SINGAPORE (Nov 29): Coffeeshop chain operator Kimly said its executive chairman Lim Hee Liat (right) and executive director Chia Cher Khiang (left) are under investigation by the Monetary Authority of Singapore and the Commercial Affairs Department.

They are suspected to have flouted the Securities and Future Act.

See: Kimly shares suspended on regulators' probe

In a separate announcement, the company said that it will cancel an acquisition of a drinks company called Asian Story Corporation. The deal, which was paid using $16 million in cash, was announced as completed on July 2.

See: Kimly acquires seller of Asian Story drinks for $16 mil

In addition to Lim and Chia, Kimly’s former non-executive director Alain Ong Eng Sing is also under probe. Ong, former CEO of Japanese drink company Pokka’s subsidiary based out of Singapore, quit from Kimly’s board in January this year after the company’s AGM.

According to Kimly’s SGX announcement on Nov 29, Lim, Chia and Ong have been interviewed by authorities and have their passports impounded. Their IT equipment, and company records, have also been seized.

In September this year, Kimly was in the news for reportedly hiring Ong after he was asked to leave Pokka International, the subsidiary which he headed for years. While he was the CEO there, Ong’s wife, Vivian Lai, an actress, was a long-time celebrity endorser of the Pokka brand.

In a clarification statement to the SGX on Sept 30, Kimly neither confirmed nor denied the appointment of Ong, which was reported by Chinese evening paper Lianhe Wanbao.

“We wish to clarify that the Company does not comment on news or information from third party sources and urge shareholders of the Company to be cautious and discerning in assessing any news or information regarding the Company or its subsidiaries.”

When Kimly announced the acquisition of ASC back in July, it mentioned how ASC’s drinks command a market share of 7.7%.

In the Nov 29 announcement, Kimly revealed that ASC outsources the production of drinks to Pokka. Kimly received a letter on Nov 22 from Pokka, giving six months’ notice that the arrangement will be stopped.

It wasn’t clear if ASC uses other contract manufacturers, or produces its own drinks. As of Mar 31, 2018, the company had a net tangible asset value of $448,000.

The vendor is one Wang Chia Ye, whom Kimly said in July is unrelated. It wasn’t clear if Wang is related to Ong, the former Pokka employee.

According to Kimly, Wang has already repaid $12 million. He will repay the remaining amount over three years.

For now, Kimly’s executive chairman Lim and executive director Chia will continue their roles, as no formal charges have been made against them.

Separately, Kimly reported full year earnings of $21.9 million, up 2.1%, for the year ended September. In the same period, revenue was up 5.3% y-o-y to $202.2 million.

The company plans to pay a final dividend of 0.68 cent per share, which comes on top of the interim dividend of 0.28 cent per share already paid in May this year.

Kimly was one of the hottest IPOs of 2017. Its offer for 173.8 million new shares at 25 cents per share was 8.3 times subscribed. Kimly shares more than doubled to 51 cents on its third trading day on Mar 22, 2017. It last traded at 28 cents.

The company has asked for the trading suspension to be lifted on Nov 30.

PrimePartners Corporate Finance was its IPO sponsor.