Franchise Retail Brands in administration: shareholders face losses in firm once behind New York Slice, Hombre Mexican
THE company once overseeing brands including the New York Slice pizza chain and Mexican fast-food outlets has plunged into administration, amid a festering lawsuit and complaints about the Brisbane-based franchise operation.
Administrators from GM Insolvency were appointed on Wednesday to Franchise Retail Brands, which owes more than $500,000. Shareholders who invested almost $5.3 million could face losses.
“It took me four years to build this business and six months (for them) to kill it,” said Todd McGregor, who sold his New York Slice franchise operation to Franchise Retail last year.
Franchise Retail started in 2016, pledging to help in areas that small businesses struggle, such as in marketing or legal work.
The aim was to oversee brands including New York Slice, Hombre Mexican Cantina and 1582 Coffee, and had once even planned on absorbing cake-and-coffee chain Shingle Inn.
Bruce Dwyer, a Franchise Retail director only appointed last month, said he hoped creditors would accept a deed of company arrangement to let it trade out of the current difficulties.
“We’re still hoping that we can save the company. There are really good people there and a very good coffee roaster,’’ Mr Dwyer said.
GM Insolvency principal Ginette Muller said creditors included professional firms and landlords.
The company had employed about 10 staff until recently and four-company owned New York Slice stores have been shut. Ms Muller said investigations would continue.
Franchise Retail had been under pressure. Queensland Supreme Court records show it was seeking to set aside a statutory demand for money from a company run by Mr McGregor, who had built up the chain from two pizza stores to 14 in a four-year stint before the sale to Franchise Retail.
Mr McGregor, still a franchisee of two stores in Brisbane’s Fortitude Valley, told The Courier-Mail that Franchise Retail had still owed money from the acquisition. The deal had involved some upfront cash, some deferred payments and equity, he said.
Mr McGregor declined to specify the amount owed. But he said there were “others that have option deeds that are owed money as well”.
He said Franchise Retail had a high turnover of key personnel, and criticised spending.
Official accounts showed $2.5 million in wages, he said. “You’re burning cash at that rate. It’s crazy,” he said.
This was spent before Franchise Retail had embarked on its long-touted but never completed $20 million stockmarket float, he said.
Mr McGregor also said the Australian Securities and Investments Commission should investigate.
Franchisees are still running, although some of the Mexican outlets having gone to a new franchise operation.
LWP might be on its last legs
IT sure looks like embattled LWP Technologies might be on its last legs.
The loss-making Brisbane energy sector minnow has secured a voluntary suspension of its shares on the ASX as it conducts an internal review expected to take one or two months.
The probe, which will pore over dwindling cash reserves and ongoing expenses, was prompted by a body blow from the ATO this month.
The tax man has knocked back three separate R&D rebate claims totalling $1.68 million for the 2014 and 2015 financial years.
The ATO has proposed slashing the rebates to just $129,126 and even then there may be shortfall penalties and interest costs.
The two sides are locked in talks and it’s not clear yet whether the company will lodge an appeal.
LWP, which has failed to commercialise its fracking technology since listing in 2006, revealed this month that it has just $480,000 in cash and plans to liquidate a share portfolio valued at $560,000.
That followed a $7.6 million loss in the first half, prompting auditors to warn once again that the company is in danger of collapse. That big river of red ink came after $6 million losses in each of the 2016 and 2015 financial years.
Flying home from the US yesterday, new chairman Dan Lanskey said he believed the company could survive. “You can always raise further capital,’’ he told City Beat.
Lanskey, a former Queensland cop active in the US oil and gas sector, took over last month after long-serving chairman Siegfried Konig resigned.
Konig, who was on a $430,000 salary package, said at the time that he would stay on as an adviser.
But Lanskey said all expenses are under the microscope right now, including that nice little earner for Konig.
Franchise Retails Brands head Sean Corbin resigns just weeks before $20 million float
FRANCHISE Retail Brands managing director Sean Corbin has stepped down just weeks before a planned $20 million public float.
Sean Corbin resigned on Tuesday as managing director of the Brisbane food and beverage group, which bought the Shingle Inn chain in June for about $5 million.
Corbin, a former boss at struggling LWP Technologies who
co-founded FRB last August, did not return a call seeking comment.
FRB chairman Matthew Morgan failed to respond to an email.
But City Beat spies tell us the board had concerns about Corbin’s management, both in style and substance.
“It’s been coming for a while,’’ a source close to the firm said. “There was also an issue with key staff. Quite a few people left.’’
Sean Corbin illustration by Brett Lethbridge.
Company insiders said Corbin’s exit was unrelated to the IPO, even though it had been repeatedly delayed since late last year and was now expected in October or November.
