Financials
Well this answers my question. How does 23 million in deposits and owner loans of 3.5 disappear if the company was making profits previously? It had to be current loss, inventory gain, investments or owner draws. Obviously they have been financing the company through deposits and those have decreased this year. The smoking gun is the equity line. Starting the year at $148K means most of the profit for the life of the company was pulled out before this year with zero strategic reserve. Hard to comprehend this management in a modern company and the reason the owner has the money to finance the bankruptcy.
BTW: Gross margin is low in my opinion at 11%. Increasing pricing by 32% gets them to a gross margin of around 33%. Not sure what industry standard is but this seems high and only a way to get out of the current situation.
See attached for the financials submitted by Van's to the court today. Looking quickly at this, here are some of my takeaways:
1) According to their numbers, they would have been profitable this year if they didn't take a $5M write off for laser cut parts remediation and a $4M inventory write off (what's that about)?
2) They had $3.7M in cash on 11/30 and $22M in inventory (at cost or sale value?) against $24M in customer deposits. That says to me they had the inventory to ship our kits while being subsidized by new orders, but needed bankruptcy to deal with the LCPs issue and not so much the underpricing issue.
3) They only have $148k in retained earnings. So they pulled out all the profits previously and left a company that didn't have the equity to absorb these current issues.
4) They believe they would only get $2.5M in a liquidation of the inventory.
Well this answers my question. How does 23 million in deposits and owner loans of 3.5 disappear if the company was making profits previously? It had to be current loss, inventory gain, investments or owner draws. Obviously they have been financing the company through deposits and those have decreased this year. The smoking gun is the equity line. Starting the year at $148K means most of the profit for the life of the company was pulled out before this year with zero strategic reserve. Hard to comprehend this management in a modern company and the reason the owner has the money to finance the bankruptcy.
BTW: Gross margin is low in my opinion at 11%. Increasing pricing by 32% gets them to a gross margin of around 33%. Not sure what industry standard is but this seems high and only a way to get out of the current situation.