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October 28,2010
After assessment of last 3 years income and expense statements, as well as an analysis of
inventory, we find the following:
I. Basic Operations are strong, creating real value (assuming normal debt cost)
1. Sales have increased steadily from '08 to '10 results. Total sales in the 3-year period
were $20mm, with 2010 accounting for just over Y2 of that totaL
2. Gross profit margins On those sales have been steady in mid to high 50's. 2010 margin is
projected to be 57%.
3. Cost of Goods Sold over the three year period is $8.67mm, including a 2010 projection of
$4.97mm .
4. The Gross Profit over the 3-year period is $11.3, with 2010 at about $6.5mm.
5. Operating costs have been steady in the last 2 years after an increase in year 2 of about
400% matching the increase in sales, there was no increase in operating-costs in year 3
despite a near 200% increase in sales. The operating costs for the current level of sales
appears mostly fixed at just under $500k, currently about 5% of sales.
6. The Net Ordinary Income over the period was $10.2mm, with about $6mm in 2010.
7. These figures represent unleveraged operations before financing costs, but could support
debt costs into mezzanine levels easily (low, mid 20's) as an interim step towards
normalized (bank debt/single digit) levels.
n. Inventory has exceeded sales capacity, must be monetized to meet obligations
1. The market value of inventory is estimated at $54mm assuming a normal sales period and
2. The cost of that inventory is estimated at $24.5mm, yielding a gross profit margin of 54%
(consistent with actuals).
3. At 2010 sales velocity level, current inventory would require 4.7 years to deplete. If sales
growth levels continue year-aver-year at same rate as increase from 2009-2010 (66%)
then the sell-out time is still 2 years.
m. Conclusions
1. Financing has exceeded capacity of the operations. Too much capital has been raised and
excessive inventory was purchased. Overall financing picture raises questions about
variance between Sources and Uses:
Invested capital:
Proceeds from sales:
Total sources
Purchased Goods sold (COGS)
Purchased Inventory unsold
Operating Expenses
Total Uses
$ 8.70mm.
$ 1.10mm
$ O.75mm
. $35.05 mm
+/- $39mm
Must explain Variance. Financing should provide capital for operating costs and cost of
purchased goods/merchandise. Debt Service payments should come from proceeds generated
by operations (NOl). Borrowing in excess of purchase needs yields non-productive capital at
high carry cost. Have investor payouts come from capital and not sales? Obligations do not
include accrued interest (unknown at this time).
2. Investor obligations (i.e., principle) outstanding could be met or slightly exceeded
ilirough a sale of inventory at Market value however:
a. Inventory cost (assume "fire sale") is Y2 current estimated investor obligations,
and sales at that level yvould create a $25+mm shortfall.
b. At the 2010 sales vel9city, it would take 4.7years to move the inventory and
monetize the $54mm market value.
3. Trading inventory should yield ahigher value or higher level of liquidity, or at least move
perishable or seasonal goods more quickly. It does not yield any higher value, according
to the numbers we reviewed. Inventory acquired by direct purchase (not trade) has an
estimated margin of 54%. InventOly acquired by trade also has an estimated margin of
54%. Therefore, the time that it takes to accumulate the inventory actually decreases the
value and the practice of trading should be more closely examined.
4. Inventory levels are excessive (4.7 year supply at current sales levels) and must be
reduced even absent the current need for capital to meet investor obligations.
5. Cost of capital at average of 60%/yr is mathematically feasible (although unnecessary)
given high margins and manageable sales costs however inventory must turn within the
Recommended Action: Immediate steps
1. Review operational conclusions with Principle II to ensure we have proper
understanding. If assumptions and. conclusions are correct, move immediately with all
resources towards monetizing the existing inventory at highest number possible - as soon
as possible - focusing on increasing channels and buyers.
2. Develop accurate account summary for each principle, paid-to-date, accrued
interest. Develop strategy for each investor; anticipate settlement strategy.
3. Advisors to work to build on Principle 1's letter to investors and develop a plan to
communicate with investors in anticipation of a change in terms. Advisors to meet with
party resources week of November 1 to discover optimal team to develop strategy for
workout including potential conversion of debt to equity.
4. Principle I to initiate conversations with key investors signaling immediate change in
terms with a focus on managing the best outcome in light of changing economy and
business model.
5. Investigate sources of capital to provide for quicker monetization of inventory and permit
some pay down of existing principle. .

