Magnis Energy Technologies returns to ASX after securing new audit opinion over New York battery gigafactory

Auditors Hall Chadwick change their view on Magnis Energy Technologies’ New York gigafactory, which clears the company’s return to trading on the ASX.

Magnis Energy Technologies has warned it has $1.6m in funds left, with the battery player’s shares tumbling on its return to the ASX after a four-week suspension.

In accounts posted on the ASX on Tuesday, Magnis revealed it had failed to make any sales in the last quarter, with the company facing a looming financial crunch.

This comes as Magnis returned to trade on Tuesday after the company was pulled from trade on October 2.

Magnis was pulled from trading boards after the ASX queried the company’s disclosures amid concerns from auditors Hall Chadwick over the company’s future financial viability.

However, Magnis said there had been no “material changes” to its new set of accounts, noting the revision largely related to a revised audit opinion concerning the company’s New York based battery factory.

Magnis Energy Technologies chair Frank Poullas near his offices in Sydney. Picture: Britta Campion/The Australian

The ASX had placed Magnis in suspension after the company posted a $72.7m loss in its full-year accounts against a cashflow of just $58.6m.

Magnis revealed it had just $30m in assets, with $22m cash, while facing at least $15.6m in debt repayments falling due within the year.

Magnis said the auditors of its Imperium3NY battery gigafactory had been forced to give a qualified opinion of the site to Hall Chadwick, leading to the mixed opinion.

In a letter to the ASX, Magnis said although it took responsibility for the late filing of its company accounts, “the company does not believe that its actions contributed to BDO’s inability to gain the requisite level of confidence in relation to the Outstanding Matters”.

In the update to Magnis’ accounts, Hall Chadwick director Anh Nguyen said the qualified audit opinion in the October 3 set of accounts was as a result of the component auditor for iM3NY not completing their work “on those areas”.

“Since then, the component auditor have completed their work and issued an audit report with unqualified opinion,” he said.

“As we now have obtained sufficient appropriate audit evidence, our audit report has been issued with an unqualified opinion on the reissued consolidated financial statements.”

Magnis also revealed it had breached listing rules on Monday, with the company revealing it had misstated fees paid to its directors.

The ASX found Magnis breached its $650,000 director fees caps when it paid members of the board “special exertion” fees worth almost $472,138, plus a further $150,021 paid to entities associated with some directors.

Magnis said while the $472,138 did “constitute genuine special exertion fees” the payment of those fees was not made within the bounds of Magnis’ constitution.

“The company regards this as an unfortunate and disappointing oversight and will ensure that such an oversight does not occur again in the future,” Magnis said in a market statement.

In response, Magnis said it would seek shareholder approval at the upcoming annual general meeting to boost its limits beyond $650,000 avoiding the repeat of a similar breach.

Magnis also published an update to its activities on Tuesday, revealing the company burned through $9.4m in the three months from July to September.

This saw cash in the bank tumble to $14.8m from $22.1m for the full year, with the company warning it had just 1.6 quarters remaining funding.

Magnis disclosed no receipts from customers in the period, also revealing it had spent no funds on production.

This comes after the company repeatedly promised shareholders funds would flow from its flagship factory iM3NY.

Magnis told shareholders in April, its major customer Sukh Energy would take delivery of cells in the second half of 2023.

Sukh has been touted as Magnis’ biggest customer, with $655m in offtakes agreed with the gigafactory.

In October 2021, after being questioned by the ASX, Magnis said iM3NY would deliver $80m in revenues in 2022, growing to $360m by 2023. This was tipped to soar to $1.8bn by 2027.

Magnis has been a frequent flyer of the ASX’s listings compliance team, with every update from the company subject to special approval by the market operator.

The company is also under intense scrutiny by the corporate regulator, which revealed in August it had opened a new investigation into the company amid concerns over “suspected false or misleading statements and breaches of continuous disclosure obligations by Magnis”.

The Australian Securities & Investments Commission had previously investigated Magnis and its chair Frank Poullas over “suspected misconduct concerning Magnis”, with the earlier investigation finding a breach of the requirement to notify the market of relevant interest in the company “was potentially arguable”.

Magnis shares closed down 18.92 per cent at 6c each on Tuesday. Its shares peaked at 73c in November 2021.