Struggling beer brand Broo has alerted the Australian Stock Exchange (ASX) of inaccuracies in its financial reports as a result of not excluding government excise charges.
The company identified the error when compiling its latest half-year reports, and has subsequently withdrawn and replaced its annual report for the year to 30th June 2021.
Broo explained there was an error in relation to the accounting for government excise on inventory purchases, which the company said was made by the its external accountants while preparing the financial statements.
While the stock value amount reported in the results is held by the company, explained Broo, the value of stock reported did not exclude the amount of government excise charges that would be payable when it is sold and no longer held in a warehouse.
As a result, inventory, which was originally stated at $1.8 million, should have been valued at $967,923.
Cost of sales should have been $2.5 million instead of the $967,923 Broo reported, and loss before tax increased considerably, to $2.7 million with net assets sitting at $1.2 million rather than the $2 million it had previously stated.
Additionally, Broo this week released its half year results for the six months to 31st December.
Revenues from ordinary activities grew 8.5 per cent to $566,363, but losses from ordinary activities after tax increased 183 per cent to $3 million. It also has a working capital deficit of $2.7 million.
Despite its poor performance, on 21st January 2022, the company issued more than 6.3 million shares at 1.5 cents each (totalling $94,900) to settle accrued directors’ fees.
It also issued 30 million options over ordinary shares to a corporate advisor with an exercise price of 2.5 cents, valued at $159,893. This is dependent on the business making consolidated revenue of $10 million in the financial year 2022, and $15 million for class B rights.
Additionally, Broo issued 5 million Class A and 5 million Class B performance rights to its chief executive officer, thought to be founder Kent Grogan although he is listed officially as chairman and executive director.
No dividends were paid during the period. At the time of writing, Broo’s share price had dropped to low of $0.009 cents per share, putting its market capitalisation at $8.6 million. It was valued at $126 million when it first launched on the ASX in 2016.
Ballarat property sale updates
Broo also issued its latest in a series of property sale updates for its Ballarat land, which it has been intending to sell for $7.5 million since July 2021.
The land, at the Ballarat West Employment Zone, was supposed to have been the home of Broo’s $100 million self-styled “world’s greenest brewery”.
But, when it was acquired in 2017 for $2.2 million, the land came with conditions, namely that it entered into an approved use agreement with Development Victoria, which is responsible for the BWEZ.
The site is subject to a call option under the original purchase agreement with the vendor having the option to buy back the land in the event that Broo defaulted on its obligations to develop the brewery – an option which was due to expire yesterday, at the end of February 2022.
Broo has been attempting to arrange the sale of the land at Lot 1 of Stage 1 of the sought-after BWEZ development to the Bentley Property Group, a privately-owned Ballarat property development company.
The group needs Development Victoria’s approval to vary the original Section 49 agreement with Broo to enable the sale to proceed.
All land on the BWEZ must be developed in accordance with Section 49, to ensure that commitments made by purchasers are delivered.
A Development Victoria spokesperson told Brews News today that the organisation is “committed to achieving the best outcome for the BWEZ project and the Ballarat community”.
“Development Victoria’s approval will be required for the sale to proceed,” they said.
Despite the length of the negotiations, Broo in its latest update said it was “confident the approval will be forthcoming”.