mm2 Asia’s going concern flagged as auditor notes current liabilities

SINGAPORE (THE BUSINESS TIMES) – The auditor of mm2 Asia has flagged a material uncertainty that may cast significant doubt on the entertainment company’s ability to continue as a going concern, the group reported in bourse filings on Wednesday (July 13) night.

In its report on the financial statements of mm2 Asia for the financial year ended March 31, 2022, Nexia TS Public Accounting Corporation noted that the group incurred a net loss for the financial year, and its current liabilities exceeded its current assets.

mm2 Asia incurred a net loss of $42.1 million for financial year 2022, according to its auditor’s report. As at March 31, 2022, its current liabilities exceeded its current assets by $76.3 million. Its auditor also noted that the group has borrowings amounting to $154.4 million, which are due within the next 12 months from the end of the financial year.

These conditions “indicate that a material uncertainty exists that may cast significant doubt on the group’s ability to continue as a going concern”, Nexia TS said.

However, mm2 Asia’s financial statements have been prepared on a going concern basis, with the assumption that the group “will be able to meet its liabilities as and when they fall due”.

As of July 13, the company has taken steps to address the going concern, and as such its board believes “there are no concerns on the group’s ability to operate as a going concern basis”, mm2 Asia said in a Wednesday statement.

The steps involve mm2 Asia issuing 390 million placement shares in the capital of the company at five cents per share to raise $19.5 million in a new share placement completed on April 4.

Its wholly owned subsidiary mm Connect on May 12 and June 22 also entered into agreements to issue unsecured convertible bonds in an aggregate of $12 million carrying a 5 per cent per annum coupon rate. The bonds mature two years from their respective dates of issue.

The group also on June 16 entered into a term sheet with UOB Kay Hian as arranger in relation to a proposed issue of exchangeable bonds with a principal amount of $54 million, coupled with detachable warrants by the group. This remains subject to entry into the definitive agreements after negotiations between the parties.

As at July 13, the transaction is in progress.

The bonds will carry a coupon rate of 5 per cent per annum and a tenure of two years from the issue date, which will automatically be extended for one year in the event the exchange right is not exercised at the end of the tenure.

They will be issued together with 250 million warrants, each carrying the right for a period of five years from the issue date to subscribe for one new ordinary share in the company at an exercise price of 6.5 cents per new share.

The consideration from issuance of the warrants, if fully exercised, will be $16.25 million, mm2 Asia said, with expected total funds raised from the proposed issuance amounting to $70.25 million.