KUALA LUMPUR: Meridian Bhd's auditor have raised concerns regarding the continued viability of Meridian Bhd as a business entity.

In its recent filing with Bursa Malaysia, the property developer's external auditor, Messrs Jamal, Amin & Partners, issued a disclaimer of opinion on the group's annual audited financial statements for the period spanning from July 1, 2022, to Nov 30, 2023.

The auditors pointed out a lack of compelling evidence to support the directors' claim that it can sustain its operations.

Despite Meridian's financial statements assuming ongoing operations, a range of significant uncertainties, such as recurring losses, inadequate cash reserves, legal proceedings, and regulatory hurdles, cast doubt on the validity of this assumption.

The auditors highlighted that over the past three financial years, both the group and the company have incurred substantial net losses. Meridian reported a net loss of RM17.27 million, while the company's net loss reached RM90.98 million, raising concerns about the company's financial health and sustainability.

Negative indicators such as current liabilities exceeding current assets by RM4.935 million were also highlighted in the financial statements.

Furthermore, the group's cash reserves are alarmingly low, with bank overdrafts exceeding the credit limits granted by financial institutions.

Significant tax liabilities totaling RM4.56 million, along with RM4.89 million in tax penalties from the previous financial year, have also been noted. Legal action has been initiated by tax authorities to recover these balances, but the proceedings remain ongoing and unresolved.

"We have not been able to obtain sufficient appropriate audit evidence in respect of the estimates and assumptions made in the cash flow projections prepared by the management. Accordingly, we are unable to obtain sufficient appropriate audit evidence to support the validity of the going concern assumptions adopted by the directors in preparing the financial statements of the group and of the company," the auditors said.

Meanwhile, the auditors highlighted that certain investment properties and inventories, collectively referred to as "the properties," with a total carrying amount of RM50.43 million, representing 28 per cent of the total assets of the group, are still registered under a former subsidiary company, despite its disposal.

The transfer of titles for these properties to the group has not been completed, complicating matters further due to the former subsidiary's winding-up process, the auditors said.

"Included in the term loans of the group is an amount of RM2.974 million, where we were unable to confirm the amount and the existence of the term loan, and we were unable to obtain any other audit evidence relating to the accuracy and the existence of the term loan.

"Accordingly, we are unable to determine whether potential adjustments are necessary, if any, and whether the group is obliged to settle the term loan," they said.

The auditors added that the combined impact of these factors casts significant uncertainties regarding Meridian's ability to continue operating.

Meridian has been classified as a Practice Note 17 (PN17) company, having triggered the PN17 criteria of the Main Market of Bursa Malaysia due to its minimal operational activity.

The developer has expressed its intention to formulate a regularisation plan to address its PN17 status, while Bursa Malaysia said it will continue monitoring the company's progress in complying with the Main Market listing requirements.