KUALA LUMPUR (Oct 29): Microlink Solutions Bhd (KL:MICROLN) said its external auditor Baker Tilly Monteiro Heng PLT has issued a qualified opinion involving the group’s write-off of software development expenditure totalling RM76.07 million for its extended 15-month financial year ended June 30, 2025 (FY2025).
According to the auditor’s report, RM50.23 million was written off after the directors were unable to locate the intellectual property related to the expenditure, while another RM25.84 million, initially capitalised in prior years, was deemed not appropriately incurred.
“The directors are of the opinion that this expenditure was not appropriately incurred and have commenced legal proceedings,” the company said in a filing with Bursa Malaysia on Tuesday.
Baker Tilly said it was unable to obtain sufficient appropriate audit evidence on the recognition, classification and write-off of the software development expenditure during the financial period, and therefore could not determine whether any adjustments might have been necessary.
The audit firm also identified several key audit matters for FY2025, including impairment assessments of goodwill, trade receivables and investments in subsidiaries, which are areas that required significant judgement by the directors due to uncertainties in the underlying assumptions and economic conditions.
"These judgements and assumptions are inherently uncertain," the auditor said.
Microlink said the review process related to the qualified opinion is currently ongoing.
“Based on the findings to date, the board of directors will implement necessary corrective measures, strengthen internal controls and compliance procedures, and establish continuous monitoring and improvement to mitigate the risk of future irregularities,” it added.
Microlink’s financial year for FY2025 was extended to cover 15 months from April 1, 2024 to June 30, 2025, after the board in February approved the change of financial year end from March 31 to June 30.
The company was profitable in four of the last five financial years, according to AskEdge data, but its recent performance is a concern, marked by a net loss of RM95.77 million on revenue of RM413.01 million in its extended 15-month FY2025 that ended on June 30.
Microlink, which was transferred to the Main Market of Bursa Malaysia in 2023, saw the emergence of Insas Bhd (KL:INSAS) as its largest shareholder with a 32.89% stake in July this year, after subscribing to rights issue shares translating to a 29.81% stake.
Prior to the cash call exercise, Omesti Bhd (KL:OMESTI) was the single largest shareholder of Microlink.
Last week, Microlink initiated legal proceedings against its former chief executive officer Chia Yong Wei, as it sought damages amounting to US$9.39 million (RM38.74 million).
The civil suit centres on alleged breaches of fiduciary duties, fraudulent misrepresentation and breach of trust by Chia in relation to the company’s funds and affairs, which Microlink said have caused financial loss and harm to the group.
Chia has not publicly responded to the suit.
Chia, who was appointed as Microlink’s CEO in March 2016, served for over six years before stepping down in September 2022. He has since been replaced by Ramlee Abdullah.
Microlink’s shares closed unchanged at 9.5 sen on Wednesday for a market capitalisation of RM152.8 million. Year to date, the counter has fallen by more than 60%.