AS part of No Signboard’s annual report release last Friday (Jan 19), the company’s auditor, PKF-CAP, flagged uncertainty over the company’s ability to continue as a going concern.

The auditor noted that the company posted a net loss of S$4.7 million for the financial year ended Sep 30, 2022, with net cash outflow from operating activities of S$982,000.

In addition, it noted that the company’s current liabilities exceeded current assets by S$6.6 million, while total liabilities exceeded total assets by S$7.1 million as at Sep 30, 2022.

The net current liabilities included bank borrowings of S$2.1 million that were reclassified from non-current to current as the company defaulted on monthly repayments due to insufficient funds.

“These factors indicate the existence of a material uncertainty that may cast significant doubt on the group’s and company’s ability to continue as going concerns,” the auditor said.

However, the company’s board remains confident that the memorandum of understanding (MOU) signed between the company and Gazelle Ventures for up to S$5 million in investments as well as its restructuring exercise will help it generate cashflows from operations, and meet the company’s and group’s working capital requirements, and to operate as going concerns.

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The company had earlier entered into a MOU with Gazelle Ventures for S$5 million, of which S$500,000 would be secured through subscription of new ordinary shares representing 75 per cent of the enlarged issued and paid-up share capital of the company. The remaining S$4.5 million would be provided through a convertible instrument.

The auditor also noted that the company’s executive chairman is under investigation by the Commercial Affairs Department for the abortive share buyback executed by the company’s chief executive in 2019.

It added that the board of directors and management have assessed the matter and concluded that it will not have a significant impact on the company’s financial statements.

As part of the audit, PKF-CAP also identified indicators of impairment in the company’s related right-of-use assets as well as plant and equipment at its restaurants.

This led to an impairment charge of S$1.4 million and S$807,564 on the company’s right-of-use assets and plant and equipment respectively after the outcome of impairment tests.

The auditor considered this a key audit matter given the heightened level of estimation uncertainty associated with current market conditions, and the significant management judgement involved in determining the recoverable amounts for the assets.

As at Sep 30, 2022, the group’s right-of-use assets and plant and equipment were S$136,388 and S$438,177 respectively, representing 11.1 per cent and 35.5 per cent of the group’s total assets respectively.

No Signboard shares have been suspended since Jan 24, 2022.