Preservation ofInvestors' accounts & relationships

Ensure accurate accounting of obligations to investors to remove pressure of
accruing debt on idle capital.
Management of onerous debt obligations
Protection of res(mrces of Principles I and II..
Improvement of Operations and inventory management to increase margins,
monetize inventory quickly.
Ultimate recapitalization to support profitable business with high margins,
salvage value, go forward with reorganized and efficient structure.
2008 2009 2010 3 YrTotals
Sales $ 1,687,332 $ 6,870,410 S 11,430,000 $ 19,987,742
Trnnsfer $ S S
$ S S
TOTAL INCOME $ 1,687,332 $ 6,870,410 S 11,430,000 $ 19,987,742
COGS S 793,241 2,910,360 4,970,000 $ 8,673,601
Purchases $
Merchandise $
TOTAL COGS S 793,241 2,910,360 4,970,000 $ 8,673,601
GROSS PROFIT $ 894,091 3,960,050 6,460,000 $ 11,314,141
Margin (GP/Sales) 53% 58% 57% 57%
Unexplained/Non Std Exps
Tmnsfur $ $ $
Investor S $ $
Loan Repay $ $ $
LoanD]'s $ $ $
GLCEntLoan $ $ $
Loan $ $ S
lvIiscellaneous $ S $
$ s $
.,% ofttlexp 0% 0% 0%
Std Operating fups 121,022 S 487,000 475,000 $ 1,083,022
as % of sales 7.17% 7.09% 4.16%
TOTAL OPERATING EXPENSES 121,022 $ 487,000 475,000 $ 1,083,022
NET ORDINARYINCOlvlE $ 773,069 3,473,050 5,985,000 $ 10,231,119
Other Expenses $
Other Income
NET INCOME $ 773,069 3,473,050 5,985,000 $ 10,231,119
From: "David S. Dwyer" <davidsdwyer@gmail.com>
SUbject: DRAFT
Date: October 19,201012:28:40 PM EDT
To: "J; Derek Imes" <derek@piadv.com>
I enjoyed getting to meet you this moming, and getting to hear more about GLC Limited.
I had one meeting Immediately after ours and recently returned to my desk to start to focus on what we discussed.
In addition to what you gave us this morning I wlll also need;
1. Year End Financial statements for GLC Limited. I think you said you had these for 2009 and 2008. This would Include:
a) Balance Sheet
b) P&Ulncome Statement
c) Cashflow
d) Statement of Shareholder Equity
You sent with us today the monthly P&L for 2010 from Jan-June. Those monthly statements for the current year are part of what we need so I thank you
for that. Let me know when JUly- Sept statements are available. On the YE stuff, It is best if we have the audited statements from your accountant
This is the critical first step - getting a quantifiable picture of the business. I'm going to dive into what you gave me beginning today. and I will likely have
some questions. Some of those might be answered by the YE statements, but once I've reviewed those then I can compile a list of questions to keep
us on track.
The next step will be drafting the story that details the past success and translates it into a future stream of income. I have already started that business
plan draft and I am sure that I will need to get with you soon to fill In some of the holes.
With past experience and recent conversations with the folks we're going to take this to, we have a good sense of what we need 10 pull together. As
you get Ihe financial information please email It 10 me and Derek, or call me and I will come and get a copy. Again, I'm looking forward to working with
you on this.
You now have my contact information, including my phone which I always have on me and I will remain available to you as you need.
David S. Dwyer
(404) 2748001
From: "David S. Dwyer" <davidsdwyer@gmail.com>
SUbject: Fwd: Donnan
Date: October 18,20103:18:45 PM EDT
To: "J. Derek Imes" <derek@piadv.com>
Hope all is OK with your family. Give me a buzz when you can.
Warren is going to China on Thursday. He's worried Donnan will go cold on this unless we get to him quick.
Begin forwarded message:
From: "Warren Goodstone" <warren@wirko.com>
Date: October 18, 2010 2:46:17 PM EDT
To: "'David S. Dwyer'" <davidsdwyer@gmail.com>, "'J. Derek Imes
Subject: Donnan
Can we shoot for early tomorrow, say 9 or 8.3 please. I have to be in Atlanta by 11.30.
Kind Regards
Warren Goodstone
David S. Dwyer
(404) 274-8001
From: "David S. Dwyer" <davidsdwyer@gmail.com>
SUbject: big lots
Date: August 24, 201010:41 :13 AM EDT
To: "J. Derek Imes" <derek@piadv.com>, Warren Goodstone <warren@wirko.com>
From WSJ this am:
"Shares of Big Lots Inc. (BIG) rallied 15% in premarket trade after the retaHer lifted its full-year outlook and reported a 37% jump in
quarterly profit." .
