SSL Venture Capital remains insolvent with exposure to bankruptcy growing in 2021Friday, October 22, 2021
Venture capital company SSL Venture Capital Jamaica Limited remains insolvent but its finances are improving.
The company's auditor, Baker Tilly, has issued a qualified opinion on SSL Venture Capital Jamaica Limited's consolidated financial statements for June 30, 2021. SSL Venture Capital Jamaica Group as at June 30, 2021 has accumulated deficit of $160.6 million, in contrast to a year ago when the deficit was $319.5 million.
For the company, the accumulated deficit was $123.4 million as at June 30 this year in comparison to $222.5 million in 2020. In addition, at June 30, 2021, the group's current liabilities exceeded its current assets by $73.2 million coming from $18.3 million in 2020. This makes the group, which is listed on the Jamaica Stock Exchange insolvent, with its exposure to bankruptcy growing in 2021. In their qualified opinion on the 2021 financial statements, Baker Tilly drew attention to Note 2(c) in the financial statements, which indicate that the group reported profits in 2021 of $164.8 million and a loss of $152.8 million in 2020.
This profit was not sufficient to eliminate the accumulated losses over the years. Losses were also reported in previous years, whilst the company chalked up profits in 2021 of $99 million and a loss of $55.13 million in 2020, plus losses reported in previous years. Baker Tilly opined that, “Continuation as a going concern, therefore, may be in doubt and is dependent on obtaining continued financial support.”
The auditors say, “No adjustments have been made in the financial statements for any effects this might have on the carrying values of assets and liabilities as at the reporting date. The group and the company have not been able to sustain profitable operations, as such have remained dependent on their ultimate parent (SSL Growth Equity Limited) for continued financial support. To date, SSL Growth Equity has not made any formal commitment to continue such support.”
The audit evidence obtained by Baker Tilly is sufficient and appropriate to provide a basis for its qualified opinion with the auditing firm, noting that, “The audit of the consolidated and stand-alone financial statements conclude on the appropriateness of management's use of the going concern basis of accounting.” Baker Tilly emphasises that its “conclusions are based on the audit evidence obtained up to the date of our auditors report. However, future events or conditions may cause the group and the company to cease to continue as a going concern”.
Based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the group's and the company's ability to continue as a going concern, Baker Tilly contends that, “If we conclude that a material uncertainty exists, we are required to draw attention in our auditors report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion.”
The Jamaica Observer sought and obtained a response from SSL Venture Capital regarding the future of the group and company. Chief Operating Officer Anthony Dunn advised the Caribbean Business Report that, “Since the company is technically insolvent the board and executive management are considering options to ensure shareholders' interest in SSL Venture Capital are protected. The market would be informed of further actions to be taken by the company.”
He reiterated the auditors' findings that, “The group and the company have not been able to sustain profitable operations, as such have remained dependent on their ultimate parent (SSL Growth Equity Limited) for continued financial support.” Dunn restated the observation of Baker Tilly that the business may be in doubt and would be dependent on obtaining further financial support.
However, he was quick to make the point that SSL Venture Capital Group reported profits for the first time in 2021 of $164.8 million after losses in 2020 of $152.8 million and losses in previous years.
Dunn sought to make the distinction between Stocks and Securities Ltd (SSL Jamaica), which remains a privately, licensed and active brokerage and wealth management company and SSL Venture Capital. SSL Jamaica is the second-oldest brokerage house in Jamaica and is separate and independent of SSL Venture Capital.
After taking the reins in 2019 of both SSL Jamaica and SSL Venture Capital, current CEO Zachary Harding last year started restructuring SSL Venture Capital, which is no longer focusing on start-up companies. SSL Venture Capital was formed in 2018 by Mark Croskery, the then CEO of SSL Jamaica. SSL Venture Capital was listed on the Jamaica Stock Exchange in August 2018, following a reverse takeover of failed music publishing company, C2W.
The company later acquired equity in Blue Dot, Muse 360, and Bar Central. The aim at the time was to assist fledgling entrepreneurs to access funding to realise their dreams and to introduce these entities to the Junior Market as part of the exit strategy.
Muse 360 Integrated Limited ceased operational activities in August 2019. The stake in Blue Dot was sold to its founder but that transaction was later rescinded and 20 per cent of the shares was sold to Yes Iyah Limited, a company owned by Ryan Reid, Sean Shelton and Dr Michael Banbury. The remaining 30 per cent is under contract with an unnamed party. Bar Central was shuttered in December 2020 as the novel coronavirus pandemic had a devastating impact on the company's revenues.