KUALA LUMPUR (March 18): China-based sportswear manufacturer Maxwell International Holdings Bhd is making plans for its management to travel to Malaysia to resolve the audit issues it is currently facing.

In a filing with Bursa Malaysia today, Maxwell said that it is still liaising with Ferrier Hodgson MH Sdn Bhd, the auditors who are undertaking an extended audit of the company's advertising expenses.

"The company's management is making arrangement to come to Malaysia to resolve and provide more supporting documents to Ferrier Hodgson on the extended scope of audit on the advertisement expenditure, and is still liaising with [the audit firm] on this matter," read the company's announcement.

The extended audit was a result of the irregularity surrounding the company's advertisement expenditure for the financial year ending Sept 30, 2015 reported by its statutory auditors Baker Tilly Monteiro Heng (BTMH).

Maxwell had reported a significant net loss of RM46.25 million, which was attributed to advertising expenditure, compared to a net profit of RM12.18 million in the previous corresponding quarter.

The company had incurred selling and distribution expenses of RM42.59 million during the quarter, a sharp jump from RM1.09 million a year earlier.

BTMH had also raised concerns on the recoverability of funds amounting to RM103.7 million, which is 40% of the company's cash pile as at Sept 30, in asset management company Jinjiang Jin Chuang Private Capital Management Co Ltd (Jin Chuang).

On this, Maxwell said Jinjiang Zhenxing Shoes & Plastics Co Ltd (Zhenxing Shoes) will arrange for Jin Chuang to transfer all the funds into the account of Maxwell's wholly-owned subsidiary Zhenxing Shoes.

"As the concern raised by the statutory auditor is on the recoverability of the funds placed with Jin Chuang, the company decided that Zhenxing Shoes will notify the asset management company to transfer all the funds into Zhenxing Shoes' bank account or a bank account nominated by Zhenxing Shoes," said Maxwell.

In its statutory audit, BTMH had also noted that a company called Zhenxing — a subsidiary of Maxwell — was being sued by Fujian Quanzhou Li Cheng Qu Chuang Xing Micro Credit Co Ltd due to a dispute on a loan agreement.

The defendants in the case comprise Zhenxing as the borrower, Maxwell executive director Jenny Li Kwai Chun and two others as the guarantors. Li said the loan controversy involved her as a personal guarantor and not Zhenxing.

Today, Maxwell told the local bourse that it has accepted the advice of its independent directors to seek legal counsel on the matter.

Maxwell's share price has tumbled as much as 16.5 sen, or 78.6%, from 21 sen a year ago to 4.5 sen today. Its market capitalisation currently stands at RM19.9 million.