Live Clothing Pty Ltd (In Liquidation) ACN

Transcription

1 Live Clothing Pty Ltd (In Liquidation) ACN Statutory Report by Liquidators 11 May 2018 Ferrier Hodgson is an affiliation of independent partnerships/entities Liability limited by a scheme approved under the Professional Standards Legislation Level 28, 108 St Georges Terrace, PERTH WA 6000 P F E. regina.rao@fh.com.au ferrierhodgson.com

2 Contents Section Page 1 Introduction 2 2 Current position 2 3 Investigation into the Company s affairs 3 4 Return to creditors 13 5 Conclusion 13 Glossary 14 Annexure A Receipts and Payments 15 1

3 1 Introduction We refer to our Voluntary Administrators Report dated 2 February At the meeting of creditors held on 13 February 2018, creditors resolved that the Company be wound up under Section 439C(c) of the Corporations Act 2001 and Martin Jones, James Stewart and I were appointed Liquidators of the Company. I now take this opportunity to report to you on the following matters relating to the liquidation of the Company: An update on the progress of the liquidation; The current position in relation to the realisation of assets; The results of my investigations into the Company's affairs; and The likelihood of dividends being paid in the liquidation. This report should be read in conjunction with the information contained in the Voluntary Administrators Report dated 2 February Based on the asset realisations and investigations to date, it does not appear there will be sufficient funds in the Liquidation to pay priority creditors in full, however, employees are able to claim any shortfall under the Fair Entitlements Guarantee Scheme (FEG Scheme). Given the likely shortfall to priority creditors, we do not anticipate any return to ordinary unsecured creditors. 2 Current position Matters addressed during the liquidation Since the appointment of Liquidators, the following matters have been attended to: Communications with creditors of the Company; Collection and review of the books and records of the Company; Tasks associated with the realisation of the Company s fixed assets including the execution and completion of a Sale of Business Assets agreement with an unrelated third-party; Liaising with employees and the Department of Jobs and Small Business in relation to the payment of outstanding employee entitlements by the FEG Scheme; Attended to the payment of a first priority dividend; Investigations into the recovery of potential unfair preference payments, including of preparation of a preference claim against the ATO; Attendance to statutory requirements; and Investigation into the affairs of the Company; Preparation and lodgement of this report with the Australian Securities and Investments Commission (ASIC). Liquidator s realisations to date Summary of receipts and payments A summary of the receipts and payments in the liquidation to date is attached as Annexure A. Creditors are advised that the Liquidators account of receipts and payments can be inspected at the offices of Ferrier Hodgson, Level 28, 108 St Georges Terrace, PERTH WA 6000, during business hours. Asset realisations We set out below a summary of the RATA for the Company as submitted to me by the Director(s) showing the ERV of assets, together with the realisations to date applicable to those assets: 2

4 $000s Note RATA ERV $ Realisations to date $ Cash at bank Cash on hand Debtors Inventory at appointment , Plant and equipment Total assets 2, We make the following comments in relation to my investigations in relation to the Company s assets: Cash at bank All cash at bank was retained by the NAB at our appointment pursuant to their right of set off in respect of the secured debt provided to the Company Cash on hand The cash on hand relates to the cash held in-store as floats as at our appointment, which were recovered in full at the end of the trading period Debtors As the Company operates a retail business, there was no accounts receivables of any significance. The debtors of $2k relate to lay-buys held across various stores as at our appointment. Any lay-buys collected and paid for since the appointment of administrators are captured in the net inventory realisations Inventory The Directors ERV for inventory reflects the gross sales price of all inventory held at the date on which Voluntary Administrators were appointed. The Administrators and Liquidators realised all inventory through the existing store network, noting that the realisations to date of $521k reflect the net realisations after costs of realisation, including professional fees. I note that the realisations to date of stock on hand at appointment only reflect the estimated realised value of that inventory and not the overall trading performance during the administration and liquidation. Trading profits accounts for all revenues and all expenses incurred during the trading period, an account of which is provided at Section 3.4 of this report Plant and equipment The Company s plant and equipment comprised of warehousing equipment (such as racking and other storage), shop fit outs and three motor vehicles, which were all sold to the new owner as part of the asset sale totalling $24,200 (incl. GST). 3 Investigation into the Company s affairs In due course we shall lodge our report with ASIC pursuant to Section 533 of the Act on the outcome of our investigations into the affairs of the Company. In the meantime, the salient points from our preliminary investigations are summarised hereunder. Statutory information The Company was incorporated on 19 August

