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after 165 days of suspension, two resignation announcements will benova health(06606.hk) is once again at the center of public opinion.

on september 9, nouva health announced that deloitte touche tohmatsu (hereinafter referred to as "deloitte") has resigned as the company's auditor. on the same day, nouva health's chief financial officer (cfo) gao yu and joint secretary mo minghui also announced their resignation from the company.

on march 28 this year, novecare health briefly suspended trading and announced that the company would delay the release of its 2023 annual report and launch an investigation into the company's financial data.

however, after three consecutive announcements of continued suspension, the market still has not received the results of the investigation of nouva health. in the past 165 days, doubts surrounding nouva health have continued to ferment in the capital market. nouva health, which was listed on the hong kong stock market with the halo of "the first cancer early screening stock", is caught in a financial fraud scandal, which will not only affect the market's confidence in the company and the early cancer screening industry, but may also bring a crisis of trust to hong kong-listed 18a biotech companies.

regarding the progress of the above investigation and the resignation of senior executives and other related matters, times finance sent an interview outline to novecare health, which stated that all progress should be based on the company's announcement.

image source: tuchong creative

the financial report shows that deloitte served as nova health's auditor from 2020 to 2022, with a cumulative auditor salary of 16.886 million yuan during the period. as a long-term partner, why did it leave before the investigation was completed? market insiders are puzzled.

in the announcement on march 28, deloitte, as the auditor, clearly pointed out three issues of concern, including the validity of certain sales transactions of coloclear and the commercial substance and commercial rationality of the relevant sales model, the validity of certain sales transactions of pupu tube (english name: pupu tube) or uu tube (english name: uu tube), the validity of certain sales and marketing expenses and the commercial substance and commercial rationality of related marketing activities.

the changweiqing, pupupu tube and youyou tube mentioned by deloitte are all the commercialized products of nouva health. at that time, nouva health mentioned that according to the requirements of deloitte, the audit committee had appointed a third-party expert ("investigator") to conduct an independent investigation. this announcement means that 225 days after being questioned about financial fraud, nouva health has entered the formal investigation stage.

however, five months after the investigation was launched, nouva health suddenly announced that deloitte had resigned. regarding the resignation, nouva health explained in the announcement that "the company has been in contact with deloitte, asking it to commit to a tentative timetable for completing the 2023 audit, but noted that deloitte has not been able to commit to the relevant timetable, which has resulted in the company being unable to determine when the 2023 audit will be completed, and therefore when the 2023 annual results will be published."

in order to ensure the publication of the 2023 annual results as soon as possible, the board of directors of novecare health believes that it will be in the overall best interests of the company and its shareholders to appoint another audit firm to replace deloitte as the company's auditor so as to complete the 2023 audit as soon as practicable.

in response, capitalwatch ceo zhu jiang said on social media, "the pressure for deloitte to resign as auditor came from the hong kong independent commission against corruption (icac). icac went to deloitte's hong kong office twice to request the audit records and took away a bunch of documents. perhaps before they could come to a conclusion, deloitte took the initiative to refuse to sign the 2023 annual report of nova health."

on august 16, 2023, capitalwatch released the "investigation report on the fraud of financial data of nouva health", which was the fuse that triggered the financial fraud scandal of nouva health.

in response to zhu jiang's remarks, nouva health responded to times finance, saying, "this news is totally unfounded." as for more investigations into its communications with deloitte, nouva health said that the content of the announcement should be taken as reference.

liu zhigeng, a well-known financial and tax audit expert and senior certified public accountant, pointed out in his analysis to times finance, "generally speaking, there are several reasons for auditors to resign. first, deloitte is likely to have different opinions with nouva health on the rationality, compliance, authenticity and effectiveness of related transactions. the two sides may each hold their own views and refuse to give in, dragging on for a long time; second, nouva health is dissatisfied with certain audit opinions that the auditor believes need to be issued, and the two sides hold their own views and refuse to give in; third, nouva health may have found an auditor who made private commitments on relevant important issues, thus forcing deloitte to resign, but it is not easy to rush to announce it to the public at present."

since the beginning of this year, regulatory authorities have taken strong measures to enforce the responsibilities of intermediary institutions, severely punishing "collaboration in fraud", and forcing intermediary institutions to fulfill their responsibilities.flushdata shows that as of early june this year, 107 intermediary institutions, including securities firms, accounting firms, law firms, evaluation agencies, credit rating agencies, etc., have received various fines issued by the china securities regulatory commission and the shanghai and shenzhen stock exchanges. among them, 28 are accounting firms.

cfo resigned and became a director of a nova holdings company in may

it is not just the auditors who have announced their resignations. according to the announcement of nova health, gao yu has resigned as the company's joint company secretary and the company's chief financial officer, effective from september 9, 2024 and september 30, 2024 respectively. gao yu will ensure a smooth handover during the transition period.

according to the prospectus, gao yu has served as the chief financial officer of novecare health since june 1, 2020. he is also one of the joint company secretaries, responsible for financial and strategic planning, business development, participation in operational management and investor relations activities.

as cfo, at the 2023 interim performance meeting, gao yu also responded with other management to the rationality of some financial data of novecare health.

in addition to gao yu, mo minghui has also resigned as joint company secretary of novecare health and will no longer serve as an authorized representative and legal proceedings agent, effective september 9, 2024. liang yinghan will take over the above company positions.