FRB’s stable of businesses include New York Slice, Hombre Street Food Cafe & Bar, 1582 Coffee, Sabatini’s, Crave Ice Creamery and The Dessert House.
It is understood the group, which hopes to raise another $30 million after listing, plans to snare the Lord of the Fries chain and settle on the Shingle Inn deal at the time of the float.
An investor presentation from float underwriters Bell Potter reveals plans for a significant expansion of the franchising footprint of the outlets.
Brisbane bizoid Siegfried Konig fell on his sword yesterday as chairman of struggling LWP Technologies. His resignation follows a humiliating legal loss on Friday, with a court dismissing LWP’s lawsuit seeking to claw back $774,000 from a joint venture partner.
Konig slammed “a vicious hate campaign’’ against the aspiring energy player, which hopes to commercialise its fracking technology, but has piled up enormous losses in the process.
He said criticism of the company was “absolutely blown out of all proportion”, even though auditors have warned it’s in danger of collapse.
Taking his place in the board room will be Dan Lanskey.
He’s a former Queensland cop who improbably pivoted to the oil and gas industry, where he has been active mainly in the US for more than 15 years.
Although LWP floated in 2006, Lanskey said that LWP’s technology remains in part “untested’’ and “there may be a commercial opportunity’’ for it in the US.
Konig, who will stay on as an adviser for an undetermined amount of time, said he would retain his significant holding.
Too bad the stock is virtually worthless at just .001 cents.
One disillusioned investor told City Beat that it’s hard to see how LWP can bounce back.
“Their reputation has been destroyed and they will need a significant capital raising just to keep going,’’ he said.
“If their tech was half as good as they claimed, one of the majors would have snapped it up by now.’’
Siegfried Konig’s loss-making LWP Technologies in legal battle over new battery with JV partner
HAS obscure Brisbane energy player LWP Technologies done its dough with a joint venture partner supposedly researching new-age batteries in Thailand?
It sure looks that way based on a legal battle now playing out in the Brisbane Supreme Court.
In June last year loss-making LWP committed $1.6 million and 30 million of its shares to acquire a half-stake in new entity GraphenEra as part of a joint venture with bizoid Victor Volkov.
LWP boss Siegfried Konig talked up the potential, claiming it could be a “future $1 billion company’’.
But LWP sued Volkov and his VVV Technologies in January alleging gaping holes in the company’s story emerged, including questions over who owned the patents for the graphene battery aimed at competing with lithium models.
The company hopes to claw back $774,000 and cancel the shares amid claims that Volkov’s laboratory was little more than an empty shed with a few bits of equipment, including what looked like a set of soft serve ice cream machines.
But Volkov has fought back, chasing LWP for his legal costs after a series of legal loopholes appear to have rendered the joint venture null and void.
Konig and then-director Sean Corbin allegedly agreed to transfer the shares to Volkov even though a technical bungle meant they were not directors of GraphenEra.
Despite the error, they also still paid the funds for the JV directly into Volkov’s company bank account.
Since then, Volkov has sold his LWP shares, now practically worthless, at just 0.001¢ apiece.
Interestingly, the signature of Volkov’s son, Vadim, appears on the shareholders agreement originally setting up the ill-fated JV.
Vadim Volkov is an alleged Hells Angels bikie and drug kingpin, who has been fighting the government’s bid to seize his multimillion-dollar fortune after he was charged with trafficking in cocaine, ice, ecstasy and steroids in Queensland last year.
LWP’s dispute with Volkov senior returns to court this Friday.
Neither Konig nor Volkov senior could be reached for comment yesterday.
Corbin, who left LWP last year and is now planning to float his Franchise Retail Brands, yesterday defended the business deal with VVV.
MEANWHILE, LWP continues to hemorrhage cash with seemingly little prospect of a turnaround.
The company, which is also developing technology used in fracking, reported a $7.6 million net loss in the first half as auditors once again warned about a “material uncertainty’’ about its ability to survive.
That followed a $6 million loss in the 2016 financial year and a $6.4 million loss the year before.
LWP had less than $900,000 in cash at the end of May, according to an ASX filing late last month.
All the red ink has prompted talk of a class action among disgruntled investors, who have seen the market cap of the company nosedive from about $40 million two years ago to less than $6 million today.
Investors have also called on ASIC to investigate the company, which has already drawn two “please explain’’ queries from the ASX since January.
Konig, who earned a $430,000 salary package last year, has previously maintained that he is one of the biggest shareholders and has suffered like other investors.
It is a tale of intrigue involving millions in lost shareholder value, radical new technologies and a failed joint venture with alleged links to a member of the Hells Angels.
