Ann: MOZ - Q3FY21 Appendix 4C market update, page-3

"ANYONE ELSE CONCERNED"


Yes, the auditor! The working capital facility expires on the 6th of July and accordingly needs to be renegotiated fairly soon.

From the Auditor’s report:

Material uncertaintyrelating to going concern We draw attention to Note 1 in the financial reportwhich describes the events and conditions which give rise to theexistence of a material uncertainty that may cast significant doubt about theGroup’s ability to continue as a going concern and therefore the Group may be unable to realiseits assets and discharge its liabilities in the normal course of business. Ourconclusion is not modified in respect of this matter.

Excerpt from note 1:

Going Concern

The financial reporthas been prepared on a going concern basis as the Group continues to managethrough the impacts of the Coronavirus (COVID-19) pandemic which resulted inoperational changes being made by management. The impact and management of theeffects of the COVID-19 pandemic resulted in the Group ending with a netcurrent liability position of $67,123,000 as at 27 December 2020. Currentliabilities include $75,967,000 in lease liabilities and a deferredconsideration of $9,603,000 in exercising the option to purchase the remaining49.9% equity interest in EziBuy. Alsoincluded are derivative financial instruments of $4,608,000 and $9,505,000 inemployee benefit provisions which are not expected to be settled by cash in thenext 12 months. TheDirectors believe it is appropriate to prepare the financial report on a goingconcern basis after considering the following factors:

§ On a consolidated basis,the Group stores are in a profit making position which is contributing to thepositive operating cash flows.

§The Group’s current working capital facility($25,000,000) expires in July 2021. It is expected that the facility will berenegotiated and extended within the coming months based on discussions todate.

§ The Directors expect thatfuture net cash inflows from operating activities in conjunction with bankfacilities made available will be sufficient to support the Group’s operatingactivities.

§ Management has beensuccessful in partnering with suppliers to manage through the impacts ofCOVID-19.

§ The Group continues tofocus on the cost of doing business (CODB) and aligning synergies and processesthat will see further positive impacts to the Group in the second half of thefinancial year.

§ Management remainconfident that based on the synergies, margin gains and operationalefficiencies the Group will remain compliant with all financial covenants.

The continuinguncertainty linked to the impacts of COVID-19 over the next 6 months remains aconcern to the Directors. The Government timelines on the vaccination programmeshould see Mosaic Brands customer base immunised on or around the start of thenew financial year. The Group retains the ability to manage this uncertainty bytaking alternative measures, which may include, additional debt financing,equity raising and further cost curtailment, which the Group has a history ofachieving. The interim financial statements do not include any adjustmentrelating to the recoverability and classification of assets carrying amounts orthe amount of liabilities. Thecontinued uncertainty around COVID-19 and that the Group has yet to finalisethe extension of the working capital facility gives rise to an existence of amaterial uncertainty which may cast significant doubt on the Group’s ability tocontinue as a going concern. The Directors have concluded that there arereasonable grounds to believe that the Group will be able to pay its debts asand when they fall due. On this basis the financial report has been prepared ona going concern basis.