Energem (ENCP) - 2024 Q4 - Annual Report

PART I Business The company manufactures graphene and graphite from palm kernel shells using patented, low-cost methods - Graphjet has developed a patented technology to convert palm kernel shells, an abundant agricultural waste product, into high-value artificial graphene and graphite[31] - The company aims to be a low-cost producer, with a projected production cost of approximately $4,500 per ton for graphite, significantly cheaper than natural or other artificial sources[32][47] - A key strategic agreement has been signed with Toyoda to supply $30 million annually of graphite and graphene for their carbon-neutral mobility products, although no revenue was generated in 2023 due to export controls in China[40][52] - Graphjet is planning significant capacity expansion, including its first main plant in Malaysia and a commercial facility in Nevada, USA, capable of producing 10,000 metric tons of battery-grade graphite annually[53][55][66] - The global graphite market is projected to grow to $36.40 billion by 2030, driven by demand from the lithium-ion battery industry, particularly for EVs[35] Risk Factors The company faces significant risks from its limited operating history, lack of revenue, and regulatory compliance issues - The company has a limited operating history, has not recorded any revenue, and incurred a net loss of approximately $17.8 million as of September 30, 2024, leading auditors to express substantial doubt about its ability to continue as a "going concern"[71][72] - Graphjet faces intense competition based on price, quality, and innovation, and may not be able to recoup capital-intensive expenditures on production capacity[76][77] - The company is dependent on the palm oil industry for its primary raw material, palm kernel shells, and is vulnerable to price fluctuations and supply disruptions in that market[119] - The company has received multiple notices from Nasdaq regarding non-compliance with listing standards, including minimum bid price, market value of listed securities, and timely filing of reports, which could lead to delisting[170][171][172][173] - A restatement of the financial statements for the year ended September 30, 2023, was required due to the incorrect accounting treatment of an intellectual property assignment, which has led to the identification of a material weakness in internal controls[179][180][182] Unresolved Staff Comments The company reports that it has no unresolved staff comments from the SEC - Not applicable[184] Cybersecurity The company is developing its cybersecurity risk management program, with oversight from the Audit Committee - The Board of Directors delegates cybersecurity risk oversight to the Audit Committee[189] - The company is in the process of engaging external experts to assess and test its risk management systems[187] - The company has not yet encountered any cybersecurity challenges that have materially impaired its operations or financial condition[188] Properties The company's principal executive offices and production facilities are located in Shah Alam, Selangor, Malaysia - Graphjet Technology's main facility is located at Lot 3895, Lorong 6D, Kampung Baru Subang, Seksyen U6, 40150 Shah Alam, Selangor, Malaysia[190] Legal Proceedings The company is not currently involved in any material legal proceedings - Management believes there are currently no pending claims or actions against the company that would have a material adverse effect[191] Mine Safety Disclosures This section is not applicable to the company - Not Applicable[192] PART II Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities The company's shares trade on Nasdaq, no dividends are planned, and an equity incentive plan is in place - Class A ordinary shares are traded on the Nasdaq Global Market under the symbol "GTI"[194] - The company has never paid cash dividends and has no current plans to do so[196] - The 2023 Omnibus Equity Incentive Plan reserves 14,903,075 Class A ordinary shares for future issuance[197] - On May 15, 2025, the company issued 20,000,000 warrants to Aiden Lee Ping Wei to purchase up to 200,000,000 Class A ordinary shares at an exercise price of $0.055[198] Management's Discussion and Analysis of Financial Condition and Results of Operations The company reported a significantly increased net loss of $17.8 million, faces a going concern risk, and is seeking financing Results of Operations | | For the Years Ended | | Changes | | | :--- | :--- | :--- | :--- | :--- | | | September 30, 2024 | September 30, 2023 | Amount | % | | Operating expenses | | | | | | General and administrative expenses | ($17,438,014) | ($1,225,501) | ($16,212,513) | 1,322.9% | | Loss from operations | ($17,438,014) | ($1,225,501) | ($16,212,513) | 1,322.9% | | Other expenses, net | ($377,293) | ($616,398) | $239,105 | (38.8)% | | Net loss | ($17,815,307) | ($1,841,899) | ($15,973,408) | 867.2% | - The substantial increase in G&A expenses was primarily due to a $13.8 million provision for a bonus plan to reward senior management for the successful business combination and corporate listing[259][263] - The company has incurred cumulative losses and has a working capital deficit of $19.9 million as of September 30, 2024, which raises substantial doubt about its ability to continue as a going concern[266][407] Cash Flows | | For the years Ended | | | :--- | :--- | :--- | | | September 30, 2024 | September 30, 2023 | | | USD | USD | | Net cash (used in) provided by operating activities | $ (3,026,529) | $ 410,323 | | Net cash used in investing activities | (1,438,033) | (1,598) | | Net cash provided by (used in) financing activities | 4,706,973 | (700,810) | Quantitative and Qualitative Disclosures About Market Risk The company's market risk exposure is minimal due to its investment in short-term government securities - The company invests its cash in short-term U.S. government securities with maturities of 185 days or less, minimizing material exposure to interest rate risk[279] Financial Statements and Supplementary Data The audited financial statements highlight a going concern uncertainty and a restatement of the prior year's results - The auditor's report expresses substantial doubt about the Company's ability to continue as a going concern due to a net loss of $17.8 million and a working capital deficit of $19.9 million for the year ended September 30, 2024[384] - The 2023 financial statements have been restated to correct errors in the accounting treatment for intellectual property, merger transaction costs, professional expenses, and the classification of payables to directors[388][518] Consolidated Balance Sheets | | September 30, 2024 | September 30, 2023 (Restated) | | :--- | :--- | :--- | | Total Current Assets | $577,773 | $435,963 | | Total Assets | $2,171,435 | $1,142,232 | | Total Current Liabilities | $20,430,159 | $3,132,272 | | Total Liabilities | $20,430,159 | $8,470,545 | | Total Shareholders' Deficit | ($18,258,724) | ($7,328,313) | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure The company reports no disagreements with its accountants on accounting or financial disclosure matters - None reported[281] Controls and Procedures Management concluded that disclosure controls were ineffective due to material weaknesses in internal financial reporting controls - Management concluded that disclosure controls and procedures were not effective as of the end of the reporting period[282] - Material weaknesses were identified in internal control over financial reporting, citing a lack of written policies, insufficient segregation of duties, and inadequate US GAAP expertise[285] - Remediation plans include hiring an external internal control reviewer, enhancing the board's composition, and potentially hiring additional accounting staff[286] PART III Directors, Executive Officers and Corporate Governance The company's board consists of five members with a majority of independent directors and has established key committees - Chris Lai Ther Wei holds the combined roles of Chief Executive Officer, Chief Financial Officer, Chairman, and Director[294] - The Board is comprised of five members and is divided into three classes with staggered three-year terms[299][300] - The Board has a majority of independent directors, with Tan Song Jie, Chen Siow Woon, and Ang Chee Yong qualifying as independent under Nasdaq listing rules[303] - The Board has established Audit, Remuneration, and Nominating and Corporate Governance committees, with charters and compositions that comply with Nasdaq and SEC rules[305] Executive Compensation Executive compensation includes salary, allowances, and equity, with a new incentive plan adopted post-merger - The compensation for CEO and CFO Chris Lai Ther Wei includes a base salary of RM 300,000, an allowance of RM 400,000, and Class A ordinary shares valued at RM 500,000[329] - Non-employee directors receive compensation of RM 2,500 per month for their service on the Board[330] - The company has established an Equity Incentive Plan, reserving 14,903,075 Class A Ordinary Shares for future equity awards[332][336] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Company ownership is highly concentrated, with one beneficial owner holding approximately 68% of Class A ordinary shares Security Ownership | Name and Address of Beneficial Owner | Number of Shares Beneficially Owned | % of Class | | :--- | :--- | :--- | | Directors and Named Executive Officers | | | | Chris Lai Ther Wei | — | — | | Tan Song Jie | — | — | | Ang Chee Yong | — | — | | Chen Siow Woon | — | — | | Pwa Yee Guo | — | — | | Greater than 5% Holders | | | | Aiden Lee Ping Wei | 100,789,569 | 68% | - Ownership is based on 148,037,022 Class A ordinary shares outstanding as of July 11, 2025[356] Certain Relationships and Related Transactions, and Director Independence The company has engaged in several related party transactions, primarily with entities connected to a former officer - Graphjet purchased the process for producing palm-based graphene from Liu Yu for RM29,000,000 (approx. $6.3 million)[364][472] - The company entered into a commission processing contract and a tenancy agreement with ZhongHe Industries Sdn. Bhd., an entity where Liu Yu is a shareholder and director[362][365] - The Nominating and Corporate Governance Committee has the authority to review and approve all related party transactions to ensure they are on terms no less favorable than those available from unaffiliated third parties[367] Principal Accountant Fees and Services The company paid audit fees to two accounting firms during the fiscal years 2023 and 2024 Accountant Fees | Firm | Period | Fees | Notes | | :--- | :--- | :--- | :--- | | Adeptus Partners LLC | FY 2023 | $135,000 | Audit Fees | | Adeptus Partners LLC | Q1-Q3 2024 | $65,000 | Audit Fees | | Kreit & Chiu, LLP | FY 2024 | $403,943 | Audit Fees (includes 2023 re-audit) | - No fees were paid for audit-related services, tax services, or other services to either accounting firm for the fiscal years ended September 30, 2024 and 2023[371][372] - All audit and permissible non-audit services provided by the independent auditors were pre-approved by the Audit Committee[373][374] PART IV Exhibits and Financial Statement Schedules This section lists the consolidated financial statements and other key documents filed with the annual report - The report includes the company's consolidated financial statements for the fiscal years ended September 30, 2024 and 2023[377][378] - A list of exhibits filed with the report is provided, including key corporate and transactional documents[380][381] Form 10-K Summary This section is not applicable as no summary is provided - None[528]