5 ASIC records reveal the following statutory information in relation to the Company at the date of my appointment: Location Registered office Principal place of business Address C/- Shreeve and Carslake, 24 Walters Drive, Herdsman Business Park, WA Unit 1, 6 Garino Rise, Wangara WA Office held Name Date appointed Date ceased Director and Company Secretary Eileen Prunty 1 August 2013 Not Applicable Director Judith Simone Caswell 23 February 2010 Not Applicable Director Hayden John Marchetto 29 October 2013 Not Applicable Director John Frederick Dunn 1 June 2006 Not Applicable Director Suzanne Michelle Caswell 1 June February 2015 Shareholders Class of shares No. of shares held Fully paid Tracey Janine Leith Ordinary Shares 22,023 Yes Judith Simone Caswell Ordinary Shares 87,268 Yes Eileen Prunty & Brian Prunty Ordinary Shares 46,118 Yes Hayden John Marchetto & Amanda Grace Marchetto Ordinary Shares 36,705 Yes Jadewin Holdings Pty Ltd Ordinary Shares 14,682 Yes Claijag Pty Ltd Ordinary Shares 54,835 Yes Suzanne Michelle Caswell Ordinary Shares 87,269 Yes Total 348,900 History of the Company and reasons for its failure History of the Company The Company was incorporated in 1993 and traded a business called Live Clothing. The business sold both menswear and womenswear under both vertical and domestic brands, which targeted the year old market. As at the date of our appointment, the Company operated 11 physical stores in the Greater Perth region and an online store. The Company enjoyed significant profits up until 2014 when its financial performance and position started to decline. Despite the fact that the Company attempted to restructure the business in 2015 and secured a trade finance facility in the same year to alleviate its cashflow difficulties, revenue continued to decline. By 2017, the Company s financial position deteriorated even more, driven by further reductions in revenues, and solvency concerns arose when the Company s cash flow forecast was revised to reflect the reduced sales levels. Ultimately, the Directors resolved to place the Company into Voluntary Administration on 22 November For a detailed history of the Company and events leading up to the appointment of Administrators, please refer to section 3.1 of the Voluntary Administrators Report dated 2 February Reasons for failure The Directors have provided their views on the affairs of the Company and attribute the following reasons to its failure: A decline in the local economy, driving a decline in sales. A shift from customer spending on apparel to appearance (e.g. makeup). Increased competition in the local market from domestic and international retailers. Rent expenses inconsistent with the Company s financial performance or position, and the delayed response from landlords in providing concessions. The forced closure of the Company s flagship store in Forrest Chase, Perth, due to precinct renovations. Delays in launching the mobile responsible e-commerce platform, which resulted in lost market share to competitors in this field. Based on our investigations to date, it would appear that the Company failed principally for the following reasons: 4