according to the announcement, both mok ming hui and leung wing han are from tricor professional services limited (a global professional service provider focusing on comprehensive services for business, enterprises and investors, hereinafter referred to as "tricor professional services"). mok ming hui is the executive director and co-head of corporate services of tricor professional services. on june 11, 2021, mok ming hui took up the position of joint company secretary of nova health. leung wing han is the director of the secretarial services department of tricor professional services.

in the announcement, novecare health mentioned that gao yu and mo minghui have each confirmed that they have no differences of opinion with the board of directors, and there are no matters concerning their resignation that need to be brought to the attention of the company's shareholders and/or the hong kong stock exchange.

in this regard, liu zhigeng told times finance, "under normal circumstances, the cfo of a listed company should be very clear whether the company has committed financial fraud. in fact, regardless of whether a listed company has committed financial fraud or not, as long as public opinion discloses the suspected financial fraud and there is no clear result, it will have a great impact on the company's cfo, so it is not surprising that he resigned."

liu zhigeng further analyzed that the discussion should be divided into two situations: knowing that there was no fraud and knowing that there was fraud. he pointed out to times finance that if the cfo knew that there was no fraud and was mentally clear, there might be two main reasons for resigning: one is that he does not want to be entangled in this trouble, so he may resign to get rid of it; the other is that he has found a better place and resigned to leave the current right and wrong.

"if the cfo knows about the fraud, he will always feel uneasy. there are two possible considerations: first, regardless of whether he has found a new job or not, resigning and leaving the troubled place is the general choice of cfos. second, the company's main person in charge naturally hopes that the fewer people who participate in the fraud and know the inside story remain in the company, the better. after giving the cfo a certain amount of compensation (hush money), he may let him resign voluntarily, making it difficult for the successor cfo to explain the fraud, making it difficult to verify the fraud." liu zhigeng told times finance.

tianyancha shows that on may 31 this year, gao yuxin served as a director of beijing huiyi hospital management co., ltd. (hereinafter referred to as "beijing huiyi"). beijing huiyi's shareholder information shows that novecare holds 19.0897% of its shares.

the halo has faded, and the mystery of financial fraud is hard to solve?

according to the official website and annual report, nouva health focuses on multi-omics cancer screening technology innovation and pipeline development, and won the "first certificate for early cancer screening in china" with its colorectal cancer screening product changweiqing. in february 2021, nouva health successfully landed on the hong kong stock exchange; in march 2023, the company successfully "delisted" and became the seventh 18a biotech company to successfully "delist" on the hong kong stock exchange.

just half a year after successfully "getting the b" rating, nova health was accused of financial fraud. on august 16, 2023, a document titled "investigation report on nova health's financial data fraud" (hereinafter referred to as the "report") was leaked. the report was issued by wall street financial media capitalwatch. the report stated that nova health created 90% of false sales revenue by constantly suppressing goods, and the actual business volume was far less than its published financial data.

after the above report came out, nouva health held an emergency meeting to respond. in a clarification announcement, the management stated that the allegations in the report were blatant fabrications.

after that, nouva health also disclosed a profit forecast for 2023 to boost market confidence. according to nouva health, this year is the first time the company has achieved after-tax profit. the profit forecast shows that as of december 31, 2023, the group's total annual revenue is expected to be between 1.979 billion yuan and 2.050 billion yuan (excluding overseas market revenue, the same below), an increase of 158.9% to 168.2% over 2022; in addition, the company's annual gross profit is expected to be between 1.808 billion yuan and 1.873 billion yuan, an increase of 179.9% to 190.0% over 2022.

among them, the flagship product changweiqing contributed 59% to the group's total revenue, with more than 1.04 million samples inspected and confirmed revenue of 1.19 billion yuan, an increase of 235% over the confirmed revenue in 2022.

before the financial fraud scandal broke out, nouva health's rapid growth significantly boosted the market's confidence in the early cancer screening industry, and it was believed that nouva health had opened up a new business model for serious medical products using the consumer medical service model.

however, everything came to an abrupt end on march 28 this year. on that day, nouva health was temporarily suspended from trading, and then the company announced that it would continue to suspend trading and delay the publication of the 2023 annual report. the specific reason was that "the board of directors believes that it is not appropriate for the company to publish its unaudited management accounts for the year ended december 31, 2023 at this stage, because such management accounts may not accurately reflect the company's financial performance and status."

to this day, nova health's 2023 annual report is still missing. during the 165 days of nova health's silence, the market could not get more progress information from the announcement, and countless speculations followed.

in december 2023, the second zaodx world cancer early screening conference was held in guangzhou, and nouva health was the chief strategic partner of the conference. however, at the third zaodx world cancer early screening conference held in june this year, the name of nouva health could no longer be found in the relevant agenda.

regarding the company's current operating conditions, novecare told times finance that the company is actively promoting its business and simultaneously updating the monthly investor report on its official website.

perhaps, for the current market, we can only wait for the final investigation results of nouva health. for nouva health, whether it can maintain the market trust of the company during the long investigation and clear itself of suspicion of fraud is crucial.

"for a company, compliance is always the bottom line." at the 2023 interim performance meeting, zhu yeqing, ceo of novecare health, said this bluntly.