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Open Letter to PKF LittleJohn and the FRC re the fraud Chill Brands and its bogus revenue

By Tom Winnifrith | Tuesday 15 March 2022


Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.


Auditor PKF LittleJohn will already be considering the unenviable task of auditing the accounts of its fraudulent client Chill Brands (CHLL) for the year ending March 31 2022. Given that Chill is now already teetering on the brink of insolvency I would suggest that PKF asks for payment up front. In light of the shocking admission today, I felt it wise to mark the card of PKF and my good friends at the Financial Reporting Council on two matters. My letter is below:


Re Chill Brands PLC and the audit for the year ended 31 March 2022.


Sirs.


To PKF Littlejohn
cc The FRC

Sirs.

I first exposed the lies and frauds committed by your client Chill Brands PLC on February 3 2021 in a 60 Red Flag dossier. That article is outside paywalls at Shareprophets.com and I suggest that you may find it instructive. But there are more recent matters I urge you to consider in light of a sort of admission made by the company, as a result of belated FCA pressure, today.



  1. Chill is owed almost £1 million by Ox Distribution, a company owned by the family of a main board director Eric Schrader. This related party deal was not, as it should have been, disclosed in the interims. I urge you to ensure that there is full disclosure in the audited accounts and that the interims are reissued. This may not be the only correction needed!


  2. Ox owes the cash having taken stock from Chill for it to sell on.  Chill uses the word sell in its RNS suggesting that Ox now has ownership of the stock. But it has yet to sell much if any of it on and so has not, as of now, paid much if any of the £943,874 it owes. Chill has said that it owes the cash as a promissory note, surely it is simply a normal sale agreement just with a very long credit period. Should this sum owed simply therefore be viewed as a normal trade receivable.


  3. The £943,874 was a very high percentage of H1 stated sales of £1.06 million and due to the failure of Chill’s online offering is likely to be a very high percentage of FY sales. But since Ox has not actually sold any of its product and Chill has not been paid for this sale at all is it right that it be booked as FY 2022 revenue at all. Since investors have not been told the actual contractual terms of the original agreement we are unable to take an IRS 15 based view of whether all these reported sales should be reversed or not.

    Do we consider that this is a consignment arrangement in that Ox has not obtained control over the stock or do we consider that Ox does have control  but that it would be imprudent for Chill to recognise any revenue until Ox has demonstrated an ability to actually ship and sell that product? That it has failed to do, more than six months after apparently “buying” the stock suggests that this must be in some doubt.


 


I urge you to consider these matters as well as whether a company in the dire financial position of Chill can be considered a going concern. I would hate for the FRC to have to mark your homework poorly and thus cc them in now as a reminder to you that I shall be urging them to have a look at the final accounts if they fail to show sufficient professional scepticism especially with regard to revenue recognition.


Yours sincerely


Tom Winnifrith

Editor www.ShareProphets.com  

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