6 Decline in Perth music festivals and a move towards electronic ticket sales, reducing sales to the business traditional target market. Reduced discretionary spending in the local economy as a result of decreased consumer confidence. Complex business model, as a result of offering both menswear and womenswear in both vertical and domestic brands, noting that the Company may not have had the scale in revenues compared to other similarly structured businesses which may be better positioned to operate under this type of structure. Limited purchasing power because of the above, resulting in lower margins. A thinly capitalised balance sheet (i.e. a reliance on debt over equity to fund the business). The business slow response to changing market conditions and consumer preferences leading to sustained trading losses in recent years. Books and records Section 286 of the Act requires a company to keep written financial records that correctly record and explain the company s transactions, financial position and performance and would enable true and fair financial statements to be prepared. The financial records must be retained for a period of seven years after the transactions covered by the records are completed. The failure to maintain books and records in accordance with Section 286 provides a rebuttable presumption of insolvency which might be relied upon by a Liquidator in an application for compensation for insolvent trading. Upon the appointment of the Voluntary Administrators, we obtained a copy of the Company s MYOB data file as at 22 November 2017 and access to all of the Company s books and records. Based on my review of the books and records received, I am of the opinion that the Company s books and records were maintained in accordance with Section 286 of the Act. Deficiency statement Based on the RATA received from the Director and my investigations, the following summarises my current assessment as to the ERV of the assets and liabilities of the Company: $000s Note Directors ERV Liquidators ERV Assets Cash on hand *Ref. trading profit below Cash at bank Debtors Inventory ,400 *Ref. trading profit below Plant and equipment Trading profits (net of costs) N/A 135 Total assets 2, Liabilities Secured creditors (1,282) (1,135) Employees claims (742) (335) Unsecured creditors (2,608) (2,885) Contingent claims (28) - Total liabilities (4,660) (4,355) Estimated surplus / deficiency (2,161) (4,196) 5

7 Our comments are as follows: Assets Please refer to our comments at section in relation to asset realisations. Trading profits Whilst the Directors included the gross sales value of inventory in their RATA, the Administrators/Liquidators were required to incur significant costs in realising the inventory through the store network, therefore in order to demonstrate the net realisation of inventory we have instead detailed the trading profits realised during the administration. Trading profits are representative of the net proceeds of all stock on hand and stock purchases made during the tradeon period, after taking into account all trading costs and the Administrators /Liquidators remuneration, disbursements and other expenses. Included in the trading profits are payments made against outstanding leave entitlements of $67k. It should also be noted that the continued trading allowed a reduction in notice entitlements that would have otherwise crystallised totalling approximately $70k. As at the time of writing, the true trading profits are to be determined as the Liquidators are yet to received final accounts from various trade creditors, however any change is likely to be slight. Liabilities Secured Creditors A summary of the Liquidators estimate of secured creditor claims is tabled below: Secured creditor Amount $ 000 Appleton Superannuation Fund 156 Karma Superannuation Fund 156 Prunty Family Superannuation Fund 156 Marchetto Superannuation Fund 89 the National Australia Bank 578 Total $1,135 The variance of $147k exists between the Directors ERV and Liquidators estimate as a result of the Liquidators forming the view that a claim by Claijag Pty Ltd (an entity control by John Dunn, a Director and Shareholder of the Company) for $140k plus interest is not secured due to insurmountable issues with its security Employee Claims A breakdown of outstanding employee entitlements is detailed below: $000s Director s ERV Liquidators ERV Unpaid superannuation 14 - Annual leave Long service leave Redundancy PILN Priority employee entitlement Excluded employee claims N/A 301 Total $742 $636 The variance between the total employee claims advised by the Directors and that estimated by the Liquidators are largely due to the payment of part of the outstanding leave entitlements during the voluntary administration, and the reduced PILN liability as a result of the continued trading (which the Liquidators have calculated as $70k should the Company have ceased to trade on appointment). Employee claims are afforded priority of repayment pursuant to Section 556 of the Act, ahead of any return to unsecured creditors. The Act provides that excluded employees (including Company directors and their spouses) are each restricted to a total maximum priority claim of $2,000 for unpaid wages and superannuation entitlements and $1,500 for leave 6

