Energem (ENCP) - 2024 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION This section details Graphjet Technology's unaudited condensed consolidated financial statements and management's analysis of its financial condition and operations Item 1. Unaudited Condensed Consolidated Financial Statements This section presents Graphjet Technology's unaudited condensed consolidated financial statements, reflecting increased net loss and operating expenses, and a strengthened cash position from financing activities Unaudited Condensed Consolidated Balance Sheets As of March 31, 2024, total assets increased to $8.5 million while total liabilities grew to $14.0 million, widening the shareholders' deficit to $5.5 million Condensed Consolidated Balance Sheet Data (in thousands) | Account | March 31, 2024 (unaudited) | September 30, 2023 (audited) | | :--- | :--- | :--- | | Total Current Assets | $1,638 | $435 | | Total Assets | $8,513 | $6,264 | | Total Current Liabilities | $2,016 | $859 | | Total Liabilities | $14,043 | $8,847 | | Total Shareholders' Deficit | $(5,530) | $(2,583) | - A significant new liability of $10.15 million for an accrued bonus was recorded as of March 31, 2024, contributing to the increase in total liabilities[9] Unaudited Condensed Consolidated Statements Of Operations The company reported a substantial increase in net loss for the three and six-month periods ended March 31, 2024, primarily due to a sharp rise in general and administrative expenses with no revenue generated Condensed Consolidated Statements of Operations (in thousands) | Period | Ended March 31, 2024 | Ended March 31, 2023 | | :--- | :--- | :--- | | Three Months | | | | General and administrative expenses | $11,588 | $660 | | Net loss | $(11,594) | $(666) | | Six Months | | | | General and administrative expenses | $12,006 | $984 | | Net loss | $(12,018) | $(996) | Loss Per Share | Period | Ended March 31, 2024 | Ended March 31, 2023 | | :--- | :--- | :--- | | Three Months (Basic & Diluted) | $(0.40) | $(0.27) | | Six Months (Basic & Diluted) | $(0.77) | $(0.40) | Unaudited Condensed Consolidated Statements Of Cash Flows Net cash used in operating activities significantly increased to $3.3 million for the six months ended March 31, 2024, offset by $5.7 million from financing activities, resulting in an increase in cash and cash equivalents Summary of Cash Flows (in thousands) | Six-month period ended March 31, | 2024 | 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(3,296) | $(222) | | Net cash used in investing activities | $(1,264) | $0 | | Net cash provided by financing activities | $5,705 | $0 | | Net change in cash and cash equivalents | $1,145 | $(222) | - Financing activities included $6.26 million in proceeds from the issuance of shares, which was the primary source of cash for the period[20] Notes To Unaudited Condensed Consolidated Financial Statements These notes detail the company's business, reverse recapitalization, significant accounting policies, going concern uncertainty, intangible assets, related party transactions, and future commitments - The company completed a business combination with Energem Corp. on March 14, 2024, accounted for as a reverse recapitalization with Graphjet treated as the accounting acquirer[26][27] - Management has identified a material uncertainty that casts substantial doubt on the company's ability to continue as a going concern, dependent on achieving profitability and receiving continued financial support from shareholders[28] - The company owns patents for producing graphite and graphene from palm kernel shells, which are being amortized over a 15-year useful life, with a net carrying amount of $5.6 million as of March 31, 2024[50][51][52] - On February 29, 2024, the Board approved a bonus of $13.8 million to senior management for the successful business combination, with $10.15 million accrued as of March 31, 2024[57] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's pre-revenue status, significant increase in general and administrative expenses leading to a larger net loss, and reliance on equity financing with substantial doubt about its going concern ability - The company has not yet had any sales of its products and is currently in the process of sampling its products to multinational companies for market acceptance[86] Results of Operations Comparison (in thousands) | Period | General & Admin Expense (2024) | General & Admin Expense (2023) | Net Loss (2024) | Net Loss (2023) | | :--- | :--- | :--- | :--- | :--- | | Three Months Ended Mar 31 | $11,588 | $660 | $(11,594) | $(666) | | Six Months Ended Mar 31 | $12,006 | $984 | $(12,018) | $(996) | - The increase in G&A expenses and net loss is primarily attributed to higher staff costs (including a provision for gratitude/bonus), marketing events, audit fees, consulting, and legal fees[98][102] - The company's auditor has expressed substantial doubt about its ability to continue as a going concern due to its financial history of net losses, with future operations dependent on obtaining additional financing[116] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company states that as of March 31, 2024, it was not subject to any material market or interest rate risk - As of March 31, 2024, the company was not subject to any market or interest rate risk[143] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were ineffective as of March 31, 2024, due to a material weakness in accounting resources and separation of financial responsibilities - Management's evaluation concluded that the company's disclosure controls and procedures were not effective as of the end of the reporting period[146] - A material weakness was identified relating to the lack of sufficient accounting resources to identify and resolve complex accounting issues and adequately separate financial responsibilities[146] PART II - OTHER INFORMATION This section provides other information including legal proceedings, risk factors, equity sales, and a list of exhibits Item 1. Legal Proceedings The company reports that it is not a party to any material legal proceedings - The company is not currently involved in any material legal proceedings[150] Item 1A. Risk Factors The company states there have been no material changes to the risk factors previously disclosed in its Annual Report on Form 10-K filed on April 22, 2024 - There have been no material changes to the risk factors disclosed in the company's Annual Report on Form 10-K filed with the SEC on April 22, 2024[151] Item 2. Unregistered Sales of Equity Securities, and Use of Proceeds This section details the company's Initial Public Offering and a private placement of units, which collectively generated significant gross proceeds, with no material changes to the planned use of funds - The company completed its Initial Public Offering on November 16, 2021, generating gross proceeds of $100 million, with an additional $15 million from an over-allotment option exercise[159][154] - A private placement of units to the Sponsor generated total gross proceeds of $5,280,750[153][154] Item 6. Exhibits This section provides a list of exhibits filed as part of the Form 10-Q, including the Share Purchase Agreement, articles of association, warrant agreements, and various employment and incentive plan documents - A comprehensive list of exhibits filed with the report is provided, including key corporate and contractual documents[161][162]