Fellazo, Inc. (FLLC), which still has not filed their 10-Q and is currently appealing their potential de-listing on the Nasdaq, filed an 8-K yesterday with a whole bunch of changes in an effort to remedy their “inadequate and ineffective internal controls” (their words, not mine). However, Fellazo appears to be pointing fingers elsewhere by also stating this was the result of, “a lack of proper instruction to the Company’s management and financial personnel or adequate guidelines regarding transactions between the Company and its sponsor, and between the Company and its management.” It seems sort of incredulous that they “lacked proper instruction” given that they had two VERY experienced lawyers attached to this transaction (EGS and Loeb & Loeb) and a VERY experienced auditor (Marcum), but sure. Okay. Moving on…
Sponsor Transfer Agreement
In order to remedy this situation, Fellazo has entered into a Sponsor Transfer Agreement with Swipy Ltd (Fellazo’s original sponsor), TKK Capital Holdings (Yes, that TKK), Nicholas Ting Lun Wong, Jonathan Peng Fai Chong, Anderson Heng Hee Toh, Tiong Ming Tan, Chin Yong Tan, Lijun Yu and Ping Zhang.
The Sponsor Transfer Agreement provides for a replacement of the Company’s Board and management, a replacement of the sponsor, and Swipy Ltd., will become 80% owned by TKK Capital. Furthermore, the Company’s officers and directors shall receive certain compensation for their services rendered to the Company. Basically, TKK said, “I’m the Captain now” and they’re going to re-name it TKK-Fellazo Acquisition Corp. (or some other name at TKK’s discretion).
Nicholas Ting Lun Wong agreed to fund the Company with an aggregate of up to $1,270,000 to be applied toward the Company’s expenses to be incurred in connection with the transactions contemplated by the Sponsor Transfer Agreement and the Company’s business combination activities. This includes any extensions of time in which to consummate a business combination (Fellazo has until ~July 29, 2020). Such Funds would be remitted in three installments as follows:
- $70,000 to be paid upon execution of the Sponsor Transfer Agreement;
- $600,000 to be placed into an escrow account within 7 calendar days of a determination of the Nasdaq Hearings Panel (the “Panel”) to provide the Company with additional time to regain compliance with applicable Nasdaq Rules (the “First Deposit”), and
- another $600,000 to be placed into an escrow account within 14 calendar days thereafter.
Changes to be effected within 3 business days following the funding of the First Deposit into escrow and include, but are not limited to:
- The Company will change its address and shall initiate action to change its name to TKK-Fellazo Acquisition Corp., or some other name selected by TKK Capital; of its name and address;
- The Company will enter into a new administrative services agreement with Texas Kang Kai Capital Management (Hong Kong) Limited which will provide certain administrative services to the Company for $10,000 a month, and in connection with the execution of such agreement, the Company shall terminate its existing administrative services agreement dated July 24, 2019 by and between the Company and Swipy Ltd;
- Jonathan Peng Fai Chong, Anderson Heng Hee Toh will transfer all their equity interest in Swipy Ltd to TKK Capital;
- Nicholas Ting Lun Wong will retain a 20% equity interest in Swipy Ltd and transfer the balance of his 33% equity interest in Swipy Ltd to TKK Capital; and
- Sing Wang will transfer 70,000 shares of TKK Symphony Acquisition Corporation to Nicholas Ting Lun Wong.
The Sponsor Transfer Agreement will be terminated if the Panel determines to delist the Company’s securities from Nasdaq.
As for leadership changes, effective February 5, 2020, Jonathan Peng Fai Chong, a director of the Company, was vacated by the Board due to his personal health issues. If you recall, Mr. Chong previously had resigned as CFO on January 6, 2020.
All of this basically means is that Fellazo basically swapped out their sponsor to TKK Capital, which by the way, kind of has their hands full trying to close their transaction with Glory Star New Media Limited, after extending their Tender Offer five times. However, we still don’t know if Fellazo (ahem, “TKK-Fellazo”) has a new auditor. And they definitely have not filed a 10-Q. Their hearing with Nasdaq was scheduled for yesterday, February 6th, so it remains to be seen if these changes bring them into compliance. However, without a 10-Q, which is what originally prompted Nasdaq to issue a de-listing notice, there’s still a chance this doesn’t fly. And if Nasdaq does de-list Fellazo, the Sponsor transfer agreement is terminated, setting Fellazo right back to where they started.