However, Mr Brookes, who was appointed chairman in 2019, said the directors believed the group could continue as a going concern and improve its results.
Funtastic shut down its unprofitable toy distribution and apparel businesses to focus on branded products such as Chill Factor, Razor scooters and confectionery. It is also introducing new products, including the Moochies range of smartwatches for children and educational toys and arts and crafts.
The company is also reducing its exposure to discount department stores such as Kmart and Big W in favour of direct-to-consumer online channels and independent retailers.
The acquisition of Hobby Warehouse, which last year acquired the licensing rights for the Toys R Us and Babies R Us brands and relaunched them online, will help Funtastic increase its direct-to-consumer sales.
However, it might have to raise capital to finance an acquisition. Its largest shareholder, Jaszac Investments, a company associated with Jason Sourasis, founder and managing director of Strategic Financial Group Australia, has lent Funtastic about $12 million.
Jaszac owns 18.5 per cent of the company and Harvey Norman chairman Gerry Harvey is still a shareholder with 9.2 per cent.
Funtastic was Mr Brookes’ first listed company role when he returned to Australia three years ago after running South Africa’s largest non-food retailer Edcon. He could not be reached for comment on Thursday.
The company has been teetering on the edge of collapse for more than seven years, racking up losses of more than $130 million after losing big distribution agreements with brand owners such as LeapFrog and Spin Master and facing declining sales from department stores as retailers such as Kmart and Big W moved to direct sourcing.
