Q&A with Tenet Fintech Group Inc. Founder Johnson Joseph to Address Recent Developments at the Company

Johnson Joseph (JJ)

Edward Vranic (EV)

Introduction

Most Tenet Fintech Group Inc. (PKK.CN) shareholders and stakeholders were caught completely off guard when it was announced on April 28, 2023, that its founder and CEO Johnson Joseph had left. There has been a ton of speculation about what exactly happened, about the events that transpired since then, and about what it all means for the future of the Company and for its shareholders and stakeholders. Yesterday afternoon I spoke with Johnson to try to get some answers to those questions.

EV

Hi Johnson, thanks for helping the Company’s shareholders make some sense out of all that’s happened over the past couple of weeks.

 

JJ

Absolutely Ed. I think we have the same objective here, which is to make sure that the Company’s stakeholders know what’s really going on with the Company rather than get caught up in online rumors and speculations. So, thank you for this opportunity.

 

EV

1. Let’s start at the beginning of this whole thing. Can you comment on what led to your departure as the Company’s CEO?

 

JJ

First of all, I want to be very clear on this. I didn’t resign as the Company’s CEO. I would never walk away from something I spent more than ten years building with Golden and with the support of so many shareholders during that period. I was asked to resign as CEO and as a director by the independent members of the Company’s board of directors (the “Directors”). When I refused, they informed me that I was terminated and that they would vote me off the Board at the Company’s upcoming AGM in June.

As for what led to their decision, I believe they just panicked about the Company’s financial position due to their lack of experience being on the Board of a small-cap venture company such as Tenet. It’s well documented that our plan was to use the prospectus filed back in September to fund the Company’s operations in 2023. But when the prospectus review process took much longer than anyone expected and eventually expired, we had to find alternative ways to temporarily get money into the Company before we could refile the prospectus. So before the Company ran out of cash, we put in place a brokered private placement and were working on closing the first tranche of that private placement. There was a sense of urgency to get this done as quickly as possible, but the situation wasn’t alarming to our executive team. Given the Company’s history, we had a lot of experience managing the Company when its cash reserves were low. But unfortunately, the Directors had a completely different reaction to the situation and essentially began to panic. Rather than focus our efforts to getting money into the Company, they instead decided that we should lay off employees and essentially kill our Canadian operations. I strongly disagreed with their approach. We had other fundamental disagreements in terms of what we believe is the best course of action for the future of the Company, but I believe our view on the finances of the Company is what finally tipped the scale and led to them asking me to leave.

 

EV

2. Why do you think the Directors decided to act on that specific day, while the Company was in the midst of such a critical financing?

 

JJ

I have to admit that that’s the part that I still don’t understand today. Despite our differences in opinion, given the fact that I was the only one at the Company working on bringing in capital, I never thought that they would terminate me when they did and put the very survival of the Company in jeopardy. But after they terminated me, I figured that they must have secured some funding or had a plan to quickly get access to funds to keep the Company running. But from what I’m hearing from people still at the Company, they have no funds, had no plans for funding when they terminated me, and still don’t have a viable plan today.

On the other hand, based on the discussions that I was having with prospective investors when I was let go by the Directors, I believe we were mere days away from reaching the minimum of $5M that would allow us to close the first tranche of the brokered private placement. There’s no doubt in my mind that as we are speaking today, we would have had that first tranche closed by now. In fact, we have a group of shareholders who are ready to fund the Company today on a short-term basis, and based on certain conditions, to ensure its survival until a long-term financing solution can be found. The Directors are aware of this, so let’s see if they’ll act in the best interest of all Tenet shareholders as they claim to be.

 

EV

3. The Directors have made it a point to cut expenses as part of their goal to "streamline" operations. What do you say to those who say that Tenet’s burn rate in Canada is way too high?

 

JJ

What those people need to realize is that Tenet in Canada is actually a group of three companies. You have Tenet itself, the public entity with a total of 19 subsidiaries in China. Then you have Cubeler, the subsidiary responsible for the development, marketing, and operations of the Company’s Business Hub. Finally, you have Tenoris3, the analytics subsidiary considered to be the “brains” of the Tenet Group that’s responsible for developing the Company’s data-driven products and where most of the Company’s IP will reside. So, Tenet isn’t a start-up with just two guys developing software in a basement. It’s a publicly traded company with a complex structure and 12 departments trying to support three entities. Those departments include R&D, marketing, analytics, accounting, HR, business development, legal, operations, etc. We don’t have any departments that are not essential to helping the Company reach its objective, which is to launch our data-driven products as quickly as possible. With the massive layoffs that the Directors have done, we have essentially delayed the launch of our data-driven products by several months. The people who think that we can just continue to operate under the business model in China, where we charge fees for facilitating transactions, simply don’t understand the value of the data we’re accumulating through the Business Hub and why it’s so important to demonstrate the value of that data to the market as quickly as possible. I believe that until we do that, the Company’s true value will not be reflected.

So, for me, it comes down to a simple choice. Do we push to leverage our first mover advantage, capture SME data, and develop data-driven products this year that the capital markets have never seen before, or do we reduce our burn rate to the point where it’s going to take us another two years to get to the point where we can get those products to market, while in the interim some company with more financial means than Tenet catches on to what we’re doing and beats us to the punch? I think we just need to find the right financial partner or partners who understand the exceptional opportunity that we’ve created for ourselves and will work with us to ensure that we have the financial means to match our ambitions. We were in discussions with such partners until the rug was pulled from under me.

