Are JB Hi Fi and Best Buy facing lights out on LIFX?

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Are JB Hi Fi, Best Buy, Apple and Amazon embroiled in a nasty brawl between an Australian smart tech company and regulators who are questioning the viability and claims made to shareholders by Buddy Technology (BUD), the maker of the LIFX products?

Basically, Buddy Technology is struggling to survive, with the company admitting it only has $1.3 million in cash and $24.7 million in liabilities, with negative working capital of $7.1 million and a net liability position of $6.4 million.

So what if there is a recall or warranty issue with the inventory they sell to these retailers because there seems to be little money in the kitty.

Buddy’s future looks bleak, as a potential takeover target their position is hampered by the high level of debt which, for an overseas company, could be affected by the rising Australian dollar.

Although they have a good product portfolio, good distribution and good relationships with global companies, it is the financial responsibility of the company that is a major problem with banks and borrowers refusing to lend. money to business.

The other big issue is how the company is run and how it has been run in the past, leading to a past delisting by the ASX, which raised several performance questions last week, viability and real compliance with listing rules. .

BUD claims that its operating level is sufficient to warrant the continued listing of its securities on the ASX, as required by listing rules.

answer to this question, please explain the basis for this conclusion. By answering this
question, please comment on the nature of BUD’s current business activities.

The company recently announced a new vendor program agreement with leading US consumer electronics retailer, Best Buy, to better address what they describe as the changing retail environment. Details of the program were not disclosed.

Currently, the company is struggling to sell its existing inventory, it is also trying to secure deals with Apple, Amazon, Google and Samsung, saying it has new SmartHouse technology to offer these companies.

They say one of the products these brands are expected to carry is the new LIFX Downlight which they believe will expand BUD’s reach to new customers outside of the typical consumer electronics retail channel.

ChannelNews understands that the company is currently in discussions with electricity distributors in Australia. Product should also be stored in Bunnings.

The company says it has sufficient financial capacity to continue funding current activity, but the ASX and several industry executives are questioning their capacity based on past decision making and the fact that they have a negative working capital of $7,074,435 and a net liability position of $6,397,024. .

Due to their bad business history, BUD has to pay for the goods in advance.

Currently 90% of the inventory that is in BUD warehouse is fully paid, the question now is what marketing budget should they pay retailers to market their product or do external marketing.

While the business was cash flow positive in January 2022, it still only had A$1.3 million on hand as of January 31, 2022, allowing the business to rely on the rapid sale of products that are in their warehouses or retail stores before they can replenish stock. .

Over the past 8 months, the company has reduced its operating expenses by more than 30%, it has also increased the price of its products, which has resulted in a “significantly higher” margin.

In June, the company was making a 30% margin, now it’s getting 43%.

The unfolding nightmare for the company is that revenues have declined for the period ending December 31, 2021 and are down through 2022 according to retail sources.

The company admitted to having “ongoing business difficulties” including shortages of critical components, manufacturing delays and the COVID-19 pandemic currently sweeping China with cities like Shanghai and Shenzhen shutting down.

Currently, the company has a financial loan from Partners for Growth of $16,098,518, but with interest, this amounts to $16,511,969. The maturities of these loans are December 2023 and May 2024.

Since March 2021, BUD has failed to meet the monthly financial test covenants under its funding agreements with PFG.

In a letter to the ASX directors, the board is of the opinion that the company’s financial records have been properly maintained and that the financial statements have been prepared in accordance with appropriate accounting standards and present fairly the financial situation and performance of BUD.

The directors also consider BUD to be still in operation, based on the fact that their borrowings of A$16,098,518 “although classified as current liabilities are not due and payable until December 2023 and May 2024.

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