Pure Hydrogen Corporation Responds to ASX Queries on HDrive Acquisition and Financial Statements
PH2 (PH2) Share Update July 2024 Tuesday 16th
Pure Hydrogen Faces ASX Queries on HDrive Acquisition
Pure Hydrogen Corporation Limited (ASX: PH2) has responded to a series of detailed queries from the Australian Securities Exchange (ASX) concerning its acquisition of a controlling interest in HDrive International Pty Ltd and various aspects of its financial statements.
Instant Summary:
- ASX queries Pure Hydrogen about its acquisition of a 60% interest in HDrive International Pty Ltd.
- Pure Hydrogen clarifies financial details and ownership structure of HDrive.
- Company addresses discrepancies in its half-year financial report.
- Pure Hydrogen outlines its capital management strategy and project funding approach.
Background and Acquisition Details
The ASX raised several questions regarding Pure Hydrogen's acquisition of a 60% interest in HDrive International Pty Ltd (HDI). Pure Hydrogen clarified that the counterparties to the agreement were Gao Dongmei and Macau Silkia Trading Co Ltd, and confirmed that these parties were not related to Pure Hydrogen at the time of the agreement.
At the time of the agreement, HDI's assets were valued at approximately $2.158 million with liabilities of $3.470 million, and goodwill was estimated at $1.312 million. However, the transactions under the agreement have not been fully completed, with the finalization expected by the end of Q1 FY25.
Financial Reporting and Ownership Structure
The ASX also questioned the reporting of HDI as a 100%-owned subsidiary in Pure Hydrogen's half-year report. Pure Hydrogen explained that the transaction had not settled by 31 December 2023, hence HDI was reported as fully owned. The company expects to finalize the transfer of shares and loans in the coming months.
Pure Hydrogen addressed the inclusion of other entities like Pure X Mobility Pty Limited and Atlas Energy Corporation Pty Limited in its financial statements, noting that these were dormant and had no material impact on the financials.
Project Funding and Capital Management
In response to questions about its capital management strategy, Pure Hydrogen emphasized its approach to not fully fund every project, thereby minimizing risks while maximizing potential upside. This strategy involves diluting its ownership in certain projects, such as Turquoise Group, while retaining significant stakes and upside potential.
Additional Clarifications
The ASX also inquired about the role of Mynt Technologies and the trial of a hydrogen generator with the Australian Meat Processing Corporation (AMPC). Pure Hydrogen confirmed that the trial was disclosed in its investor presentation and quarterly report, and that the initial trial was not material but could lead to further orders.
Regarding the production of high-quality graphene, Pure Hydrogen explained the 'bottom-up' approach used by Turquoise Group, which starts with methane gas and results in fewer defects compared to other methods. The company, however, did not disclose specific processing steps, citing commercial confidentiality.
The ASX queries and Pure Hydrogen's responses could lead to increased scrutiny from investors and analysts. The clarification of financial details and ownership structures may provide some reassurance, but the unresolved aspects of the HDrive acquisition could create uncertainty. The company's capital management strategy and project funding approach highlight a balanced risk-reward strategy, which may appeal to some investors.
Investor Reaction:
Investor reactions are likely to be mixed. Some may appreciate the detailed responses and the company's strategic approach, while others may be concerned about the unresolved aspects of the HDrive acquisition and the discrepancies in financial reporting.
Conclusion:
Investors should closely monitor Pure Hydrogen's progress in finalizing the HDrive acquisition and any further disclosures from the company. The upcoming finalization of transactions and the company's strategic initiatives will be crucial in maintaining investor confidence.