- LWP’s shares are almost worthless
- Investors are calling for ASIC to investigate
- LWP’s market capitalisation has dropped from $40 million in mid-2015 to $6 million today
Disgruntled shareholders have accused Brisbane-based firm LWP Technologies of destroying millions in shareholder value without producing any income.
LWP persuaded investors that its fly ash-based proppant — tiny balls used to keep fissures open when fracking — was a game-changer for the industry.
But now the company’s shares are almost worthless and investors are calling for the Australian Securities and Investments Commission (ASIC) to investigate.
‘It seemed like a no-brainer’
Perth-based Brad Chapman has worked in drill and blast mining for 20 years. He spent $650,000 on LWP shares, making him one of the ASX-listed firm’s biggest investors.
“Fly ash was an abundant resource, cheap, and the technology these guys said they had to be able to turn this into proppants made it much better than what was on the market for the price you could get it at,” he recalled.
“It seemed like a no-brainer — it looked very impressive.
“I’ve come to the conclusion they’ve not actually produced anything.
“If everything they predicted came true it should have been a real goer.”
He sold his shares last year, making a $240,000 loss.
LWP’s market capitalisation has dropped from $40 million in mid-2015 to just $6 million today.
The company’s shares are almost worthless, fetching just 0.1 cents, down from highs of 30 cents a share in 2009.
ASX confirms complaints from shareholders
The company’s chairman, Siegfried Konig, told the ABC he was the second-largest LWP shareholder and had seen the value of his shares drop from $3.8 million to $350,000.
“Therefore, my holding and that of the other directors is 100 per cent aligned with LWP shareholders, and the board is making every effort to restore that value,” he said.
The ASX told the ABC it had received many complaints from investors.
“LWP is a company whose issues have exercised a lot of ASX’s attention. We have made multiple enquiries and taken a range of actions within the scope of our power,” it said in a statement.
The ASX is also concerned about the management of the company, having recently required LWP to appoint independent directors and an independent governance expert.
Company has no obvious source of income
Tony from Brisbane spent $30,000 on shares in 2015, but sold out last year when he became increasingly concerned about a lack of progress and some of the company’s investments.
“I was looking for a long-term hold, it had pretty promising technologies, but management — there were too many red flags for me,” he said.
LWP has no obvious source of income as it is yet to go into production or sell any product. It has not turned a profit since 2013, when it got a tax rebate, and posted a $7.6 million loss for the half-year to December 2016.
“They’ve alluded they’ve had contracts coming up in the works, but nothing has materialised over the last two years,” Mr Chapman said.
The company appears to have survived by raising funds through issuing new shares, including $6.6 million in 2015, and a further $6 million from Lanstead Capital in 2016.
Mr Konig said the proppant product is ready for commercialisation, but the drop in the oil price has led oil and gas companies to cut back on capital expenditure.
But now, according to company accounts, the company has just $1.1 million in the bank, and the ASX has estimated LWP has cash outflows of $880,000 for the next quarter alone.
The dismal figures did not affect Mr Konig’s wages — he was paid $430,000 last financial year.
“I think they’re just milking it out now and they’ll just close shop when that money’s gone,” Mr Chapman said.
With no income, the ASX was concerned the company would fold, so it sent a “please explain” letter in mid-May.
Mr Konig responded to the ASX with a statement saying the company was taking steps to achieve positive cash flow, including halving the pay of senior executives.
Failed venture lands in court
Investors have accused management of making a raft of mistakes, including a failed joint venture with rechargeable battery technology company GraphenEra, which has ended in court.
LWP spent $1.6 million and handed out 30 million shares to acquire 50 per cent of the battery patent.
The scientist behind the invention, GraphenEra director Victor Volkov, planned to set up a laboratory in Thailand to produce the graphene battery, which he claimed would compete with lithium batteries.
LWP is now suing GraphenEra, alleging Mr Volkov mismanaged funds, and is seeking to cancel the joint venture and recover $770,000 and 30 million shares.
Supreme Court documents show LWP sent a representative to Thailand, Bruce Dwyer, who said the laboratory, rented by Mr Volkov, “was in fact at that stage an empty shed, factory that had been rented”.
Mr Chapman said he believed LWP did not have sufficient controls over the running of the joint venture.
“My thinking on it is that the directors were absolutely incompetent to go ahead with it,” he said.
But Mr Konig disputed that assessment, saying an independent third party introduced the board to the project, which had the potential to make LWP a very valuable enterprise and that he “personally saw the lab construction in progress”.
Joint venture company has alleged links to bikie gang member
Last year Mr Volkov submitted a patent, naming a close relative as an inventor, to the patent office.
Police allege this family member is a patched member of the Hell’s Angels.
