Latest / Investor Exchange / Mercurius Capital: Interim Financials to March 2025

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Mercurius Capital: Interim Financials to March 2025 · Investor Exchange

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Time for another Investor Exchange podcast. Here are your hosts, Matt and Sally.
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Let's unpack this. We've got the interim financials here from Mercurius Capital
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Investment Limited. Yep. Listed on the SGX Catalyst board.
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These are the condensed statements for the first three months of 2025, so ending March 31st.
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And we should probably mention right off the bat why we're seeing quarterly
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reports from them. It's not always standard for catalyst companies, is it?
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No, it isn't. The documents state it's required because their independent auditor
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gave a disclaimer of opinion for the full year ending December 2022.
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A disclaimer, right. That's a pretty serious flag from an auditor.
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It means they couldn't form an opinion.
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Exactly. So enhanced scrutiny, hence these quarterly updates.
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Got it. So our deep dive today is sticking strictly to what's in these Q1 2025
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statements. We want to understand the financial performance compared to last
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year, figure out why the numbers look the way they do, and get a feel for their own stated outlook.
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That's the plan. Pulling the story directly from these pages for you.
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No outside info, just what the company has reported here. All right,
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let's start at the very top line.
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Revenue and cost of sales. What are we seeing for Q1 2025?
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Well, it's simple. Zero. And it was zero for Q1 2024 as well.
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Nothing at all. No revenue. Nope.
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The report is quite clear. Their main operating business, the grocery subsidiary,
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actually ceased operations back on June 30th, 2023.
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Ah, OK. So that explains it. No active business generating sales during either
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of these first quarters.
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Precisely. Which makes the bottom line even more interesting.
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Right. So moving down the statement.
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Net loss. They reported a loss of S-197,000 dollars for Q1 2025.
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Which actually is an improvement compared to the S-308,000 loss they posted in Q1 2024.
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An improvement. How much is that? It's about a 36% reduction in the net loss
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year on year for the quarter.
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So still losing money, but losing less money. OK, that's the really interesting part then.
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How does a company with zero revenue manage to cut its losses by over a third?
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Where did the savings come from? Well, the report points to one major factor,
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administrative expenses.
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OK, what happened there? They dropped significantly from $166,000 in the first
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quarter of 2024 down to just $58,000 in Q1 2025.
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Wow, that's a cut of over S-100,000 dollars. How did they manage that?
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The report gives a reason.
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It does. It states, and I quote, this was primarily due to no director and employee
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remuneration during Q1 2025.
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No salaries at all for directors or staff. That seems to be what no remuneration
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implies in this context.
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That's a very direct way to slash admin costs. It certainly is.
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So that explains the bulk of the reduced loss. Anything else major moving on the expense side?
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Finance costs? Finance costs saw a very slight decrease, down from S-142,000 to S-139,000.
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So only about $3,000 difference. And what's driving that?
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Still paying interest on debts, I assume? Yes. The document says it's mainly
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accrued interest on convertible loans. There was apparently some adjustment
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from the previous quarter, Q4 2024, but also some increase from interest on director's loan.
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So it sort of nets out to a small decrease. Not really the main story here.
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Right. The admin cost cut is the big one. Now, there's another line item here.
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Share of loss from joint venture.
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It's recorded as nil in both Q1 2024 and Q1 2025.
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Does that mean the JV Grand Bay Hotel is doing OK?
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Broke even? No, that's not what the report says. It explicitly states the company
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was unable to obtain the pertinent financial information from Grand Bay. Unable to get the info.
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For how long? They mentioned this inability has persisted since the financial
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year ended December 2023.
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So for all of 2024 and now into Q1 2025, they haven't been able to reliably
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estimate or include the JV's results.
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So no means unknown, not zero loss. That's significant, isn't it?
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Given they likely have money tied up in that venture.
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Absolutely. It means the reported net loss of $197,000 doesn't reflect whatever
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might be happening financially at Grand Bay, good or bad, because they couldn't get the numbers.
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It's a blind spot. Okay, so the overall reduced net loss feeds through to the
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losses per share, naturally.
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Right. Basic and diluted LPS improved from a loss of 0.022 cents per share in
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Q1 2024 to a loss of 0.014 cents per share in Q1 2025.
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Reflecting that smaller loss spread over the same number of shares.