8 entitlements. Amounts owed to excluded employees that exceed the statutory limit, and all payments owing in respect of redundancy and payment in lieu of notice will rank as an ordinary unsecured claim Unsecured creditors In their RATA, the Directors have recorded unsecured creditor claims of $2.6m. A summary of the unsecured creditors is detailed below: $000s Directors ERV Liquidators ERV Trade creditors 2,464 2,467 Statutory creditors Excluded employee shortfall priority claims Total $2,608 $2,885 To date, the Liquidators have received 19 proofs of debt totalling $1,220, In calculating our estimate of unsecured claims, we have made the following adjustments to the Directors estimate taken from their RATA: Adjustments for variances between RATA estimates and claims made by specific creditors Potential claims for landlords where the premises have been vacated prior to the lease expiry, including a provision for make good. Reduction in rental arrears by the value of bank guarantees presented Contingent Liabilities The contingent liabilities related to various credit notes and gift cards issued prior to the appointment of Administrators, which have either been redeemed in the ordinary course of business while the Company was trading or written off at the end of the trading period. Voidable transactions Unfair preferences Section 588FA of the Act gives the Liquidator the power to recover certain transactions that have had the effect of conferring a priority, preference or advantage to the creditor within six months of the commencement of the winding up (the relation back period). Our investigations identified potential unfair preference payments made to creditors of the Company, which are discussed below. During the relation back period, the Company made the following payments to the ATO under various payment arrangements: Date Paid Amount Paid ($) 26 June , July , August , September , October , Total $254, We believe the ATO had clear knowledge about the Company s insolvency by virtue of the fact several payment arrangements have been entered into between the Company and the ATO, indicating systemic cash flow shortages. We are presently finalising our claims against the ATO for these amounts. 7

9 Uncommercial transactions Section 588FB of the Act requires the Liquidators to investigate transactions which may be deemed to be uncommercial, having regard to the detriment to the Company (if any) suffered as a consequence of the transaction in the period two years prior to the appointment. In addition, Section 588FDA of the Act refers to unreasonable director-related transactions and requires the Liquidators to investigate such transactions, having regard to the detriment to the Company (if any) suffered as a consequence of the transaction. A review of the Company s books and records identified that one of the Company s suppliers, PBeach Imports Pty Ltd (PBeach), is owned by one of the Company s Directors, John Dunn. Due to this potential conflict of interest, we reviewed the supply arrangement between the Company and PBeach to determine whether or not the Company was paying an inflated cost price for stock supplied by PBeach in comparison to other suppliers the Company dealt with. Our investigations revealed that the Company made a comparable margin on the goods supplied by PBeach and by other suppliers. As a result, PBeach s supply of goods to the Company appears to have been on commercial terms. Unfair loans Section 588FD of the Act requires investigations of transactions which may be deemed to be unfair loans to the Company. A loan to the Company is considered to be unfair if and only if, interest on the loan is extortionate, or the charges in relation to the loan were extortionate. The Directors and former Director of the Company provided various loans to the Company from their respective superannuation funds totalling $640,000. A review of the Company books and records identified that these loans attracted interest of 8% p.a., which is in line with market rates for commercial loans. Further, our investigations identified no repayments against the loans were made and interest had been recapitalised. Given that there is unlikely to be any return to these creditors through the liquidation, the existence of these loans does not impact the return to unsecured creditors in any way. As such, even if the loans were on unfair terms no claim for damages would exist and the Company would not have been prejudiced. Our view is that the loans were not unfair and that the shareholders loans do not form unfair loans under Section 588FD. Voidable transactions related parties Section 588FE(4) of the Act requires investigations of transactions which may be deemed to be insolvent transactions with a related party entered into within 4 years of the commencement of the winding up. From the information available to me I have not identified any transactions which would constitute voidable transactions with related parties. Insolvent trading Section 588G of the Act provides that directors are obliged to prevent a company from: Incurring a debt whilst insolvent; or Becoming insolvent by incurring a debt. If a contravention of Section 588G can be established, then Section 588M empowers a Liquidator (or a creditor under certain circumstances) to recover compensation from a director for any loss or damage suffered as a consequence of any such contravention. Indicators of insolvency From a review of the financial information provided to me, we have identified the following indicators of insolvency: 8

