Andrea Moore & Co, the clothing chain that failed in January, "significantly overstated" the value of inventory on its balance sheet and in its stock system, according to receivers McGrathNicol.
Directors Andrea Moore and partner Brian Molloy had attributed the demise of the women's fashion retailer to large-scale construction and traffic roadworks outside five of its seven stores and the late delivery of a significant amount of stock.
The company was incorporated in 2004 and in 2016 raised $750,000 in equity capital through crowdfunding platform Snowball Effect.
At the time it said 2016 revenue was $4 million and pre-tax earnings were $300,000, while for 2017, revenue was forecast to grow to $4.8 million and ebitda to $600,000.
The funds raised were to be used for working capital and fund its expansion, including selling its I AM range in 30 Farmers stores.
The report from McGrathNicol's Andrew Grenfell and Conor McElhinney said the receivers had kept the stores open while advertising Andrea Moore for sale but failed to elicit any offers.
As a result, they had focused on selling stock and rationalising trading operations. Six of the seven stores have been closed by the receivers and the remaining store and online platform will close by March 31, they said.
Moore and Molloy appointed liquidators on Jan. 8 and the same day Bank of New Zealand, owed $601,336, appointed receivers under the terms of a general security agreement.
A search of the Personal Property Securities Register at the date of receivership showed eight parties, other than BNZ had a registered financing statement against the company, the receivers said. Preferential creditors - employees and Inland Revenue - were owed $186,688.
The company had won an "Excellent Customer Service" award in 2013 at the BNZ Business Awards.
The receivers said they undertook a count of stock units in the stores and uplifted stock at third-party locations.
"On appointment, it was identified that the book value of inventory provided for in the company's accounts and stock system was, and had been for a period of time, significantly overstated," the receivers said.
As per the balance sheet at December 31, stock was valued at $3.8m and valued at $2.7m in the company's stock system on January 9, which showed 31,373 stock units. The receivers' stock take on appointment found 7,900 units valued at $538,000, or a $3.26m overstatement compared to the December 31 accounts, they said.
The directors had cooperated fully with the receivers, they said.
Last week Andrea Moore, who was the designer for the company, thanked all those who had supported her brand, saying on her Instagram account that "it's been very inspiring for me to work through this process with grace, energy and attention to detail." She also thanked online customers for their patience.
Online orders were taking longer than usual "due to an overwhelming response to the receivership," the company says on its website.