2018 for an injunction against the ASX from proceeding with its plan to delist WQW. The Court granted that injunction until further order of the Court. WQW wishes to assure the market that it is committed to maintaining its listed status on the Australian Securities Exchange and complying with all its legal obligations. WQW is in ongoing dialogue with the ASX and hopes to reach a mutually satisfactory outcome on all issues with the ASX. Phone: +61 (3) 8 618 6895 Post: PO Box 804 South Yarra VIC 3141
18 May 2018 Mr Marcus Connor Legal Practitioner Director Connor & Co Lawyers Level 5, 50 Margaret Street Sydney NSW 2000 By email: marcus.connor@connorco.com.au Dear Mr Connor Winha Commerce and Trade International Limited ( WQW ) ASX Limited ( ASX ) refers to its letter of 15 February 2018 ( ASX Show Cause Letter ) and your letter of 3 April 2018 in response, providing submissions as to why WQW should not be removed from the official list ( Submissions ) and the copies of statutory declarations provided by you in your email dated 20 April 2018 in support of the Submissions. Abbreviations used in this letter reflect the names and terms that were defined in those letters. ASX has carefully reviewed the Submissions and supporting statutory declarations. It notes in particular: A. the findings set out in the ASX Show Cause Letter that WQW had met the requirements contained in Listing Rule 1.1 condition 7(b) at the time of its admission to the official list that were based upon the Flavours Spread, Shep Spread and Patric Spread being obtained using artificial means. B. ASX s letter of 28 February 2018 where, among other things, ASX stated: ASX s position remains that if WQW wishes to avoid removal from the official list, WQW must show good cause to the contrary as to why ASX should not take that action. For your client to improve its chances of demonstrating good cause, it should provide relevant evidence in the form of statutory declarations or affidavits from senior officers of your client, Black Swan, Plus One Group and/or Beer & Co. C. the statutory declarations of Mr Zhowei Zhong (otherwise known as Mr Jackie Chung ) and Mr Patrick Lay in support of WQW s submission that the Shep Spread was not obtained by artificial means and, in particular, the alleged role of Mr Matthew O Bryan, a director of Plus One Group in obtaining the Shep Spread, as articulated in paragraph 26 of Mr Chung s statutory declaration, where he declares: [Mr O Bryan] handled all the application forms and collection of the subscription monies. To the best of my knowledge, none of the Company s directors, officers, employees or advisers were involved in procuring those application forms. However, Messrs Johnson Teh and Patrick Lay ensured that the subscription monies were remitted to our Company s Lead Manager, Mr Michael Beer of Beer & Co, prior to the close of the IPO and paragraphs 21-22 of Mr Lay s statutory declaration where he declares: ASX Limited ABN 98 008 624 691 20 Bridge Street Sydney NSW 2000 www.asx.com.au Customer service 13 12 79
To the best of my knowledge and belief the applications and subscription monies for those Shepparton investors who expressed interest in investing in the Company were procured by Mr Matt O Bryan and his staff. I understand that they did not bother to complete Holder Identification Numbers (HINs) on those application forms in the interests of minimising the time and expense to their accounting firm. D. the statutory declarations of Patrick Lay and Mr Nelson Lay in support of WQW s submission that the Patric Spread was not obtained by artificial means, where Patrick Lay declares at paragraphs 25 26 and 32-33: I can confirm that those investors were bona fide investors and were known to me through business associate referral partners. All of them were fluent in Mandarin or Cantonese and were otherwise born overseas or had grown up in Australia. I noticed that the ones who lived in shared rental accommodation often received requests from their flatmates to also invest in the Company. I assume that was because they either understood the Company s business model or saw an opportunity to stag the share price following listing. As I was extremely busy undertaking all of the administrative tasks associated with the IPO in lead up to the close of the IPO, my college (sic) completed the application forms on behalf of those people who confirmed to me their interest in investing in the Company. and Nelson Lay declares at paragraphs 21-23 and 25: I appreciate that the failure to include Holder Identification Numbers (HINs) on the application forms is a cause for concern for the ASX. However, I understand from Patrick that he did not bother to inquire about whether or not the applicants had HINs in the interest of ensuring the forms were submitted before the IPO closed. Additionally, the fact that they are all for the minimum subscription price of $2,000.25 and that multiple investors have the same address but different surnames is explainable. I understand that many of the investors were Chinese expatriate university students and assume that they were not flush with cash given that they are university students. So it does not surprise me that when [word] got out that one of their number was investing in the Company presumably to stage the stock and make a quick profit, then the others in the same household would follow. E. your email of 20 April 2018 to Dean Litis (forwarding a copy of an email from Mr O Bryan dated 16 April 2018) in which you state: Matt O Bryan of Plus 1 Group (the Shepparton based accounting firm) has recently refused to provide us with a statutory declaration in support of our submissions (please see the email below). Based on my conversations with him yesterday, his reluctance to do so is based on our client s unwillingness to pay him for legal advice on the content of the statutory declaration and any implications it might have for his AFSL. F. Dean Litis email to you dated 23 April 2018 which states: Page 2 of 5
