QSGI, Inc.(fka QSGI)

[rjviking]

I am not refrencing the pr I am inquiring about your post #67247
where you state in your 3rd paragraph that the Gasket Guy is at least $750K in debt.

It appears QSGI was not able to obtain bank financing for this acquisition or there would be no need for a subordinated sellers note.

These always come with a higher interest rate and no company would be willing to pay 7.5% in an era when interest rates are at an all time low with conventional bank financing.

It is also apparent that The Gasket Guy is at least 750k in debt and has used it's assets as collateral. They are allowing QSGI to collect on their accounts receivables to pay off this debt.

Whether that is outstanding receivables or future is not stated. Either way it is about the equivalent of two years worth of profit that is not being collected by either entity since TGG is claiming about 375k in profit (unaudited) based on the last 12 months.

Found an interesting piece on the earn out provision. It appears to be a standard in the service industry that protects the buyer.

The PR reads :


QSGI INC. (Pink Sheets:QSGI) today announced that its wholly owned subsidiary, QSGI Green, Inc., has acquired certain assets of The Gasket Guy, Inc. and its related operations. The acquisition will represent 100% of QSGI Green's operations and financial results going forward. The Gasket Guy, Inc. is a leading provider of replacement gaskets for refrigeration units that provide significant energy savings for restaurants, hotels, supermarkets, fast-food chains, and other businesses nationwide. QSGI Green acquired The Gasket Guy, Inc. through an asset purchase agreement for the company's operating assets. The agreement consists of a subordinated seller's note not to exceed $412,500 maturing no later than December 5, 2016 and bears interest at a rate of 7.5% annually, an agreement by QSGI to collect approximately $725,000 of The Gasket Guy's accounts receivables to be used to satisfy existing bank debt for which the assets serve as collateral, as well as an earn-out based on QSGI Green achieving profit milestones over the next five years.

So again I'm just wondering how the $725K in receivables turned into debt?