Trading Has Been Suspended for Nearly 2 Weeks
A CMON Audit is potentially putting a tabletop games publisher in danger of closure and it's not entirely clear what's going on.
Several issues have cropped up over the last few weeks. Firstly, the company announced that an audit would cause them to delay the release of their yearly financial report. As a consequence of that, they've suspended trading their stock on the Hong Kong Stock Exchange while they figure things out.
What Are the CMON Audit Issues?
As ICV2 neatly summarizes, there are three problems with this company's audit:
First up is "A distributor agreement with transaction value of approximately US$1.5 million." At the moment, CMON has an exclusive agreement with Asmodee NA; it's unclear why this item is an issue.
Second to that is "the rationale and substance of the significant increase in the prepayment balances as at 31 December 2019." No details are provided here, either, but a prepayment is exactly what it sounds like: paying financial obligations in advance. Judging by the text, it seems that someone may have paid out a hefty chunk of change to someone that the company owed money.
The third, final, and perhaps most serious issue is "other information as required by the auditors for their audit procedures on certain audit issues including ‘going concern.'" A "going concern" more or less means that a company is able to keep the lights on, and it seems like there might be an issue here.
What Kickstarters Are Potentially At Risk?
Like many tabletop publishers, CMON has its hands in a fair few Kickstarters. Some of these are hotly-anticipated titles, and a couple of them are currently in the process of fulfillment, namely the Bloodborne board game and the CMON Time Machine bundle.
Aside from these two campaigns, the company is also launching a campaign for Ankh: Gods of Egypt in the next few days.
Unfortunately, the severity of the CMON audit issues are really only known to the higher-ups within the company. We've reached out to CMON and will update this article when we receive a reply.
CMON Games Responds About Audit Issues
CMON Games sent a response to us over the weekend with information regarding the situation. They explain that due to the nature of how they record KickStarters, the going concern happens as they record Kickstarter funding as both an asset and a liability as they have the money and the outstanding pledges to fulfill. Here's a portion of what they shared on their website:
"Going concern" is a highly technical accounting term referring to a situation where net current liabilities are greater than net current assets. This happens for CMON from time to time since we record funds received from Kickstarter as both a liability and an asset - the money is an asset we received from our backers, but it is also a liability we owe to them that is not fulfilled until we ship our products. Since we use the funds to pay for molds, production and development of those products, and some of these are considered "Non-Current assets”, the asset column goes down as we use the money to fulfill the development of the game. Once we ship the game, the project goes back into the black because we can take the liability for the Kickstarter funds off the books.
The tricky part is when this crosses a financial reporting year, which happens often for Kickstarter projects, and if that happens it automatically triggers this technical nomenclature, and if you review our prospectus you will see we have reported this in the past.
They state that they will be continuing as a company and that all their kickstarters are in the process of being fulfilled right now, but that COVID-19 has made fullfilment in some cases more difficult. Here's the projects update they provided:
Starcadia Quest – Fully shipped out to backers.
Blood Rage Digital – Physical rewards fulfilled. Digital game has finished Beta testing and a launch date will be announced soon.
Time Machine – Partially fulfilled. The lockdown has slowed down packing in the USA hub and delayed deliveries in Europe.
Munchkin Dungeon and Project Elite – On the way to fulfillment centers. We will face some delays in Europe as our fulfillment center is not considered an essential service and cannot operate until the lockdown is lifted
Marvel United, Bloodborne, Night of the Living Dead, Trudvang Legends, and Zombicide 2nd edition are in various stages of production as per schedule, please check the relevant project pages for the latest status updates.
If everything is as CMON Games says, there should be no problems keeping the lights on and business as usual - at least as possible under the current situation - continues.
Do you think the CMON audit issues are a serious problem? What's your favorite tabletop game from this company? Let us know in the comments below!