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And I see a note about convertible loans being anti-dilutive.
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Standard stuff when you have a loss.
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Potential shares aren't included if they'd make the loss per share look smaller.
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Okay, so that's the profit and loss picture. Less loss, primarily due to cutting
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salaries, but with a significant unknown regarding the joint venture.
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Let's pivot to the balance sheet.
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What's the overall state of financial health as of March 31st, 2025?
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Well, the headline number isn't great. Both the group and the company are in
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a net liabilities position, meaning liabilities exceed assets.
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And is that position getting better or worse? It actually worsened during the quarter.
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Group net liabilities increased from about S3.56 million dollars at the end
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of December 2024 to S3.75 million dollars at the end of March 2025.
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And the company level? Similar trend. Net liabilities up from roughly S$2.69
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million to S$2.87 million.
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And that increase, that worsening net liability position, that's basically the
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S$197,000 net loss for the quarter eating into their already negative equity, right? Exactly right.
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The loss directly increases the accumulated deficit, pushing them further into negative equity.
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What about the key asset and liability movements? Let's start with current assets.
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Anything notable there? Current assets did edge up slightly from S$83,000 to S$97,000.
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The report says this is mainly higher prepayments and other receivables.
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But the really stark figure is cash.
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Ah, yes. The cash balance. How low are we talking? For the group,
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it was $11,000 at the end of March. And it was $11,000 at the end of December, too.
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Basically flat and incredibly low. For the company level, it's $9,000.
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$11,000 cash for the entire group. Like that's barely anything,
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like a rounding error for many companies. How can they even operate?
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It's a wafer-thin cushion, absolutely. Yeah. Raises immediate questions about liquidity.
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Okay, what about non-current assets? Anything significant there?
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They remain stable during the quarter.
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The big item, as we discussed, is the investment in that joint venture,
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Grand Bay, carried at $5.12 million to the group.
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And that value hasn't been impaired despite not getting financials?
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And we'll get to the other issues with it shortly, I suppose.
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That's a key point. The carrying value is static here, despite the clouds hanging
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over it. Oh, and property, plant, and equipment.
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Fully depreciated. Zero book value.
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So the asset side is dominated by an uncertain JV investment and almost no cash.
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What about the liability side? That's where the net position is worsening.
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Yes. Current liabilities increased. Went from about $8.77 million to $8.97 million.
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What drove that increase? More borrowing? Primarily higher trade and other payables,
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according to the report.
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It specifically mentions increased advances from directors and also higher payables
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to suppliers for operating expenses. So it sounds like directors are putting
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money in just to keep things afloat, and maybe they're stretching payments to suppliers.
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That's what the increase in those payables suggests, yes.
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Borrowings also ticked up slightly, but that was mainly the accrued interest
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on the convertible loans we mentioned earlier.
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This all points to a worsening working capital situation, then.
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If current liabilities are rising, and current assets, especially cash,
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are static and low. Absolutely.
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The report confirms their negative working capital position increased.
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It went from $6.6 state million negative at the end of 2024 to $8.87 million
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negative at the end of March 2025.
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So they owe nearly $9 million more in the short term than they have in short
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term assets to cover it. That's a huge gap.
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It highlights significant liquidity pressure.
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And as you said, the overall equity position for the group just keeps shrinking
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due to the ongoing losses. OK,
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so the balance sheet paints a picture of increasing financial distress.
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Let's see how this connects to cash flow. Did any actual cash move during Q1?
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Well, the headline number on the cash flow statement is, again,
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a bit surprising at first glance.
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Net cash used in operating activities for Q1 2025 was nil.
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Zero. Zero cash used in operations. Yeah. But they had expenses like those finance
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costs and the reduced admin costs.
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How could it be zero? It was $4,000 used last year. Ah, the details explain it.
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Operating cash outflows before changes in working capital were S-57,000.
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So they did spend cash on ongoing costs. Okay, S57K out, so how did it end up nil?
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Because that outflow was exactly
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offset by S57,000 dollars generated from changes in working capital.
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And how did they generate cash from working capital?
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Selling off inventory? Collecting receivables faster?
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Neither of those, really. The S57,000 dollars generated was mainly due to a
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$71,000 increase in trade and other payables.
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Ah, so they generated cash by essentially not paying a $71,000 worth of bills
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or obligations during the quarter, that increase we saw on the balance sheet.
