Would you agree, then, that Schadel's appetite for expansion has exceeded the capacity of the product, which is driving away investors? The convertible notes are one thing and could be manageable as Schadel demonstrated for the first half of last year. However, he insists on adding new branches before the existing ones have even proven themselves much less are able to contribute to the financing of expansion. Schadel is expanding as if he already has the investors. For lack of a better way to put it, it looks really amateur as he releases PR after PR of "Look what I can do!" with little to show for expenses. The payroll taxes were the first significant casualty of that lack of direction that another poster commented on. Now the convertible notes are becoming a major issue. Do you maybe see now how $10,000 per month for an unnecessary and truly costly bill is actually a really big deal especially at this stage of growth?
The most significant problems Schadel has to overcome are:
1. Pay off the delinquent payroll taxes and don't ever fall behind on them again. NOBODY who is a serious investors wants an ugly, dark cloud like a possible IRS lien hanging over their investment.
2. Pay off convertibles before they convert. It shows discipline and an appropriate level of concern for shareholder value, which he should have had from day one, but openly admitted it wasn't a priority in his shareholder letter (big mistake, IMO).
3. Let the existing branches prove that LaborSMART is investment worthy. Anybody can buy. Big deal. Just because you can buy a garden big enough to feed an army doesn't mean you can take care of it enough to be able to feed even one person.
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