BEIJING, Sept. 10, 2018 /PRNewswire/ -- Link
Motion Inc., (NYSE: LKM), a leading smart car and smart ride
company, today announced the summary of the results of the
independent investigation conducted by an independent Special
Committee of its Board of Directors and carried out by its
independent counsel, Loeb & Loeb LLP. The Company also
announces changes to its Board of Directors and remedial steps it
is taking to enhance its corporate governance and operational
controls.
1. The Special Committee and the Report to the
Board
Background
- The Special Committee comprised of independent directors was
created in 2016 to deal with allegations concerning internal
governance matters raised in connection with an investigation into
Dr. Henry Lin's resignation as
Chairman and Chief Executive Officer of the Company and the Board's
decision to replace him as Chairman with Dr. Vincent Shi. Loeb & Loeb was first
retained as counsel to the Special Committee in November 2016 to investigate these
allegations.
- During the first half of 2018, additional allegations were
raised and the mandate of the Special Committee was expanded to
deal with these matters as well.
- On August 27, 2018, Loeb &
Loeb made an oral presentation of the results of the investigation
to the Board of Directors.
- Elements of the reported findings pertain to matters related to
RPL Holdings Ltd., one of the Company's major shareholders.
RPL's sole shareholder is a trust, of which Dr. Lin and Dr. Shi are
major beneficiaries. Dr. Lin was the sole director of RPL
until the delivery of a letter announcing his resignation in 2016,
at which time he was replaced in that capacity by Dr. Shi.
Principal Findings Related to the Company and its Board of
Directors
- Loeb & Loeb found it was reasonable for the Board to
conclude that (i) in December 2014,
Dr. Henry Lin resigned as CEO and
Chairman of the Company, and (ii) there is not sufficient evidence
to conclude that Dr. Henry Lin's
letter of resignation from those positions was not authorized or
ratified by him.
- However, Loeb & Loeb found a discrepancy between the reason
disclosed by the Company for Dr. Lin's resignation at the time of
announcement ("personal reasons unrelated to the Company") and the
reason provided by counsel to the Company at the request by
management in response to a subsequent request for more information
as to the nature of the "personal reasons" from the staff of the
U.S. Securities and Exchange Commission. In that response,
"health reasons" were put forward as the basis for Dr. Lin's
resignation. This statement was not accurate and complete
since members of the Company's management were aware that Dr. Lin's
resignation was significantly related to his involvement with a
Chinese government investigation involving matters unrelated to the
Company.
- In connection with the transaction in which the Company
divested its subsidiary, FL Mobile, Loeb & Loeb reported that
there is not sufficient evidence to support allegations that (i)
the Company intentionally tried to conceal the restricted nature of
the RMB 440 million dollar bank
deposit, (ii) the Company's repurchase of 5.66% of the outstanding
FL Mobile shares from Dr. Vincent
Shi was inappropriate or (iii) Company management lacked
integrity regarding the disclosure that this deposit constituted
restricted cash.
- In connection with the sale of FL Mobile shares by the Company
to Tongfang Investment Fund Series SPC ("Tongfang"), the
investigation found that, under the agreements signed with
Tongfang, the Company has the ability to recover the shares it has
sold to Tongfang if Tongfang fails to pay its RMB 1.77 billion senior note delivered in payment
for those shares. Furthermore, there is not sufficient
evidence to conclude that the agreements signed with Tongfang are
related-party transactions that would require special procedures
for approval.
- With respect to internal controls and cash management, Loeb
& Loeb reported that there is not sufficient evidence to
support the allegations that any director, officer or employee of
the Company has the ability to inappropriately direct funds out of
the Company or that the Company's banking relationships with China
Industrial Bank or Bank of Jiangsu
are not trustworthy.
- In connection with the sale of Class B common shares by the
Company to China AI Capital, the investigation found that the
transaction was presented to the Board in accordance to proper
procedures and decision-making and did not violate the Company's
Memorandum and Articles of Association.
- Loeb & Loeb investigated Dr. Lin's statement that he did
not sign and did not authorize the execution of the letter of
resignation as sole director of RPL. Loeb & Loeb reported
its finding that a Company employee had custody of Dr. Lin's
signature stamp, which she had used to "stamp" the letter of
resignation as director of RPL. Loeb & Loeb further found
that it was "more likely than not" that the employee had done so at
the instruction of Dr. Shi. Dr. Lin was the sole
director of RPL until the delivery of the letter announcing his
resignation in 2016, at which time he was replaced in that capacity
by Dr. Shi.