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Precisely. It's cash preservation by delaying payments. This was partly offset
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by a set $14,000 increase in receivables, meaning more money owed to them, which uses cash.
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But the net effect was inflow from working capital changes. So not really cash
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generation in a sustainable sense, more like cash management through payables.
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That's a fair description. And importantly, the cash flow statement shows absolutely
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zero cash flow from investing activities,
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and zero from financing activities in Q1 2025. Nothing.
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No assets bought or sold, no debt raised or repaid, beyond accrued interest,
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no equity issued. Nothing at all reported in those sections.
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Which means the overall change in cash and cash equivalents for the quarter
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was nil, which explains why the cash balance stayed stuck at that S11,000 dollar level. Exactly.
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Complete inactivity on the cash front other than juggling those operational payables.
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This whole picture, no revenue, net liabilities, minimal cash,
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zero operating cash flow, leads us, I think inevitably, to the next big section in the report.
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Significant events and going concern uncertainty.
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Yes, and the language here is very direct.
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The report explicitly states that the net loss, the net liabilities,
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the low cash, and other events indicate a material uncertainty.
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A material uncertainty about what? About the groups and the company's ability
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to continue as going concerns. Basically, can they survive and pay their debts as they fall due?
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The report flags this doubt very clearly.
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That's the formal language auditors use when they have serious doubts.
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What specific events does the report highlight as contributing factors? It lists several.
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First, they just remind us about
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the winding up of the Song Mart groceries business back in August 2023.
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That's the root cause of the lack of operations. The original problem,
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yeah. Then, something new, potentially.
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A Song Mart-related claim. Apparently, in March 2025, they got a letter of demand
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from the liquidator of Songmart Malaysia. A demand for what?
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Related to stamp duty from the original acquisition back in 2021.
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The company says they're investigating if the claim is valid,
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but it's another potential liability cropping up from the past.
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Okay, another ghost from the past.
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Any positive developments mentioned? Well, they mentioned the settlement with
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Alliance Bank. Remember, there was a summary judgment against them related to Songmar debts. Right.
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They paid about U.S. $460,000 back in July 2024, which was roughly 50% of the
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claim, and a full and final settlement.
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So that particular legal battle is over. It cost them cash last year,
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but it resolved that specific issue. Okay, one fire put out.
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But the report details another major legal issue, doesn't it?
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Involving the former CEO, a Mr. Chu.
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Yes. This one seems particularly critical right now. The report refers to prior
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demands and even winding up threat from him.
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But the key development is a settlement agreement reached in April 2025. April 2025.
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So after the Q1 reporting period, but obviously very relevant.
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Exactly. It's disclosed as a significant subsequent event.
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And the terms, well, they seem quite demanding.
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What are the terms? This sounds like where things get really precarious based on the document's tone.
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The company has to pay Mr. Chu S-365,000 as a single lump sum.
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And they have to do it within three months from the date of that April agreement.
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Three months from April. So roughly by July 2025, S-365,000 with only S-11,000
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in the bank at the end of March.
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Precisely. That's the immediate challenge. But here's the really critical part,
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the consequence of not paying. If they fail to pay that S-365K on time and don't
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get a written waiver, Mr.
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Chu can immediately go to court and seek judgment for the original, much higher amount.
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The original amount stated is $576,387.20, plus accrued interest going back
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to November 2024, plus legal costs. Wow.
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So miss the S-365K payment deadline, and suddenly the liability jumps potentially over $600,000.
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That's a huge risk tied to a very tight deadline, especially with their cash situation.
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The report flags this clearly. Very clearly.
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It's a major contingent liability hanging over them, a real sort of Damocles, as they say. Okay.
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What else contributes to this material uncertainty? Another factor mentioned
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is their status as a cash company.
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They notified the SGXST about this back in June 2024.
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And what does being a cash company imply? Does the report elaborate?
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It just notes that this status comes with specific requirements under the listing
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rules. It doesn't spell them out, but typically for you listening,
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this means the exchange sees them as having minimal operations or assets besides
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cash, though ironically they have very little cash.
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They usually get a deadline to find and acquire a new viable business or face potential delisting.
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So add regulatory pressure from the exchange to the list of challenges.
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Correct. And then there's that Grand Bay joint venture again.
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We knew they couldn't get financials, but there's more. More trouble.
