Four months since appointing receivers to untangle the mess of a business created by Buddy Technologies (ASX: BUD), receivers have found one asset of value to sell off but that won’t come even remotely close to paying off debts owed by the tech company which has been suspended by the ASX since April 2022 following a series of corporate fumbles.
FTI Consulting were called in as receivers of Buddy Technologies in April 2022 pursuant to action called upon by Partners for Growth VI, L.P. (PFG). During the process, PFG provided limited funding to Buddy subsidiary businesses that would enable some operations to continue, such as selling inventory, while FTI sought offers to sell or recapitalise the business.
That process has now been completed with FTI finding buyers for Buddy’s LIFX business that manufactures smart lighting products.
US-based Feit Electric Company will acquire LIFX with plans to provide an app with platform support to existing LIFX products which will continue to be sold in Australia and New Zealand under the new ownership.
FTI will continue in its role as receivers for Buddy while all other subsidiaries are wound down while assisting with the sale of residual assets. PFG however, has acknowledged that there will be a shortfall in repayment for the full amount of secured debt owing to PFG which renders much of the Buddy business worthless.
In effect, Buddy Technologies shareholders should expect to get nothing back from their holdings with BUD shares last trading on the ASX on 12 April 2020 at $0.06 each, giving Buddy Technologies a market cap of $21 million at the time.
Confirmation from receivers as to the value of Buddy Technologies assets brings an end to a disastrous period for the Company whose understanding of basic accounting principles was questioned by the ASX prior to the company entering receivership.
Even in their response to an ASX query on 4 April 2022, the Company acknowledged that their Half Year reports lodged had never been signed off by a CFO on the grounds they didn’t have one. In hindsight, it’s an understandable excuse given the mess that poor bugger would have walked into if they’d accepted the CFO role.
Such corporate management followed a mass exodus of Directors in June 2021 when the writing was probably on the wall after another internal accounting blunder when having to retract their statement of a “revenue record breaking quarter’.
On that occasion, the Company inflated their Q3 FY21 revenue figures by incorrectly including intercompany accounts of subsidiaries selling products to each other.
According to Buddy’s H1 FY22 financial statements that were not signed off by a qualified CFO, the Company reported $13.6 million in sales revenue with a net loss of $49.9 million which included a $44.8m write down on the LIFX business which they acquired in 2019 for $71.9m. The balance sheet also showed -$6.4m of equity in the Company.
With $16m owed to PFG, which has acknowledged there will be a shortfall on liquidation, Feit Electric Company looks to have picked up a handy LIFX business for pennies on the dollar.
As for Buddy shareholders, you can make up your own crappy puns about their lights.
Alfred Chan is a Business Reporter at The Sentiment specialising in ASX-listed small cap companies, a bloodstock enthusiast and former equities analyst.
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