 

EV

4. The delay in the prospectus offering appears to be central to the issues Tenet has faced recently. Can you shed some light on why it has taken so long that the prospectus actually expired before you got the green light from the OSC?

 

JJ

Let me first say something about the normal review process of a prospectus. It’s not like you receive questions and comments from the regulators one day, you answer the questions and comments the next day, and then the regulators come back with more questions and comments the following day. The first comment letter we received from the OSC contained about 90 questions and comments if I recall correctly. They touched on everything from our operations in China, to the AMF investigation, to our operations in Canada, our financial statements, and everything in between. So, it took us a while before we were able to get back to the OSC. Once we sent our response back to the OSC, it then took them a while before getting back to us with additional questions and comments. This went back and forth several times with gaps as long as six weeks between contacts with the OSC. At times there was confusion and misunderstanding as to what exactly the OSC wanted, which added to the delays. For example, there was one particular point about a question related to the AMF investigation that our lawyers felt would have violated client-attorney privilege but that the OSC insisted needed to be answered. Our lawyers and the OSC finally got on a call and came to an understanding as to how the point would be addressed in the prospectus, but that situation greatly contributed to the delay. That’s why I’m hopeful that once the Company refiles its prospectus that the review process will be much shorter than what we just went through.

 

EV

5. So where does Tenet go from here? There are a lot of concerned shareholders out there, including me, who are wondering if the Company will survive this ordeal. Do you have a plan to get us out of this mess?

 

JJ

Right now I’m obviously very limited in terms of what I can do. But I’ve been working with some of the Company’s biggest shareholders to make sure the Company survives. Right now the Company is in real danger of going under since the Directors took control and have no plans to bring in the funds the Company needs to meet its immediate obligations. I’ve been told that they were trying to find a way to get money from our Chinese subsidiaries, but quickly realized that that wouldn’t be possible. Some of the Company’s shareholders, Golden and I have proposed to fund the Company for at least the next couple of months. But I was told that the Directors won’t even have a discussion with us about that. I think all Tenet shareholders need to remind the Directors that the Company belongs to its shareholders and not to them. If the two options on the table right now are either accepting funding from our group of shareholders or having the Company file for bankruptcy, then the Directors need to step aside and do what’s in the best interest of the Company’s shareholders. I would therefore highly encourage all Tenet shareholders who want to protect their investments and who care about the Company to contact the Directors and ask them to tell them how they’re going to get money into the Company by the end of next week. And if they can’t give you a credible answer, then ask them to resign so that the Company can survive. I am not trying to alarm anyone by saying this, but we’re quickly running out of time here.

We’ve been in a news release “blackout” period for the better part of 7 months now and haven’t been able to tell our shareholders and the markets what’s been going on at our Canadian operations. We’ve made a lot of progress on that front, so I would look to share that with the public as soon as we get some financial stability back in the Company. As I stated before, I was having discussions with groups in both the U.S. and Canada that could be long-term financial partners for Tenet. So, the plan would be to disclose as much as possible about our Canadian operations, Tenet’s global vision, and our planned data-driven products, all of which have led to my discussions with the aforementioned groups, and to work with them on a long-term financial plan. We would also refile the prospectus, which is still needed to allow the Company to regain its NASDAQ listing.

 

EV

6. It sounds like you’re still very much committed to Tenet. Is part of the plan for you to return as the Company’s CEO?

 

JJ

My commitment to Tenet is not just about the time, energy, and money that Golden and I have put into building this Company. It’s also about where we are today and how people react when they realize how the Company is positioned to capitalize on a unique opportunity when it comes to how we plan on monetizing our data. You don’t just walk away from that. As for potentially returning as Tenet’s CEO, that’s up to the shareholders to decide. Like I said, the Company belongs to them and not to anyone else.

 

EV

7. The Directors held a brief conference call yesterday, and they cited goals like increased transparency into the Company's operations and improved corporate governance. Both are righteous goals to have in order to allow Tenet to take the next steps and achieve important milestones like uplisting to the NASDAQ. If you are able to return as CEO, what would you do to facilitate these goals going forward?

 

JJ

Those initiatives were already being implemented long before the Directors came along. We’ve being working with E&Y in China and Richter in Canada on internal controls and SOX compliance for well over a year. Keep in mind that we achieved NASDAQ listing requirements and that the fact that we’re temporarily de-listed has nothing to do with transparency or corporate governance. Of course, we’ll continue with those initiatives.

 

EV

8. Before we wrap up the interview, is there anything else you’d like to share with the Company’s shareholders?

 

JJ

As a shareholder, whether you’ve invested $5 or $5,000,000 in the Company, never lose sight of the fact that you are part owner of the Company and have power and a voice. You don’t have to stay on the sidelines and watch people who have not invested a single penny in the Company drive it into a brick wall. The Directors may think that they’re above everyone and can operate with complete impunity, but that’s not true. The Company belongs to you and the Directors answer to YOU.

 

EV

On behalf of all Tenet shareholders, thank you for your time Johnson and for providing your perspective on the recent events at the Company.

 

JJ

Thanks again for the opportunity Ed. I really appreciate everything you’ve done to keep our fellow shareholders well-informed.

 

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