This first item does seem like boilerplate, especially since in the prospectus there is a sentence stating "Other than FAB’s lease obligation for office space in Los Angeles, already included in the financial results, we do not know of any other obligations that FAB will retain that may become the responsibility of Libsyn." Full excerpt below.
The second item is a possible concern and something that I also noticed. The financials with balance sheet information are for end of Q1 or Q2 depending on the documents referenced. So, between June 30 and August 1, FAB could have sucked out the cash and we would not know. Also, the piece you quote discloses that cash distributions are a regular activity. I would personally want to get a clear picture of where the balance sheet stands today. If we are being safe, then should not rely on that cash in thinking about the company's value. I wrote a previous message about that. Relying on balance sheet for more than $.06-.07 of the stock price is wishful thinking.
I would guess they didn't take the cash out. They explain the transfers as "Each month, the cash balance of each subsidiary is reviewed and the cash used for maintaining normal operations is transferred to the Parent." Based on their own disclosures, there has been a long history where "normal operations" does not mean a few million dollars in a single month. So, if they suddenly took out a few million dollars within a month, they would expose themselves to a lot of scrutiny. If they are running a con game, I think they are too greedy to wrap it up this early and get themselves tied up in new litigation. If they just had their eyes on only the cash, they could have just kept overpaying themselves $1.5 million a year for a couple of years without even filing disclosures.
Excerpt from prospectus
The Spin-Off may Expose us to Potential Liabilities Arising out of State and Federal Fraudulent Conveyance Laws and Legal Distribution Requirements.
The Spin-Off could be challenged under various state and federal fraudulent conveyance laws. An unpaid creditor or an entity vested with the power of such creditor (such as a trustee or debtor-in-possession in a bankruptcy) could claim that the Spin-Off left FAB insolvent or with unreasonably small capital or that FAB intended or believed it would incur debts beyond its ability to pay such debts as they mature and that FAB did not receive fair consideration or reasonably equivalent value in the Spin-Off. If a court were to agree with such a plaintiff, then such court could void the Spin-Off as a fraudulent transfer and could impose a number of different remedies, including without limitation, returning our assets or your shares in us to FAB, voiding our liens and claims against FAB, or providing FAB with a claim for money damages against us in an amount equal to the difference between the consideration received by FAB and the fair market value of us at the time of the Spin-Off.
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The measure of insolvency for purposes of the fraudulent conveyance laws will vary depending on which jurisdiction’s law is applied. Generally, however, an entity would be considered insolvent if either the fair saleable value of its assets is less than the amount of its liabilities (including the probable amount of contingent liabilities), or it is unlikely to be able to pay its liabilities as they become due. No assurance can be given as to what standard a court would apply to determine insolvency or that a court would determine that FAB was solvent at the time of or after giving effect to the Spin-Off, including the distribution of our common stock.
From and after the Spin-Off, we will be responsible for the debts, liabilities and other obligations related to the business or businesses which we own and operate following the consummation of the Spin-Off. Although we do not expect to be liable for any of these or other obligations not expressly assumed by us, it is possible that we could be required to assume responsibility for certain obligations retained by FAB should FAB fail to pay or perform its retained obligations. Other than FAB’s lease obligation for office space in Los Angeles, already included in the financial results, we do not know of any other obligations that FAB will retain that may become the responsibility of Libsyn.