LWP met with Mr Volkov and his relative as part of its due diligence.
“The principal scientist assured the board that his relative had absolutely nothing to do with GraphenEra,” Mr Konig said.
A number of former LWP shareholders have made complaints to the Queensland Police, ASIC and the ASX, and are now considering a class action.
“These guys are downright greedy,” Tony from Brisbane said.
“ASIC’s done nothing and you complain to them and it’s a black hole. Information comes in and nothing goes out.”
ASIC declined to comment.
Investors criticise a range of LWP’s decisions
Investors have criticised a number of LWP’s decisions, including LWP investing $500,000 in a retail chain run by its former CEO Sean Corbin, who resigned from LWP in November 2016.
Mr Konig was also previously listed as a director of this retail company.
While Mr Konig said the company did nothing wrong, the ASX forced LWP to undo the deal.
The ASX also forced Mr Konig and Mr Corbin to sell shares issued to their children, with profits to be donated to a charity.
LWP executives were forced to sell 41 million shares acquired when LWP bought Mr Konig’s private company Ecopropp.
Mr Konig conceded “some of our previous company secretarial matters could have been handled better”.
The company was also caught out claiming it had independently tested its proppants, but in March was forced to write a retraction, blaming its investor relations team.
The testing had been done by LWP’s former chief scientist.
“The accusation that testing was not independent is entirely false and without foundation,” Mr Konig said.
Investors have also criticised LWP for making a $300,000 loan to a traffic signalling company Omnet, which went bust soon afterwards.
LOSS-making Brisbane energy outfit LWP Technologies faces a backlash from angry investors.
More than 170 former shareholders have joined forces in the hope of launching a class action against the listed firm, headed by Siegfried Konig.
They allege that poor management decisions and questionable transactions have resulted in the company’s market cap plummeting from about $50 million in mid-2015 to around $12 million today.
The firm, which is developing technology used in fracking, raised $1.6 million in June to invest in a company focused on next-generation batteries.
But the move has proved disastrous, with LWP now trying to claw back $774,000 and cancel 30 million of its shares.
The ASX has sent the LWP several “please explain’’ letters this year over numerous transactions, including a $300,000 loan to a traffic signalling research and development firm which went bust shortly afterwards.
LWP retrieved $500,000 invested in a franchising company controlled by director Sean Corbin after the ASX described the deal as a related party transaction in breach of listing rules.
The ASX has also questioned whether other deals were between related parties, including the acquisition of shares in capital raisings by the adult children of both Konig and Corbin.
In response, Corbin told the ASX that “any non-compliance was unintentional and inadvertent’’.
LWP is already under pressure, having suffered a $6 million net loss last year. That followed a $6.4 million loss in 2014-15.
Just this week LWP revealed the losses have continued in to the current financial year, with $1.5 million in red ink through to October.
It’s enough for auditors to warn that a “material uncertainty’’ now hangs over the company’s ability to continue as a going concern.
Neither Konig, who earned a $430,000 pay packet last year, nor Corbin returned calls seeking comment yesterday.
NEW RETAIL FLOAT
A NEW retail group in Brisbane has well-advanced plans to raise between $15 million and $20 million in a public float by the end of the financial year.
Sean Corbin, a former head of Allied Brands, now runs Franchised Retail Brands Limited and soon hopes to have at least five well-known outlets under his wing.
It’s all very hush-hush but City Beat spies report that the retailers expected to take part include the well-known Shingle Inn chain, the New York Slice pizza group and Raw Energy cafes.
It’s understood that NBC Capital boss Bruce Scott, fresh from presiding over the crash of Eagle Boys, has reached out to offload his Degani coffee network.
Scott, who did not return a call yesterday, has previously denied NBC plans to get rid of the cafe group.
Corbin said yesterday that a draft prospectus was in the works but it was “way too premature’’ to talk about specifics.
He declined to reveal which broking house was underwriting the IPO and he said “confidentiality agreements’’ prevented him from talking freely about the retailers joining him.
Corbin stepped down last month as CEO of little-known Brisbane resources outfit LWP Technologies, which is chaired by Siegfried Konig.
Records show Konig and Corbin registered Franchise Retail Brands in August and both served as directors but Konig has since resigned from the new entity.
That followed an embarrassing slapdown last month by the ASX, which alleged LWP had breached listing rules by investing $500,000 in a related party, namely Franchise Retail Brands.
LWP disputed the allegation but clawed back the money anyway.
It’s probably just as well, since LWP suffered a $6 million net loss last year and $6.4 million of red ink in 2014-15. Auditors have also flagged a “material uncertainty which may cast doubt over the group’s ability to continue as a going concern’’.