MySQUAR teeters on the brink as it discovers undisclosed transactions

(Sharecast News) - MySQUAR updated the market on its precarious trading situation on Friday, announcing that in order to preserve cash, it had temporarily shut down one division and part of another to further conserve cash.The AIM-traded firm said the mobile money division and 'MyMingalarbar', a social app, had ceased operations within the past week.Some staff from both divisions had been made redundant, with the board also saying that the directors and senior staff had not been paid for between two and three months.The mobile games division and Mingalarbar Morning, a lifestyle and entertainment portal, remained active and continued to operate, the board said.MySQUAR also announced that, following its announcements on 5 and 9 November, its non-executive directors were able to provide further details on a related-party transaction following a review of the segregated account into which the proceeds were paid from the bond issues announced on 7 March and 20 June."On 5 February, it appears that a loan of £0.2m was provided to the company by a company that may have been a substantial shareholder of the company at the time under the terms of a promissory note dated 2 February, issued by the company to that shareholder," the MySQUAR board said in its statement."The terms of the promissory note are that the loan was repayable in 45 days with the company to bear the $500 of administrative and transaction fees of the lender."The loan was repaid on 13 March out of the proceeds of the convertible bonds issued by the company, and announced on 7 March."MySQUAR said the preliminary view of the non-executive directors was that the loan may have constituted a related party transaction under Rule 13 of the AIM Rules for Companies, and as such, should have been notified at the time.That notification should have also been accompanied by a statement that the directors, having consulted with its nominated adviser, considered the loan to be "fair and reasonable" insofar as the shareholders were concerned.MySQUAR's non-executive directors also said that in breach of Rule 13, the company did not consult with its nominated adviser at the time in relation to the loan, adding that regardless of whether the loan did or did not require disclosure as a related party transaction, it may have otherwise required disclosure in accordance with the AIM Rules.They also said the loan should have been considered and approved by the board in compliance with the board memorandum on the financial position and prospects procedures adopted by the company on 29 June 2015."The related party transaction referred to above is included in payments amounting to approximately £0.9m, referred to in the company's update of 9 November," the board said"In addition to these payments two further series of payments have come to light which ought to have received board approval."Those included a payment made on 22 February in the sum of $13,800 to Rising Dragon Singapore, which the board considered to be a related party, although the sum fe;; below the class tests for the purposes of AIM Rule 13.They also referred to "various payments" made to a company believed to be related to a director of MyPay, made between 8 February to 4 April, in the sum of $188,742."The board is currently considering its options in relation to the above matters."MySQUAR said its cash position remained "critically low".It said a creditor, which had previously indicated it was prepared to provide a working capital facility, had completed its due diligence with the firm now awaiting an offer of funding.The board cautioned that there could be no certainty an offer of funding would be forthcoming, so there remained a "material uncertainty" regarding the company's working capital position."The company is in discussions with a NEX-quoted company regarding the sale of the company's subsidiary companies."It is proposed that the consideration on such a sale include shares in the NEX quoted company and that, in due course, such shares be distributed to the company's shareholders."However, there can be no certainty that this sale will complete or in what timeframe," the board repeated.MySQUAR said its shares would also cease to be traded on AIM with effect from 0700 GMT on 10 December, as it had been unable to appoint a new nominated adviser.