JSE Sens

AYO TECHNOLOGY SOLUTIONS LIMITED - Supplementary Announcement to the Announcement Dated 4 June 2019 and Renewal of Cautionary Announcement.

12 June 2019 - 17:15 PM
AYO
Supplementary Announcement to the Announcement Dated 4 June 2019 and Renewal of Cautionary Announcement.

AYO TECHNOLOGY SOLUTIONS LIMITED
(Incorporated in the Republic of South Africa)
Registration number: 1996/014461/06
JSE share code: AYO
ISIN: ZAE000252441
("AYO" or "the Company")

SUPPLEMENTARY ANNOUNCEMENT TO THE ANNOUNCEMENT DATED 4 JUNE 2019 AND
RENEWAL OF CAUTIONARY ANNOUNCEMENT.

Shareholders are referred to the announcement (Announcement)
released on SENS on Tuesday, 4 June 2019 regarding findings of an
internal management review pursuant to the Agreed Upon Procedures
(AUP) performed by BDO Cape Incorporated (BDO).

This supplementary announcement is being released by the Company to
provide shareholders with additional information in order to clarify
certain aspects of the Announcement:

1. Pursuant to the AUP performed by BDO, management conducted its
   own internal review based on the findings contained in BDOs
   Factual Findings Report.

2. Following managements internal review, the Company was of the
   view that it was in possession of price sensitive information and
   accordingly, released the Cautionary Announcement to demonstrate
   the effect of the misstatements identified during managements
   review on the statement of comprehensive income, statement of
   financial position, statement of changes in equity and statement
   of cash flows contained in the published 28 February 2018 interim
   results. Despite including the words revised, the Announcement
   is not a restatement of AYOs interim results for the six months
   ended 28 February 2018 (2018 Interim Results) in accordance
   with IAS 34 and IAS 8.

3. The Announcement dealt with the material adjustments identified
   by management in its internal review and was not intended to deal
   with all matters identified in BDOs Factual Findings Report,

4. The Company has engaged its external auditors, BDO, to commence
   with the audit of the 2018 Interim Results. On completion of the
   audit, the Company will release restated audited 2018 Interim
   Results and provide all the necessary disclosure as required by
   IFRS, the Companies Act, 71 of 2008 and the JSE Listings
   Requirements (including full details of the errors in the
   application of IFRS).

5. Although there are misstatements in the 2018 Interim Results, it
   is important to note that the board of directors believe that
   these had no material effect on the audited results for the year
   ended 31 August 2018.

6. BDO have confirmed that, based upon the information obtained
   during the AUP engagement they do not believe that their
   unqualified audit opinion of those annual financial statements
   will change.

7. The Company refers shareholders to the following sections in the
   Announcement which contained errors and /or were incomplete:

   7.1   In the table headed Condensed Statement of Changes in
         Equity:
         The third column titled as % change 28 February 2018
         should be titled Revised Unaudited at 28 February 2018.

   7.2   In the table headed Summarised Consolidated Statement of
         Cash Flows:
         The third column titled % change 28 February 2018 should
         be titled Revised Unaudited at 28 February 2018.

   7.3   The   adjustment  of   R51 084 000  in   the  table headed
         Summarised Consolidated Statement of Cash Flows:
         The adjustment is a reclassification from cash flows from
         investing activities to cash flows from financing
         activities. The adjustment relates to the repayment of a
         loan from a shareholder incorrectly recorded as investing
         activities.

   7.4   Note 1. Cost of sales:
         The Company wishes to point out that the original
         adjustment of R18 million was not based on any factual
         underlying information. An estimate was made at the time
         based upon an analytical review which revealed that the
         gross profit margin for a subsidiary was lower than
         anticipated. Pursuant to the process referred to in 1
         above, management was able to verify R11,3 million of
         invoices against the journal entry of R18 million. This
         results in the understatement of cost of sales by R6,7
         million.

   7.5   Note 2. Other operating expenses:
         The Company points out that the adjustment of R10 million
         to the commission expense was based on an analytical review
         performed, which revealed that the average commission paid
         at a subsidiary had risen by 5% compared to historical
         levels.

         When, pursuant to the process referred to in point 1 above,
         the employment contracts were subsequently inspected, it
         was noted that as the commission structure was embedded in
         the existing employment contracts it should have been
         accounted for and not reversed. Furthermore, there was an
         error in the analytical review and that the commission was
         not out of line with the past.

   7.6   Note 4. Listing cost expenses:
         The Company also points out that the capitalisation of the
         costs was an error, and not the incorrect application of
         judgement.


RENEWAL OF CAUTIONARY ANNOUNCEMENT

Shareholders are referred to the cautionary announcement released on
4 June 2019 advising shareholders to exercise caution when dealing
in the securities of the Company until the audit of the 28 February
2018 interim financial results is completed and published on SENS.
Shareholders are advised that the above audit is still not completed
and hence are advised to continue exercising caution when dealing in
their shares in the Company until the audit is complete.


Cape Town
12 June 2019

Joint Sponsor
Vunani Corporate Finance

Joint Sponsor
Merchantec Capital

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