ASX strongly suggests that your client reconsider its position not to pay Mr O Bryan s legal costs in regards to the statutory declaration. Without a statutory declaration from Mr O Bryan it will be very difficult for ASX to make a determination in WQW s favour. G. your email of 14 May 2018 to Dean Litis (forwarding a copy of an email from Mr O Bryan dated 8 May 2018) advising that Mr O Bryan sought legal advice from Clayton Utz at WQW s expense but he still refuses to provide WQW with the requested statutory declaration. ASX s conclusion on spread For the reasons previously articulated in the ASX Show Cause Letter, ASX has concluded that WQW obtained spread largely by artificial means. In particular, in relation to the: 1. Flavours Spread the Flavours Loans can only be explained as arrangements intended to facilitate compliance with the ASX Spread Condition. ASX regards those arrangements as using artificial means to obtain spread. Whether WQW was aware of the Flavours Loans at the time is irrelevant. 2. Shep Spread ASX considers Mr O Bryan s evidence in support of both WQW s submissions and the statutory declarations of Messrs Chung and Lay that it did not obtain the Shep Spread by artificial means as integral to WQW dispelling ASX s findings in relation to the Shep Spread and showing good cause as to why it should not be removed from the official list. Given Mr O Bryan s refusal to provide a statutory declaration in support of the statutory declarations provided by Messrs Teh and Lay, ASX considers that it is entitled to draw an adverse inference that the Shep Spread was in fact obtained using artificial means. 3. Patric Spread ASX finds the statutory declarations of Patrick Lay and Nelson Lay in support of the Submission that the Patric spread was not obtained using artificial means at best unconvincing. There are no specific details about their networks of investors who allegedly were the source of that spread and there is no adequate explanation of why each investor invested the minimum amount or of the other anomalies identified in the ASX Show Cause Letter. ASX also finds it difficult to accept Patrick Lay s declaration that all of the investors included in the Patric Spread were fluent in Mandarin or Cantonese. A number of these investors clearly have non-chinese names and backgrounds. For example, the investors residing at: a. 211 Curlew Place, Shepparton (an address cited in the ASX Show Cause Letter), included Mr John Buzzo, Mr Martin Auro, Ms Emma Bennie, Ms Melissa Carter and Ms Tracey Baker); b. 2/107 the Boulevard, Shepparton (Ms Cassandra Clark, Ms Emily Corish, Mr Mehadev Dhanur and Ms Katie Dorsett); and c. 597 Wyndham St (Ms Ashleigh Edwards, Ms Barbara Hall and Ms Olivia Eddy). In addition the suggestion that in a number of cases the investor s objective was to make a stag profit does not reconcile with the fact each investor applied for an issued sponsored holding, suggesting they were a first time investor. ASX does not consider the suggestion that the Patric Spread has been obtained by artificial means is refuted by the Submissions or the supporting affidavits. Other issues As referred to in ASX s letter to WQW dated 13 October 2017, the structure of the WQW board was a significant factor in ASX s decision to admit WQW to the official list: Page 3 of 5
Discussions that occurred between ASX and Mr Michael Beer of Beer & Co Pty Ltd, Lead Manager to the WQW initial public offer, in early November 2016, in which ASX expressed its concerns that the board of directors then proposed by WQW: a. did not have directors with sufficient ASX listed company experience; and b. did not have an appropriate representation of independent directors, and that, as a consequence, if WQW did not address these issues, ASX would be likely to reject its application for admission to the official list. The appointments made by WQW of Messrs Nelson Lay (11 November 2016), Peter Beer (14 November 2017) and Andrew Thomson (14 November 2017) to the WQW board as non-executive directors prior to its listing on ASX on 5 January 2017 were ostensibly made to address ASX s concerns. However, within nine months of WQW s listing, both Mr Beer and Mr Thomson had resigned as directors of WQW without any public explanation. Further, ASX refers to Note 4 to WQW s most recent financial statements for the half year ended 30 September 2017 which states: As you are aware, WQW s interest in Flavours and its plans to grow that business were integral to establishing a relevant connection with Australia and a significant factor in ASX s decision to admit WQW to the official list. In the sixteen months since WQW listed, WQW has not made a single announcement to ASX under Listing Rule 3.1, including in particular in relation to the Flavours business. All of its announcements have been to comply with its periodic reporting obligations under Chapter 4 of the Listing Rules, the director interest provisions in Listing Rule 3.19A, the specific notification obligations in Listing Rules 3.14 and 3.16, or to respond to ASX queries. In light of the above, ASX has concluded that not only did WQW secure its admission to the official list using artificial means, the basis on which WQW was admitted to the official list has fundamentally fallen away. Accordingly, it is appropriate that ASX terminate WQW s admission to the official list pursuant to Listing Rule 17.12. ASX advises that it will proceed with WQW s removal from the official list prior to the commencement of trading on Tuesday 22 May 2018. Page 4 of 5
If anything above is unclear, please feel free to contact me. Yours sincerely [Sent electronically without signature] James Gerraty Manager, Listings Compliance (Melbourne) P: (03) 9617 7842 E: james.gerraty@asx.com.au Page 5 of 5