The business plan for GL, should we have the opportunity to create it, will write itself. This is the era of saving money.
David S. Dwyer
(404) 274-8001
From: "David S. Dwyer" <davidsdwyer@gmail.com>
Subject: Re: flnancials
Date: August 2,20104:59:00 PM EDT
To: "J. Derek Imes" <derek@piadv.com>
Cc: Warren Goodstone <warren@wirko.com>
Warren and I spoke.
I think we have to consider that they have the same skepticism as you do.
They are likely saying ''these guys want us to spend $1 OOk and they can't even say where the money is coming trom"
Putting it in that light will either make us cut the cord and move on with our lives or try to swallow and persevere.
What we can do for them is great, and we have to prove that. I'm willing to continue to show that proof because of the upside for them and for us.
First, we need to respond today and say it's not $100k.
Derek, didn't we think it was more like $25-30 between lawyers and accountants and we could get it back for them inside ot 6 months?
Hell I'll pay it back to them if we get this going! I'll pay them 2x the cost I don't care.
Secondly we need to be more specific about what the dId effort is, and is not.
Is it a full audit? Will guys with green eyeshades and sleeve garters come in and go through their books.
we need to right now just talk abouttha misperceptions.
Then we need to address his concerns and talk about what we can actually do.
I hear you D, I sense the frustration and If you don't want to keep chasing it it's cool.
I have some tuelleft in the tank and I'm wiling to keep going with it.
I can't blame you it you don't. Warren and i both think there is room for something here but I do think we have to pony up some info.
So today it's just how much and what is involved - basically. Not down to the details.
In the next few days it's what can we do.
On Aug 2, 20tO, at 3:18 PM, J. Derek Imes wrote:
This is mindless. After we have asked for even a minimal amount of records to authenticate this operation, we are supposed to
pony up $3 million and then we can see what's going on.
It is nowhere near $100k in costs to get some third party accounting eyes on the operations up to this point, and J have no idea why
. he would think that. 50mebody's been eating retard sandWiches. How is that for entertainment.
BTW- he calls and texts me at 10:30 at night, and he can't call back to tell me he did close on this money and update me on what
Greg said.
50 now that Igot that out of the way, somebody start the conversation for me where I ask for $3 million bucks to hand to an ex
football coach who buys surplus and seconds and has no accounting to back anything up.
I am sure this is not an actual Ponzi scheme, but I am betting time weighted returns are strating to trail off and therefore the assets
and liabilities are slightly upside down at times.
Any ideas.
J. Derek Imes
Principia Investment Advisors LLC
325 Milledge Avenue, Suite A
Athens, GA 30601
Office 706.549.4383 FAX 706.549.4382 Mobile 706.202.2077
Email: derek@piadv.com
Website: www.piadv.com
From: Warren Goodstone [mailto:warren@wirko.coml
Sent: Monday, August 02, 2010 1:47 PM
To: J. Derek Imes; 'David Dwyer'
.Subject: FW: financials
Its getting entertaining!
From: Jim Donnan [maiIto:iim@iimdonnan.com]
Sent: Monday, August 02, 20101:16 PM
To: Warren Goodstone
Subject: Re: fmancials
Weare not interested in paying out almost 100 k in due diligence until you guys can prove you can bring some investment
money to the table.Start with 3 mil and then we can go on with the reorganization.
I discussed with Derrick that we had received some new money that we started out at lowpayments.You could add yours
to this.
On Aug 2,2010, at 10:46 AM, Warren Goodstone wrote:
Coach, our efforts are not about short term stuff. We intend to set you up to be able to get single digit interest rates across
your entire capital base, create a company that has a tangible value to someone else if you ever decided to sellout, take out
the current SEC and investor lawsuit risks to you and Greg personally and to help you make maximize the potential of this
business without major change to your current modus operandi. We will even help execute the plan with my direct
involvement ifthat appears beneficial.
So rather than just shelve it, how about we proceed with the work required to get you guys and your families where you will
benefit most?