10 Endemic shortage of working capital balance sheet test According to the available financial statements, it would appear that the Company had net asset and working capital positions as follows: Net asset position (total assets less total liabilities) $000s 31 Dec Jan Feb Oct 2017 Total assets 4,400 3,262 3,452 2,693 Total liabilities (4,035) (3,166) (3,695) (4,208) Net asset surplus / (deficiency) $365 $96 $(243) $(1,515) - The financial position of the Company deteriorated dramatically during the second half of FY17 due to the losses incurred in that year and resulting in a reduction in inventory and cash placing strain on the working capital position. - The net asset position of the Company suggests that the Company might have been insolvent from as early as February 2017 Working capital position (current assets less current liabilities) $000s 31 Dec Jan Feb Oct 2017 Current assets 2,739 1,623 1,836 1,326 Current liabilities (2,706) (2,137) (2,226) (2,548) Working capital surplus / (deficiency) $33 $(514) $(390) $(1,222) - We have seen a significant decrease in working capital during FY17 and CY17 in the form of decreases in cash and inventory as a result of ongoing trading losses which limited the Company s ability to replenish inventory. - The significant fall in the level of inventory held in 2017 is in art reflective of the closure of the Forrest Chase and Rundle Mall stores but largely due to the cash flow shortage being experienced, which impacted the inventory holding it could sustain. - The working capital position of the Company suggests that the Company might have been insolvent from as early as January

11 Profitability According to the available financial statements, the Company s trading results were as follows: $000's FY16 FY17 YTD FY18 Sales 18,267 14,388 3,745 Cost of Sales (9,445) (7,245) (1,827) Gross Profit 8,822 7,143 1,918 Gross profit margin 48% 50% 51% Wages (4,514) (3,860) (1,057) Rent (4,744) (3,669) (992) Store Expenses (366) (328) (94) Distribution Expenses (2) - - Office Expenses (558) (385) (132) Marketing Expenses (188) (156) (63) Product Expenses (141) (91) (19) Depreciation (284) (271) (82) Total Expenses (10,797) (8,760) (2,439) Operating Profit (1,975) (1,617) (521) Other Income/(Expenses) 26 (132) 23 Profit Before Income Tax (1,949) (1,749) (498) Income Tax (Expense)/Benefit Net Profit/(Loss) for the Period (1,949) (1,749) (498) We make the following comments: - Based on the records provided it appears that the Company generated a trading loss from as early as FY15. - Notwithstanding the above, some time prior to this the Company had generated significant profits and as a result it was able to fund its losses from retained profits through to February 2017, at which point in time the year to date losses exceeded retained earnings. - Despite efforts to reduce the expenses of the Company, revenue and gross profit continued to decline to that the extent that the reduction in expenses was not insufficient to prevent the Company recording significant losses Cashflow Cash flow forecasts The Company maintained a cashflow forecast updated for actuals on a weekly basis. Forecasts were based upon sales figures from previous years and adjusted for anticipated declines/increases based on the current performance and promotional activity. Whilst the Company books and records we have obtained did not include periodic historical cash flow forecasts (noting that the cash flow forecast was maintained in Excel and updated for actuals on a weekly basis), we were able to obtain cash flow forecasts prepared in June, July and September The cash flow forecasts prepared in June 2017, together with advice from management, indicated that the Company would have a cash deficit of approximately $274k in January 2018 if all creditors were paid as and when they fell due and no amounts were drawn down under the NAB facility. If the Company utilised the NAB facility of $750k it would have been able to avoid the cash deficit, however forecasts were not prepared beyond January 2018 at this stage and therefore it was not possible to determine when and if any draw downs on the NAB facility could have been repaid. The cash flow forecasts prepared in July 2017 incorporated improved trading targets and forecast a cash surplus of $274k in January 2018 after paying all creditors as and when they fall due. The Directors formed the view that the targets were achievable during Christmas and the New Year trading period given the seasonality of the business, and that the Company would be able to pay its debts as and when they fell due up until at least January The forecasts prepared in September show a material increase in the projected cash deficit as at 31 December 2017 if creditors were paid as and when they fell due. At this point management began to engage with its external advisors in relation to the appointment of Voluntary Administrators. 10

