Well.. I 'AUDIT' for a living and have seen several similar such situations. Typically it's in the purchaser's best interest to dig in an see exactly what they are buying.
Not that they were selling the company or that it really applies to GZFX, but does the Company ZZZ Best ring a bell? In the late 80's that company went public, was supposedly worth 10's of millions and in the end was liquidated for $50k. Buyer/investor beware...
Anyway, in this case, they performed an inventory and didn't like what they saw. I.E. what DVD said they had was not what was found.
I've NEVER seen a case where the purchasing company hires their firm to audit anything BEFORE some kind of purchase and sale agreement has been reached. It just doesn't happen. Though I did recently see a case where one of my clients sold one of the divisions to another party and the other party didn't bother to perform any inventory counts.
Kudos to GZFX for having the smarts to back out of the deal. However, shame on them for ever attempting to acquire a business that doesn't mesh well with their core operations. And shame on them for wasting precious cash flow on this wayward deal.
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