Kind Regards
Warren Goodstone
From: Jim Donnan [mai1to:jim@jimdonnan.com]
Sent: Monday, August 02, 2010 10:25 AM
To: Warren Goodstone
Subject: Re: fmancials
I feel like we are on a hold for now-we have new money without restructuring
On Aug 2,2010, at 10:19 AM, Warren Goodstone wrote:
Morning Coach, where are we at with respect to getting the financials moving please? I am in town today and then off to
do another furniture install in Baton Rouge tomorrow, Is there any benefit to catch up today and keep this moving forward
before I leave as we are completely committed to the plan and maximizing the GL potential.
Kind Regards
Warren Goodstone
David S. Dwyer
(404) 2748001
Global Liquidators New Capital Structure
Explanation of Principia Role - July 31,2010
Last week Principia requested financial information (corporate and
personal fmancial statements, personal and corporate tax returns,
and an accounting of current capitalization) from Global
Liquidators. In anticipation of the receipt of that infonnation, we
see a good opportunity to underscore our goals for Global
Liquidators, and explain the need for that information.
The overall goal is to find the lowest price possible for the
capital Global Liquidators needs for its operations and
continued growth. Global Liquidators' current capitalization
methodology was necessary during the start-up phase, but the
company's success has created the opportunity to dramatically
reduce its costs of capital.
Principia is proposing to create, manage, and execute the planning
and the execution of a transition between the initial capital
methodology and the new financing at a lower cost. It begins
with a translation of the success into a professional document
to serve as proof that Global Liquidators is "Investable", It
quantifies Global Liquidators' success and uses data and word
descriptions to give confidence to an educated and savvy investor.
The paperwork Principia requested is. necessary to compile
that document. The document is vital to this transition because of
the need to change the reason investors are willing to put money
into the company. Currently, investors' security and willingness to
invest is supported by a personal knowledge: of Jim Donnan. The
result is a universe of potential investors limited to those with that
personal knowledge. This is problematic for four (4) key reasons:
1. Coach Donnan is required to remain involved at a very high
2. This type of basis for investment leads to over-pricing (as we
are seeing now). Investors willing to pay a more risk-
a d j u s ~ e d price for capital MUST be able to quantifiably
assess their risks, and this document gives them that ability.
3. There is now a dangerous and unnecessary liability for Coach
Donnan, creating enormous exposure to investor suits, and
possibly even SEC violations.
4. No matter how clean an investment is, without certain
paperwork there will always be looming questions that also
limit the number of potential investors. It is unwise to be
compared to unscrupulous investment when the means are
there to show the true value and legitimacy of the business.
This is more than just finding cheaper money. Given the current
capital structure and its associated costs, there will always be
someone to offer a lower price (to a point). The professional,
disciplined effort Principia is proposing will:
Find the lowest price of funds possible
Make limitless the universe ofpotential suppliers of capital
. Create tangible value that can be sold, transferred, or
leveraged for additional growth. This is not an option in the
current capital structure.
Eliminate the need for Global Liquidators' principles to
spend valuable time and resources raising capital
Dramatically reduce dangerous exposure to the current
These benefits speak to the on-goiilgnature of Principia's
commitment. Principia will constantly . monitor the market to
ensure that the goals met on the front eiid are maximized going
forward. Ultimately, this transition will increase the wealth that
the principles of Global Liquidators have to pass on to their
children and grandchildren. The transition will create tangible
value in the business beyond the projected revenue stream.
Global Liquidators probes the depths of where supply and demand
intersect in consumer goods. Principia will use its resources to
fmd that intersection for Global Liquidators' cost of operations and
You asked us to bring you $3mm. What happened?
First we had to deal with a misread ofwhat you wanted. But once we realized what you
wanted we went out to pursue it. . We thought you wanted to preserve your current
investors at their rates so we developed an elaborate structure to do that. Nowthat we
know you just want growth capital and some flexibility, we are talking about simple, not
We went to our sources and found a great willingness to invest in Global Liquidators.
P I ~ s , the rates are single digit - far, far belowwhere you are paying now. There are two
hurdles - both ofwhich we can get you over:
1. These guys represent disciplined money and they require some basic evidence of
your success. Most of it you have right now and what you don't have we can
create for you. Now we no longer need personal fmancials, too. You will have no
personal guarantee.
2. Your success has put you to where you can get their attention, but they want to
start at $1Omm, not $3mm. Surely we can fmd a way for you to use $1Omm if the
absolute borrowing costs are about the same as for $3mm ($1Omm at 7% vs.
