PETALING JAYA: MLABS Systems Bhd’s external auditors, Messrs PKF, have expressed qualified opinion in the company’s audited financial statements for the financial year ended June 30, 2021.

       The qualified opinion was about Mlabs’ subsidiary which had invested in Coinful Capital Fund, according to a filing with Bursa Malaysia yesterday,

       PKF said the fund participated in the non-voting, redeemable shares issued by DGC Fund, a segregated portfolio of Coinful Capital Fund, which is known as Coinful Growth Fund I (CGFI).

       The CGFI is unquoted with the objective to seek capital appreciation with investments in digital assets and derivatives with underlying digital assets a reference rate or index, utilising options, futures, swaps and other derivative instruments as well as digital assets’ “decentralised finance” products.

       PKF said the investment was accounted for as unquoted financial assets at fair value through profit and loss, with the carrying amount as at the financial year ended June 30, 2021 amounting to RM1.71mil.

       CGFI is managed by Lazarus Securities Pty Ltd and administered by Bolder Fund Services (Singapore) Pte Ltd.

       “As at the financial year end, the fair value of the investment is determined based on the net asset value of the fund according to the policies stated in the agreement.

       “However, we are unable to assess the information in determining the fair value of the investment as well as the subsidiary’s participating shares in the CGFI.

       “Owing to the nature of the investment and records, we were unable to satisfy ourselves by any other audit procedures,” it said.

       Meanwhile, PKF said during the financial year, Mlabs reported a realised gain on investment amounting to RM757,543.

       However, the director had originally recorded the transaction as RM73.4mil and RM72.6mil of revenue and cost of sales respectively, arising from the trading of unwrought gold as a new business activity of the subsidiary.

       The external auditor said under MFRS 15 “Revenue from Contract with Customers”, revenue will be recognised at a point in time when the company’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced.

       It pointed out that based on the offtake and underwriting agreement on Dec 30, 2020, the subsidiary shall underwrite the purchase and sales of unwrought gold through a company.

       “Hence, this company is responsible to procure and to sell unwrought gold at a specific target price provided by the subsidiary, therefore it does not create a contract of sale of unwrought or refined gold.”

       PKF also said that the subsidiary had taken a role as an investor hedging against the fluctuations of the gold price.