Manalto ex-chairman says he is ‘deeply sorry’ after staff go unpaid

The former employees of a Manalto subsidiary say their salaries have gone unpaid since they were locked out of their office in July.

Josef van Niekerk, a former developer at Soshlr – a South African subsidiary of ASX-listed social media manager Manalto — told Stockhead he and about 30 other staff were abruptly locked out of the firm’s Cape Town office on July 26.

Soshlr was set up by Manalto (ASX:MTL) founder Anthony Owen in 2016 to build a social media management tool for small to medium businesses.

Mr Owen resigned as managing director in March, although he continued on with the company as an advisor.

Mr van Niekerk says 32 staff are owed salaries from July to various dates. Seven staff who’d earlier taken redundancies were also owed payments, he said.

Manalto’s former chairman Jim McKerlie said staff at the subsidiary walked off the job — a detail Mr van Niekerk disputes — when, for the second time, Manalto was not able to pay their salaries on time.

Mr van Niekerk says the liquidation of Soshlr in South Africa was never finalised, due to the board resigning.

“No one could claim [Unemployment Insurance Fund] benefits from the Department of Labour, as the liquidation request never reached the magistrate.”

Hurting the trust relationship

Cape Town is Africa’s Silicon Valley.

Mr Owen opened Soshlr there to access a hub of talented, inexpensive South African developers.

Manalto listed on the ASX in March 2015, offering a cloud-based social management tool for big businesses. Soshlr – launched a month later — was to have been a small business version.

The South African development team was launched in 2016, with the idea that it would be paid for by revenues that would start flowing once Soshlr gained traction in cloud stores.

Mr van Niekerk says his March salary was five weeks late.

“That was the first time they really hurt the trust relationship,” he said.

On July 25 staff received an email from Mr McKerlie, which Stockhead has seen.

The email said that because most of a planned Manalto $2.5 million capital raising had not come through they didn’t have enough money for wages.

“I know this will have a very big impact on our people,” Mr McKerlie said in the email.

“I am working very hard on a solution and I will inform you of any developments. Several options are being considered and will take a few days to be considered.

“I am deeply sorry about this. It would be inappropriate and unfair to offer any false hope.

“You have put your trust in the company and the company has let you down.

“The truth is the excesses of the past have created too much baggage.”

That was the last straw for the South African office.

“There was this one unanimous sigh in the office, people were so angry,” Mr van Niekerk said.

“The next day, we were locked out of the office… We were revoked access to systems like BitBucket and daily standup meetings we normally had in the mornings with colleagues in India, Australia and Indonesia.

“I remember logging in the next day on Google Hangouts for the daily meeting, and there was no one there.

“We were under no impression that the company was intending to liquidate.”

Mr van Niekerk says when the staff got the email they didn’t walk off the job, but found new employment over the ensuing weeks and later resigned.

“We needed to find a way to keep paying our home loans and care for our families”.

Mr van Niekerk says staff are angry at the way they’ve been treated.

“They are not in this country where they have to face us,” he said.

“They know how hard it would be for us to challenge them in court because how do you hire a lawyer if you don’t have a salary.”

Manalto’s money troubles

Manalto got into financial trouble when anticipated sales of the Manalto and Soshlr products did not materialise.

Its half-year report in February showed revenue of $US50,488 ($65,000) and a $US2 million loss. Debts totalled almost $US1 million.

Mr McKerlie says the Soshlr model could never make money because it needed to sell huge volumes of licences a month.

By the start of this year the company had sold only 113 licences — 90 of which had never been opened because they were part of a bundle — at an average of $4.50 each.

A plan outlined in January proposed to combine the Manalto and Sohslr products by March to kick start sales, but others had already cornered the market.

Mr McKerlie spent the early part of 2017 winding up Soshlr subsidiaries in Ireland, the Netherlands and the US, but they’d wanted to keep the South African team who’d built the products.

“We felt we couldn’t give them termination notices because we were hoping that when the money did come in from [corporate advisor] EverBlu they would come back to work,” he said.

“We absolutely hoped that we would keep that team and [had I known the money wasn’t coming] I would have terminated that team.”

Mr Mckerlie was also sensitive to the fact that had they told the ASX they’d had to lose the South African team for financial reasons, they could kiss the money goodbye.

The Manalto board quit in September after EverBlu promised to pay the company’s debts if the directors all stepped down.

Mr van Niekerk hopes that talks with the new board will mean the South Africans will see some of the dues they’re owed.

Dire straits

Manalto released its quarterly report on Monday and it has $145,000 left in the bank.

It says it will spend $471,000 in the fourth quarter – almost all of which is on corporate and administrative costs. It’s allocated $30,000 to product and operating costs.

This quarter’s accounts includes $601,000 raised via convertible notes, but doesn’t include another $550,000 in convertible notes.

The report said Manalto’s US staff were carrying out demonstrations of the product and identifying potential customers, while in Australia they were working with Ray White to bring on more franchisees.

It did not provide an update on sales numbers.

Receipts from customers totalled $36,000.