12 The declining cash flow is reflective of the losses sustained by the Company and its working capital deficiency over this same period. Access to alternative sources of finance Our investigations have found that the Company sought and obtained finance from traditional financiers and related parties from October 2014 (the date the Directors provided funding from their superannuation funds) to April 2015 (the date the NAB provided the trade finance facility). We note one exception, being a loan recorded in the Company s balance sheet from Claijag Pty Ltd in February There was no cash injected from this loan, as it was a conversion of outstanding invoices to long term debt, freeing up working capital. We also note that Claijag Pty Ltd is controlled by John Dunn, who is also a Director of Live Clothing. Our investigations found that the Company was unlikely to have had sufficient unencumbered assets to secure additional funding of any material amounts since the NAB provided its initial funding in 2015, noting that this loan was only secured as a result of the Directors providing personal guarantees to the NAB to cover the full amount of the loan. Based on the position previously taken by the NAB and the deterioration of the Company s financial position since that date, we believe it unlikely that the Company would have been able to obtain any additional funding from traditional lenders. Disposal of non-core assets The Company had no non-core assets of any significance which could be realised to assist with the payment of its liabilities. Dishonoured payments A review of the Company s banking records did not identify any dishonoured cheques or payments by the Company Ageing of creditors Within terms Current Days outside of Terms Date $ 000 % Total ($000 s) 31-Mar % 8% 0% 12% $ Jun % 23% 33% 20% $ Sep % 19% 4% 16% $1, Oct % 39% 17% 15% $1,311 - We have been unable to extract reliable creditor ageing reports from the Company s accounting system, however the Directors prepared the above ageing reports for the purpose of reporting to the NAB. - The above analysis excludes amounts owed to landlords and statutory creditors totalling $918k and $111k respectively at appointment. The Company had agreed payment arrangements with these creditors and were compliant with those arrangements until shortly before the appointment of the Administrators. - Whilst our review identifies no consistent increase/decrease in creditor ageing, it does show significant variability, which reflects the fact that creditors were paid as and when the Company had available cash resources. This is reflective of the broader issues with respect to working capital deficiencies. - Even though the majority of creditors were brought within terms at 30 September 2017 (i.e. 62%), the Company recorded approximately $500k of creditors that were overdue at this point in time, which is a material amount and therefore our preliminary view is that this did not represent a mere temporary liquidity issue at that point. 11

13 Overdue Commonwealth and State taxes ATO The Company had entered a number of payment arrangement with the ATO with respect to outstanding GST and PAYG liabilities. The earliest of these was entered into in or around April 2016 with respect to amounts incurred from early February Our investigations show that all payment arrangements with the ATO were complied with and paid up to date prior to November On 3 November 2017, the Company entered into the last payment arrangement with the ATO for $110K, which related to liabilities incurred for the quarter ended 30 September 2017 and which would have otherwise fallen due for payment on 28 October The 1st instalment was due and paid on 8 November 2018 although no other payments were made prior to our appointment as Voluntary Administrators on 22 November Creditor forbearances / communications We are not aware of any legal action threatened or commenced by creditors, however we note that a number of landlords had issued notices of default in respect of outstanding rent. Due to the payment arrangements agreed to in respect of those debts we believe these demand notices are inconsequential in establishing the date of insolvency. Insolvent trading conclusion Section Indicator of insolvency Date Endemic shortage of working capital January Net asset deficiency February Profitability July Cash flow test October Ageing of creditors March Overdue Commonwealth and State taxes October 2017 Having regard to the above, it is our opinion that the Company may have been insolvent from at least 1 February 2017, being the time when the Company exhausted its retained earnings to fund its continuing trading losses, had significant working capital deficiencies and in our view was unlikely to be able to secure any additional or alternative finance. Whilst cash flow forecasts prepared beyond that date demonstrated that the Company may have been able to pay its debts, creditors were already overdue and the payment of those creditors was reliant on the future profitability of the Company which ultimately did not transpire. We note that as at 31 January 2017 the Company owed $450k to the NAB, compared to $578k at the date of appointment. It may be argued that the Company caused the indebtedness to the NAB to increase by $128k whilst the Company was insolvent. Section 588H of the Act provides a number of statutory defences available to the Director which would have to be considered in deciding whether to commence an insolvent trading action. In their defence the Directors could argue: The Directors took steps to allow the Company to continue trading, such as entering into payment arrangements with creditors; The Directors engaged financial professionals attempting to restructure the business from as early as 2015; and The Directors had reasonable grounds to believe that the Company would be able to continue trading and resolving the cash shortage difficulty based on the cash forecasts prepared. As to whether the NAB has suffered any damage would depend on its recoverability of the personal guarantees provided to it by the Company s directors. Any decision to commence an action against the Directors for insolvent trading must also have regard to the following: The costs of litigation and the unknown likelihood of success; The quantum of the claim; and The Director s capacity to meet a claim for compensation. Considering the possible defences available to the Directors, it is likely that litigation would be required to recover any insolvent trading claims with little certainty of success. Given the significant cost of such litigation, the unknown likelihood of success and the fact that any damage suffered by creditors (i.e. the NAB) may be recouped under personal 12

