[ASX] Have any directors of DAU set up stores or have proposals to set up stores in China or elsewhere on behalf of Aurigin (whether in the name of Aurigin or another name)? In answering this question please comment specifically on the attached interview with Annie Guo released on The Southern Enterprises News website referred to in paragraph I above and her statements regarding the establishment by Aurigin of a store in Tianjin and the proposals to set up 8 further stores.
[MALCOLM CARSON] No
The “translated” article is incorrect in the following respects:
The press article describes Aurigin and its director’s vision for Aurigin in relation to the overall business concept and plans to establish a chain of retail outlets in China quite well and in a manner consistent with the Independent Expert’s Report, but the journalist has misunderstood the fundamentals of the business model as follows:
• The Aurigin Foods business model envisages that the “Franchisee’s” secure and establish stores, own or lease, staff, operate and manage these stores under the Aurigin franchise and operating framework. Aurigin’s role is solely as the Franchisor and the supplier of product for those stores.
The first paragraph in the translated article incorrectly states the DAU has announced the opening of its first physical store and that 8 other stores will open soon.
• Firstly, the store in Tianjin referred to in the article, does not belong to Aurigin Foods. It was an existing established store selling Australian products and owned by a third party. To assist in lifting its profile the store was given the opportunity to trial under the Aurigin name.
• Aurigin or DAU have not incurred any costs associated with the operation of the Tianjin store.
• Secondly, we refer you to item 2.2 below with respect to the statement in the article that “8 other stores will open soon”. The article further states that “Aurigin plans to also open a store in Brisbane in addition to its existing store in Sydney”. This statement is entirely incorrect as Aurigin does not have a store in Sydney and has no plans to open a store in Brisbane at this stage.
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Only two months later on May 24th (these are excerpts from the video, please watch in full for context):
[MALCOLM CARSON] Aurigin's products are available throughout China from our retail outlets and online...
[CAPTION] Ryan: Works at Aurigin's Sydney cafe
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My comment:
The problem in my mind is not whether they are franchised stores or company owned, but how many stores they basically had already lined up in order to quickly establish the 10-15 required for the performance rights which have the potential to substantially increase Malcolm and Hui's (Annie) ownership of AAL (diluting that of DAU's). If the performance rights are converted and options exercised, then DAU's interest could be diluted from 33.33% to 14.29%.
In the Independent Expert's Report published January 15th this year, the report says that five franchisees have signed up to date, but "have yet to commence any business and are in negations to acquire premises".
There is no mention of the Tianjin store in the independent report, neither has there been any real clarification as to whether the store counts toward the 10 franchisees required for the performance options.
Further to this, at least one additional store (whether it/they were owned by Aurigin I don't know) was pictured on a Weibo account (around mid February) which appears to no longer be accessible. Why weren't any of these stores mentioned in the independent report provided to shareholders?
(20min delay)