XOX - SOS

While a key creditor discount turned XOX Bhd’s unaudited net loss into an audited net gain for FY2013 ended June 30 2013, the company is facing other challenges to keep itself in the black. This includes short term concerns over its cash flow as well as a proposed scheme with a creditor to convert its net balance outstanding into loan stocks.

In Nov 8 2013, it highlighted a deviation of 225.7% between its unaudited net loss of rm3.59 million and audited profit after tax of rm4.51 million for FY2013.

The variance was mainly due to rm10 million discount given by a major trade creditor following negotiations with XOX. It was given the credit note after the conclusion of its financial year, resulting in the subsequent adjustment in the audited financial statements.

The company says it will continue its relationship with Celcom and Axiata. The two have a commercial arrangement that allows COC to utilize Celcom’s nationwide mobile network infra.

While the creditor discount went a long way toward improving XOX’s FY2013 results, the company is working hard to turn things around.

Another point in the agreement between XOX and a trade creditor is the creditor agreed to convert the net balance outstanding of about rm16.6 million into RCULS at 10 sen per share.

Should the creditor convert the RCULS into equity, it would be entitled to nominate XOX’s top management personnel at its own discretion. In other words, the agreement entails a potential management reshuffle and a restructuring of XOX’s business.

Another caveat in the scheme says XOX will be obligated to pay a minimum of rm2 million or 90% of the creditor’s invoices issued after June 30 2013. Moreover XOX will have to remit 50% of any amount raised from a private placement to the creditor when the scheme is in force.

Another concerns, the group’s current liabilities exceeded its current assets by rm16.64 million which indicates the existence of material uncertainty. This may cast doubt about its ability to continue as a going concern.

One big worry for XOX at the moment is its depleting cash reserves. The group has cash and cash balances amounting to a meager rm244987 as at June 30 2013. After deducting fixed assets such as property, plant and equipment, its current assets amounted to rm14.8 million.

In contrast, its current liabilities stood at rm31.44 million as at June 30 2013.

The group has receivables of rm13.75 million which may come into its coffers sometime in the foreseeable future.

The agreement between XOX and its creditor is expected to have major ramifications on the company’s future direction.