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Auditor tags SeaDragon accounts

NZN 30/06/2017 Paul McBeth

Fish oil supplement maker SeaDragon's annual accounts were tagged by auditors over the value attached to its long-delayed fish oil refinery, which relies on forecast revenue.

However, it was something the accounting firm couldn't find enough evidence to support.

PwC gave a qualified opinion to the accounts over the $12.2 million carrying value SeaDragon's board placed on property, plant and equipment.

The accounts show the value of the assets was based on management forecasts for the next five financial years and assume "significant growth over this period reflecting the ramp up of Omega-3 production following the commissioning of the factory and the anticipated securing of future sales orders".

It required executives to "exercise significant judgement" given the lack of long-term sales contracts and limited sales data.

The directors accepted those forecasts and chose not to impair the assets.

"At the time of our audit we were unable to obtain sufficient appropriate audit evidence to support the reported carrying amount of the property, plant and equipment and, consequently, determine whether any adjustments to the carrying value of the specified assets was necessary as at 31 March 2017," PwC's audit report said.

Earlier this month SeaDragon confirmed its first significant order for Omega-3 oil and had several others in the pipeline, having reported a widening annual loss of $6.7 million in the year through March 31.

The company's upgraded refinery in Nelson took longer than expected, forcing SeaDragon to raise even more money to complete it.

But chairman Colin Groves and chief executive Nevin Amos talked up their achievements of the past year in the annual report, with a "sufficient cash runway for the next 12 months" which will let the firm focus on customer orders.

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