2. The Changes to its Board of Directors
Mr. Ethan Hu served as Chairman
of the Special Committee of the Board, and as such was the director
primarily responsible for the investigation into the allegations
referred to above. He was also the Chairman of the Company's
Audit Committee. Now that the arduous tasks as Chairman of
the Special Committee have been completed, on September 5, 2018, Mr. Hu tendered his
resignation as a director without any dispute or disagreement with
the Company or its Board of Directors in any matter related to his
roles on the Board. In addition, the Board of Directors
accepted the resignation of Mr. Jian Qi as an independent director
of the Company and a member of the Audit Committee.
The Board of Directors thanked both Mr. Hu and Mr. Qi for the
services they have rendered to the Company in their respective
capacities.
To expand the remaining number of independent directors, the
Board elected Mr. Jia Lian and Mr.
Xiao Yu as independent directors of
the Company. Mr. Jia Lian has
served as the chairman of Botongxingcheng (Beijing) Investment Co., Ltd. Mr. Lian
has more than 10 years' experience in finance and investment.
He graduated from Chinese People's Liberation Army Armored Force
Engineering Institute in 2004. Mr. Xiao Yu is the chief executive officer of
Beijing Hongyi Garment Trading Co., Ltd. He has more than 10
years' experience in marketing and management. Mr. Yu
graduated from Modern Art Design College in 2004.
3. Improving Corporate Governance and Operational
Controls
Based in part on the findings of the investigation, the Board
has concluded that the Company's internal procedures and processes
with respect to its decision making and operations should be made
more effective and transparent in order to avoid events in the
future that could lead to allegations similar to those that have
been investigated by the Special Committee. The anticipated
improvements will be focused, among other things, on expanded and
reinforced management and financial controls and review of
financial and operational reporting.
As a first step in that process, the directors have removed each
of the existing members of the standing Committees of the Board,
thanking them for their service. Each removed Committee
member remains a director of the Company's full Board of
Directors. As an interim step, the directors named Mr. Yu as
the sole member of each of the Audit and Corporate Governance
Committees, and named Mr. Yu and Mr. Bruson Li as members of the
Nominations Committee, pending the selection of additional
directors as members of those committees.
The Board has also decided that the corporate governance of the
Company would be enhanced by naming a Co-Chairman of the
Board. Therefore, pursuant to Company's Articles of
Association, the directors have elected Director Larry Chi as Co-Chairman of the Board. Dr.
Shi will continue to serve the Company as Chairman of the Board and
chief operating officer.
In addition, members of the Board of Directors are considering
ways to strengthen the Board's operations. These methods
could potentially include (i) adding additional new directors who
can actively contribute to the Company's growth, (ii)
improving the Committee structure and operations, and (iii)
implementing structural and procedural methods to improve the
Board's oversight of Company operations.
Finally, in order to continue to improve the Company's
governance processes, the directors have charged the management
with the task of reporting as soon as possible to the Board on
appropriate and effective steps for the Board's consideration to
achieve that goal. The Board will report to the shareholders
and other interested parties as such procedures are adopted and
implemented by the Company.
About Link Motion Inc.
Link Motion Inc. ("Link Motion" or the "Company", NYSE: LKM) is
a leading smart car and smart ride company. Link Motion's portfolio
of offerings includes enabling technology solutions and secure
connected carputers for the ecosystem of car businesses, consumer
ride sharing services, as well as legacy mobile security,
productivity and other related applications. For more information
on Link Motion, please visit www.lkmotion.com or the company's U.S.
investor relations site here.
Forward Looking Statements
This news release contains "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, and as defined in the U.S. Private Securities Litigation
Reform Act of 1995. These forward-looking statements can be
identified by terminology such as "will," "expects," "anticipates,"
"future," "intends," "plans," "believes," "estimates" and similar
statements. All statements other than statements of historical fact
in this press release are forward-looking statements and involve
certain risks and uncertainties that could cause actual results to
differ materially from those in the forward-looking statements.
These forward-looking statements are based on management's current
expectations, assumptions, estimates and projections about the
Company and the industry in which the Company operates, but involve
a number of unknown risks and uncertainties. Further information
regarding these and other risks is included in the Company's
filings with the U.S. Securities and Exchange Commission. The
Company undertakes no obligation to update forward-looking
statements to reflect subsequent occurring events or circumstances,
or changes in its expectations, except as may be required by law.
Although the Company believes that the expectations expressed in
these forward-looking statements are reasonable, it cannot assure
you that such expectations will turn out to be correct, and actual
results may differ materially from the anticipated results. You are
urged to consider these factors carefully in evaluating the
forward-looking statements contained herein and are cautioned not
to place undue reliance on such forward-looking statements, which
are qualified in their entirety by these cautionary statements.
Media & Investor Relations
MZ North America
Chris Tyson
Managing Director
949-491-8235
LKM@mzgroup.us
www.mzgroup.us
Luke Zimmerman
Senior Associate
949-259-4987
LKM@mzgroup.us
www.mzgroup.us
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SOURCE Link Motion Inc.