$3mm at 20%)
As long as it can save you $19-20mm ($60mm at 40% vs. $60mrn at 7.25%) why
wouldn't you do it? There is no need for a thorough audit (your prepared financials will
do) and we can write the business plan to get you ready. Plus, there is a strong chance
we can get to money as cheap as 4-5%.
Cost of Funds
60.00% 20.00%
. 7.25%
The cost? There are fees in the range of2-5% for the fIrst line only. That's for the
investment bankers. They are necessary in this economy. We will do all the work such
as preparation of the business plan, communication, and negotiation. Then we stay on to
monitor and always look to make more improvements. We are asking for _%ofthe
So ifwe can get prepared fmancials and some time with you to prepare the business plan,
we'11 go right to work.
PART II: Elaboration
You have been using discretionary or loose money and it is expensive. It has to be to
compensate for high risk it's willing to take or the small amounts that it is willing to
invest. It's never easy to get, and not everyone can get it. But it requires returns that are
out of scale with the benefits it brings and it should only be used when absolutely
required. Otherwise the value and wealth that the borrower is creating is paid
disproportionately to the lender/investor that did not create the value or the wealth, but
benefits from it.
Disciplined Money is reasonable. But to get it you have to show that investment dollars
are going towards a functioning, proven process - not merely an idea with great people
behind it.
With Global Liquidators, there was a time when loose money was all you could get. You
were unproven - a startup. It is no surprise that the banks turned you down. You had to
resort to very high cost financing. But nowyou have outgrown that and there is no
reason for you to be paying the rates that you are.
Your ability to get money - even the expensive loose money - was based on who you are
and your reputation for being a national figure with great integrity. That is always a
requirement for any money in the magnitude that you are getting it. But nowthat you also
have all the elements of an investable company, why not let us assemble and package
those elements so you can get single digit borrowing rates?
That still help'S you but now you have a track record for the business. With a little work
we can translate that into an investable organization that can attract and get disciplined
money. What also helps is that certain groups - groups we're working with - have-a
specialty in the kind of business you have. They understand it and have systems already
in place to lend to your business. In fact TM Capital says it's their favorite kind of
business and they have worked with Gordon Brothers and other industry leaders and
we're confident our work can get you to whatever point you want to be.
Originally we thought you wanted to grow and completely recapitalize and we thought
you wanted to preserve the returns of your investors. To accommodate that we
developed a very complicated structure but it accomplished what we thought you wanted.
Two things have happened:
1. We've understood your goals better and now we knowwe can meet those goals
without a complicated structure. In fact, we're just going to bring you money in
the format you've been getting it - Debt - but you will just pay about 80% less
than what you were paying.
2. We've also learned that we cannot bring youjust $3mm, that we need to be
getting to $10mm to be able to fully benefit from this disciplined money.
From all signs, this money is a much better fit for you and it will allow you to keep more
ofwhat you make. Actually, there is no reason to pay the high rates any longer. Here's
what we need to do:
1. Address the financial due diligence needs of the lenders. No longer do we need a
new audit as your existing fmancial statements will likely do. Nor do we need
personal financial statements as these lenders will not require a personal
guarantee. See the one-page sheet that GE Capital provides. It is typical of what
these guys will need.
2. Get you to spend some time with us so we can complete a business plan to
address the general items required for the lenders. This is creating the story that
they can buy into as they underwrite. It is simply a write up of your history, your
basic business activity, and how you will sustain your past performance into the
future. We can get what we need from you in a few hours and then we can write
it up based on what we hear the lenders are looking for.
. 3. Talk about what your needs are for the money: either to grow or to replace
expensive money you are using now, or both. With that we can gauge how much
money you will need (forecast) and that will help the pricing.
Fromthat point we will compile what we need and get you through the process. We
think it will take a few months. But the time, the rate, and the amount are all up in the air
at least until we see the fmancials and can discuss them with the lenders.
GE Capital Commercial Finance
Preliminary Information Checklist
(Prospect N a m ~ )
Brief History; Description of Business, Products and Competitors
Sources and Uses of Funds at Closing
Legal Structure (Borrowing Entities, Where are Assets?)
Audited Financial Statements (3/5 Yrs.)
Interim Financial Statements with comparables (B/S, Income
Statement, Cash Flow)
Annual Financial Projections (3-5 Years)
Monthly Financial Projections
AIR Aging; Dilution and Write-off Data Over Last 2 Years
Inventory Composition (!?y: RM, WIP, FG and Location)
Borrowing Base Certificate
Appraisals (if applicable)
~ I C":-nn-OOORR