14 guarantees, the Liquidators have formed the view that at this point in time it would be uncommercial to pursue any insolvent trading claim against the Directors. We note that Section 588R entitles creditors to commence proceedings under Section 588M against the Director of the Company subject to the consent of the Liquidator. Should creditors have any further information that may assist our investigations into the conduct of the Company s affairs, they should communicate details in writing to our office within 21 days from the date of this report. 4 Return to creditors Based on the asset realisations and investigations to date, it does not appear there will be sufficient funds in the Liquidation to pay priority creditors in full, however, employees are able to claim any shortfall under the FEG scheme. Therefore, we do not anticipate any return to ordinary unsecured creditors. 5 Conclusion The following matters will continue to be progressed: Completing our investigations into the Company s affairs; Completing our reporting ASIC; Distributing priority dividend to all employees; Assisting FEG with any further information required in verifying employees claims. We may write to you again with further information on the progress of the liquidation and otherwise, we expect to have this liquidation completed within the next 6 to 12 months. Should you have any questions, please contact Regina Rao of this office on regina.rao@fh.com.au or (08) Dated this 11 th day of May 2018 Wayne Rushton Joint and Several Liquidator 13

15 Glossary Abbreviation Description ACN Australian Company Number Act Corporations Act 2001 Administrators Wayne Rushton, Martin Jones and James Stewart ASIC Australian Securities & Investments Commission ATO Australian Taxation Office Company Live Clothing Pty Ltd CY Calendar Year Directors Simone Caswell, Eileen Prunty, Hayden Marchetto & John Dunn ERV Estimated Realisable Value FEG Fair Entitlements Guarantee FY Financial year IPR Insolvency Practice Rules (Corporations) 2016 Liquidators Wayne Rushton, Martin Jones and James Stewart NAB The National Australia Bank RATA Report as to Affairs This Report This report, prepared pursuant to Section of the IPR 14

16 Annexure A Receipts and Payments Receipts and Payments Total ($) (incl GST) Receipts Transfer from voluntary administration 708, Sale of business assets 24, Sales Inventory 730, Total receipts 1,463, Payments Advertising (562.49) Appointee Disbursements (6,166.64) Appointee Fees (275,000.00) GST Paid (124,942.00) Insurance (69,167.83) Cleaning (1,486.80) Clothing (4,656.30) Computer Software (74.76) Consultants (55,053.06) Data Communication (4,304.06) Electricity (3,618.76) Entertainment (368.98) Fuel & Oil (1,057.49) Gift Cards (2,402.75) Internet (118.71) Motor Vehicle Expenses (221.20) Parking (117.75) PAYG Paid (123,130.00) Payroll Tax (10,114.73) Point of Sale Subscription Expenses (3,728.00) Postage (1,838.34) Printing & Stationery (13,486.29) Rent & Rates (252,361.34) Repairs & Maintenance (298.29) Security Expenses (154.12) Storage (1,130.07) Subcontractors (2,585.00) Sundry Expenses (100.00) Superannuation paid (24,229.35) Telephone & Fax (5,441.62) Wages & Salaries (165,169.14) Total payments (1,153,085.87) Net Receipts 310,