Here are some extracts from today's administrators report to creditors. You can draw your own conclusions....
Doca
On 14 September 2018 we were notified by the legal advisor for a group described as “a number of unrelated independent shareholders” that a Deed of Company Arrangement (DOCA) was in the process of being formulated however further time was needed to finalise negotiations and the DOCA terms. This shareholder group has formally requested that creditors consent to an adjournment of the second meeting of creditors for a period of up to 45 business days to finalise the DOCA proposal.
Administrator’s recommendation
As we have not received a formal and confirmed proposal for a DOCA from the Directors or any other party, we are of the opinion that the Company be wound up at the upcoming meeting of creditors.
Creditors
Total creditor claims are $3m. Richard Evertz ($1.3m) is the only ‘Priority creditor’ and remaining $1.7m are ‘unsecured creditors’ but which also include Hugh Massie.
Anthony Meyer – largest shareholder
The sole director of ‘A P Reyem Pty Limited’ is Anthony Paul Meyer. Adam Shepard of Farnsworth Shepard was appointed Administrator of 'A P Reyem Pty Limited' on 30 July 2018. Mr Shepard is also the sole director of AS Capital Ventures Pty Limited (ASCV).
ASCV is currently a secured creditor of BRTV after having acquired the secured debt originally owed to First Class Securities Pty Limited (FCS) on or about 15 May 2018. Investigations into the potential relationship between A P Reyem Pty Limited and/or Anthony Paul Meyer and the Company are ongoing.
FCS sponsorship arrangement
BRTV would fund the invoice upon the customer’s preliminary acceptance of the product, regardless as to whether the customer would formally accept the product at a later stage.
Upon a customer’s preliminary acceptance of the product, 35% of the total amount agreed with the customer was immediately payable to BRTV by FCS. The remaining balance was held in a bank account controlled by FCS and was payable to BRTV when the production of the video was completed and the customer accepted the product. The terms of the arrangement also provided BRTV with the ability to substitute customers within a period of 12 months in the event that the customers decide not to accept the product at a later stage.
A BRTV sales representative would approach a potential customer in relation to BRTV’s services and to seek any interest in the services provided by BRTV. The customer would subsequently provide an informal acceptance to the production of a video to promote their business. We understand BRTV would raise a pro-forma invoice (for the full amount of the services, being $12,000 plus GST) and forward the invoice to FCS for funding.
FCS would then advance 35% of the funds to BRTV but BRTV would recognise the full amount as revenue in the profit and loss, being $12,000 plus GST. The balance less the commission to FCS would be recognised as deferred revenue on the balance sheet.
We understand that the above treatment of revenue was advised by BRTV’s accountants. However, we have not sighted a copy of the advice.
Following the change in accounting standard pursuant to the Australian Accounting Standard Board 15 Revenue from Contracts with Customers (AASB 15), the revenue recognition policies adopted by the Group were materially affected. Please refer to Section 5.2.2 for further details.
We understand that the sponsorship arrangement with FCS was secured against BRTV by a General Security Agreement. According to the report to creditors prepared by the Administrators of BRTV as at 18 June 2018, the debt owing to FCS was $56,204,312. We note, however, that the debts of FCS were assigned to ASCV on 15 May 2018.
Analysis of Financials
- The Company recorded substantial trading losses from FY2015 to FY2017
- The liquidity ratio continued to decrease from FY2015 and dropped below one in FY2017
- The working capital deficiency was negative in FY2017.
Given the above indicators, it appears the Company and its controlled entities would have been insolvent from at least 1 July 2017.
Management expenses increased significantly until the end of FY2017. These expenses consist of fees, which were, according to the management accounts, paid to various consulting and advisory firms
Directors
From our investigations, it appears that the Directors and Officers may have breached Sections 180 to 184 of the Act by not acting with the standard of care and diligence required or in good faith by using their position and information.
Unreasonable Preference and Director-Related Transactions
A preliminary review of the books and records of the Company has identified payments totaling $1,750,312 to five creditors that may constitute unfair preferences within the six months prior to the relation back day, being the date of our appointment. We note that some of these transactions may also constitute uncommercial transactions. "
A number of consulting/advisory firms (related to the directors) are identified in the management accounts as having received a number of payments made by the Company which may constitute uncommercial transactions.
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