Remark Holdings Corrects Recent Misinformation Campaign by Short Sellers
As we evaluate what further actions we will take, we wanted to take this opportunity to respond to
Wolfpack Research'skey allegation is that we do not actually own shares of Sharecareas we report in our filings with the Securities and Exchange Commission. Such assertion is absolutely false. As of June 30, 2020, we owned approximately 4.5% of the issued shares of Sharecareand our CEO, Kai-Shing Tao, occupies a seat on Sharecare'sBoard of Directors. Additionally, as of this writing, the litigation that we previously reported in our SECfilings that could have potentially resulted in our loss of control over the investment in Sharecarehas been resolved, as we recently paid in full all amounts owed in satisfaction of the judgment entered into against us during the litigation.
Remark never ceased to own its approximately 4.5%
Sharecarestake, as the ability to settle the legal matter without loss of control of the Sharecareinvestment was always under our control. The payment in full of the underlying judgment against Remark means that there is no longer any basis for potential seizure of the Sharecareinvestment owned by Remark. Wolfpack Researchalleges that we must not have control of our Chinasubsidiaries that we report, for accounting purposes, as variable interest entities (VIEs) simply because we did not publicly disclose the contents of the contracts that give us control over the VIEs; the allegation is simply wrong. We have standard VIE contracts in place, including related loan agreements, that were drawn up and executed several years ago with the assistance of Arnold & Porter, an internationally well regarded law firm. VIE control may not be the same as direct equity ownership, but it is a very common framework with Chinese companies controlled by foreign entities. In fact, Alibaba, Tencent, Netease, JD.com and Baidu are some of the many examples of major companies who have structured their Chinabusiness using VIEs.
- Though we initially sourced cameras and other components from various third parties, including HIKvision (whose cameras are still readily available on websites like Amazon.com), we never shared any of our AI technology with them nor did HIKvision at any time have access to our technology.
We are now an original design manufacturer for our thermal cameras and thermal pads. We design the cameras and pads and have hired a contract manufacturer to produce the products. The manufacturers build according to our design and specifications, which is why the products are now Remark-branded products. Remark has always maintained control of the technology and intellectual property.
- Regarding our investment in AIO, we originally planned to invest
$1 millionin the company, but after funding $500,000, we determined that we would need to work with AIO to improve their results before we further funded the company. One of our Chinasubsidiaries subscribed for AIO's 20% equity interests at a post-money valuation of $5 million, and paid in $500,000. In connection with that, AIO increased its registered capital from one million Chinese Yuan to 1.25 million Chinese Yuan, and the difference between $500,000and 250,000 Chinese Yuan was deposited to the capital surplus account which is not reflected as AIO's registered capital. Such transaction is very typical. The comment from Wolfpack regarding our Chinasubsidiary's capital contribution based on their purported review of the SAIC filing is flawed and seems intended to mislead or confuse Remark's investors.
- Finally, they allege working capital and cash issues, each of which we address in every one of our
SECfilings over the past few years, but they inaccurately calculate working capital and they do not provide any source material, other than referring to obtaining tax documents in China, that would allow us refute their inaccurate assertion that we do not consolidate our Chinese subsidiaries under GAAP. We are a public company with well-regarded auditors who regularly review and audit our financials.
- As of
June 30, 2020, our cash balance exceeded $10 millionand our debt had been paid down substantially.
We are proud to be helping our customers safely reopen their businesses and schools as they try to comply with the latest safety standards.
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Director of Capital Markets and Investor Relations
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