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Yes, the report mentions a legal action in Thailand.
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A court judgment was issued back in November 2024 against Grand Bay and others. What was the judgment?
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Ordering them to repay a loan to someone called CS Property.
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And here's the kicker. If the loan isn't repaid, the judgment allows for the
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lands owned by Grand Bay, which were used as collateral to be seized and auctioned off.
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Seized and auctioned. And this is the JV where Mercurius carries a $5 million
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investment value on its books.
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That's the one. The report states Mercurius only became aware of this potential
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land seizure in late February 2025.
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They view it, unsurprisingly, as having a material impact on the group's financial
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position and are looking into the legal implication.
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So that $5 million asset on their balance sheet could potentially become worthless
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if those lands are auctioned. That appears to be the risk highlighted in their own disclosure.
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It casts even more doubt on the carrying value of that investment.
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OK, let's just quickly recap the uncertainty factors listed in this report.
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No operating business. A new claim from the defunct business.
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A massive settlement payment due by July with dire consequences for non-payment.
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Regulatory pressure as a cash company.
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And their single largest asset, the JV investment, facing potential seizure
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due to legal issues in Thailand.
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That sums up the key risks they've laid out.
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And the board acknowledges this material uncertainty about going concern in the report.
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They say they're working on strategies and will provide updates.
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And I guess the unresolved audit issues from the 2022 disclaimer related to
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Song Mart and Grand Bay still linger in the background, too. Yes.
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The report briefly notes those outstanding issues contribute to the overall
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picture of uncertainty.
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Right. So given this, quite frankly, dire picture painted by the numbers and
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events, what does the company say about its outlook?
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What's the path forward, according to this document?
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Well, the outlook commentary first mentions things they were planning,
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like a proposed acquisition of a company called Biospring, aiming for a pivot
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into the medical business. We're planning.
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What happened? The report says that proposed deal has been temporarily halted.
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They apparently ran into challenges
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executing IP rights and deploying personnel. So that plan is on hold.
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OK, so the medical pivot is stalled. What are they focusing on now?
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Now, the board states they are working on finalizing details for a collaboration
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with another party on blue carbon credits.
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Blue carbon credits. It's a completely different direction again.
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From groceries to property investment via the JV to a stalled medical tech plan.
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And now, environmental credits. Seriously.
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That's what the report states is the current focus. And how important is this
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blue carbon credit plan to their future, according to them? Critically important, it seems.
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The report explicitly says the group's outlook and financial performance for
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the next reporting period, and indeed the next 12 months, are closely tied to
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the outcome of this proposed collaboration on blue carbon credits. Wow.
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So basically everything hinges on this one potential deal in a completely new field.
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That's the strong impression given by their forward-looking statement here.
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OK, so let's try to summarize this whole situation based purely on these Q1 2025 statements.
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You have a company with literally no operating revenue. Correct.
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And increasing net liabilities, meaning they owe more than they own.
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A dangerously low cash balance, just $11,000 at the end of March.
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Yep. Facing several critical, time-sensitive issues, that huge S-365,000 settlement
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payment deadline to Mr. Chu looms large.
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With a penalty of over half a million dollars plus interest if they miss it.
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Right. Plus the risk of their main asset, the Grand Bay JV land,
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being seized and auctioned. Add in the regulatory pressure of being a cash company
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and the unresolved audit issues from the past.
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And their stated path forward, the basis for their outlook, rests entirely on
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successfully finalizing this one specific deal in blue carbon credits,
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an area they seemingly have no prior experience in, based on this report.
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It really paints a picture of extreme financial distress, doesn't it?
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Where survival seems to depend entirely on pulling off this specific new and
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undefined venture, the gap between the scale of the problems and the proposed solution seems vast.
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The report lays out the challenges very starkly. Minimal resources.
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Massive liabilities, significant uncertainties, and pinning hopes on one future event.
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So I guess the thought this leaves you with, reading just these documents,
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is how much heavy lifting can one potential deal in blue carbon credits,
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whatever that actually entails in detail, which isn't specified here realistically due?
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Can it truly offset the sheer way of the existing financial holes,
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the looming deadlines and the fundamental lack of an operating business?
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It certainly seems like a situation heavily dependent on factors outside their
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control and historical expertise. Something for you to really ponder if you're
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following this company. Thank you.