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Monday, August 18, 2014 12:51:10 AM
Actually, I did include those and even commented about them in my analysis. However, if your point is to specifically highlight the disclosed PURPOSE of these new debt instruments as being to pay commissions and procure inventory, then my comments to that are basically that the purpose doesn't really matter to me. Let me explain:
SCRC, just like any company, has a vast pool of cash needs for all sorts of purposes, be it raw materials, inventory, A/P, G&A, commissions and othe selling costs, whatever. If SCRC found itself for whatever reason short $325k and needed this liquidity, then it does not matter to me what it was for. For example, would it have made a difference if they used the cash they DID have on hand to pay commissions but then disclosed they needed to borrow this $325k to pay salaries or A/P? To me, it doesn't. What is important to me is simply the fact that this disclosure tells me that SCRC found itself in a position where its cash needs exceeded its cash on-hand and resorted to taking on more debt at usurous rates.
With the limited disclosures as well as the fact that Q2 was only the first complete quarter of Main Ave operations -- and combined with the fact that the growth has been astronomical on a month-over-month basis thus far -- as well as considering the fact that even after factoring in the backlog of shipping approved orders that there is STILL a 30-day lag to receive payment from insurance companies -- it would not be unreasonable to presume that this cash need was primarily attributable to simply a timing issue between where it needed to pay out the exponentially increasing commissions based upon increasing orders getting shipped, but yet the cash coming in from prior months is insufficient because the sales (and resulting A/R) from prior months were so low relative to the sales (and resulting commissions) being paid TODAY.
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