Exceed Company’s CFO, Director Resign as Stock is Delisted

Exceed Company Ltd., which is one of China's largest domestic sports brands, disclosed that its CFO and a director have resigned after months of delays in Founder, Chairman and CEO Shuipan Lin's plans to take the company private.

The company's board of directors said it was unable to persuade CFO Vivien Tai to stay on despite two months of lobbying. The board appointed the company's deputy financial officer Shulong Yu as interim CFO.

Director Yea-Mow Chen resigned from his seat on Exceed's board effective March 19, leaving the company with just four members and a lack of independent directors required by the Nasdaq.

Exceed said many of its overseas vendors, including companies needed to complete the company's 2014 financial statements, have stopped doing business with the company in recent months because Lin, who controls the use of all company funds outside of China, has failed to pay them.

The company was delisted from the Nasdaq April 30 for failure to pay listing fees and missed the April 30 deadline for filing its annual report on Form 20-F with the U.S. Securities & Exchange Commission. 

While Lin has attributed the late payments to illness, Exceed's board said May 19 that it “strongly disagrees with his approach in handling the situation” and reserves the right to conduct an investigation “if additional facts emerge that may suggest other reasons behind Mr Lin's inactions.” 

The board also said it had appointed an executive to begin working with overseas regulators and  vendors to prepare audited financial statements that would not have been needed has Lin completed the transaction.
 
“As a result of Mr. Lin's inaction, a substantial number of these service providers have suspended or terminated their services for the company,” directors said in a statement released May 20. “The business operations of the company, including relationships with suppliers and customers, were unaffected.  Payments to the service providers and employees in China were also unaffected.

“The amounts involved were relatively small in magnitude. The company's offshore operations, however, have halted as a result. The company thus failed to meet its accounting and financial reporting obligations to its shareholders and the public.

“In the view of the board of directors of the company, Mr. Lin bears primary responsibility for the failure to establish the management discipline and internal controls essential for meeting the company's responsibilities as a public company. The board of directors is sympathetic to Mr. Lin's explanation for the delay but strongly disagrees with his approach in handling the situation.  The board of directors reserves the right to conduct investigation it deems appropriate if additional facts emerge that may suggest other reasons behind Mr Lin's inactions. “

After peaking at RMB 2.38 billion in 2011, Exceed's revenues dropped by half to RM 1.62, or about $269 million, in 2013. In December, of that year, Exceed entered into the Agreement and Plan of Merger with companies wholly owned by Lin to take the company private, but he has been unable to secure the financing needed to put the transaction to a shareholder vote.

Exceed Company Ltd. designs, develops and engages in wholesale of footwear, apparel and accessories under its own brand, Xidelong, in China. Since it began operations in 2002, Exceed has targeted its growth on the consumer markets in second and third-tier cities in China. Exceed has three principal categories of products: (i) footwear, which comprises running, leisure, basketball, skateboarding and canvas footwear, (ii) apparel, which mainly comprises sports tops, pants, jackets, track suits and coats, and (iii) accessories, which mainly comprise bags, socks, hats and caps. Exceed Company Ltd. currently trades on Nasdaq under the symbol “EDS”.