EXCLUSIVE: LIFX Not Very Smart, Probed By ASX Amid Liquidity & False Reporting Claims
The future of LIFX Smart lights sold at the likes of JB Hi Fi, Harvey Norman and Amazon, are today up in the air with serious questions being asked of Buddy Technologies management the owners of the brand who are currently under investigation for past reporting to the ASX , they are also facing a major cash shortage.
LIFX was acquired by Buddy Technologies for $51M on Feb 5, 2019, earlier this month three of the Companies non-executive board directors, John van Ruth, Alan Robert Sparks and Rosemary Batt, walkout amid a probe into “inflated” revenues by the owners of LIFX who are seen as an expensive connected home solution.
Questions have also been raised about their liquidity and ongoing supply issues of the Company whose shares are currently suspended. after “inflated” revenues were discovered which they claim was mistakenly reported by operational management to the company’s board and its audit and risk sub-board committee.
In a letter to the ASX Listings Compliance committee the Company claims they only became aware of the supply delay when the financial reporting error was picked up.
The reporting error had masked a mismatch of inbound supply of inventory from manufacturers and (“SKUs”) going out to retailers.
At the time the Company claimed that they did not consider the supply delay would have a material effect on sales and the reporting of sales.
An ASX raised the question that the Companies March Quarterly Report indicated that the Company was aware of the supply delay in mid-March 2021.
“As such, please clarify why the Company proceeded to release the March announcement, including the statement that restocking is proceeding “according to schedule” ASX investigators asked.
The Company came back claiming that they were not aware of the Supply Delay in mid-March 2021.
Apart from JB Hi Fi and Harvey Norman LIFX products are also sold online at Amazon.com and BestBuy.com.
The ASX has also questioned information contained in previous reporting to the ASX which stated that in prior reports to the ASX, BUD stated that in order to raise further cash to fund its operations the Company was able to “draw on a pre-existing share-based arrangements”.
BUD executives responded claiming that the Company did not have a “pre-existing share-based arrangement” and the reference to a “pre-existing share-based arrangement” in the March Quarterly Reports was another error in their reporting.
The Company then admitted that they had a loan facility with an unrelated and unsecured lender for an amount of up to A$1.5 million.
The Loan interest on the A$1,500,000 12-month loan is 10%.
ChannelNews understands that ‘Critical component shortages’ are now impacting the business.
This led the ASX to ask questions about the LIFX company and their critical component shortages as well as BUD’s statement in the April announcement that ‘management may need to make material adjustments to the Company’s sales plans’ to enable existing inventories to last due to their supply problems.
It was also revealed that for the period ended 31 March 2021, BUD has no unused financing facilities available at quarter end.
Net cash used by BUD in operating activities for the quarter was $15,545,000 ($22,240,000 year to date (9 months); and that BUD’s cash position on 31 March 2021 was $1,563,000.
The ASX wanted to know how BUD intends to generate sufficient cash to continue the operate as a going concern.
The Company said that Net cash utilised by BUD in operating activities for the March 2021 quarter included substantial one-time payments, comprising of A$4.7 million for accrued interest of prior debt.
It was revealed that the Company had to make a $4.2 million payment to the Company’s primary manufacturer to satisfy obligations under a prior debt arrangement.
A further A$627,000 was spent on legal and restructuring costs associated with the early January debt refinancing.
These payments which came to A$13.93 million, were included in the A$15.55 million net cash utilised by BUD for the March 2021 quarter.
Payments by retailers in the March 2021 quarter were A$875,000 which were lower than expected.
The Company blamed one of their customers who apparently had sent payment to a closed bank account.
Buddy Technologies claims that they have established new payment terms with its largest customer Amazon with payments now being made one day after approval by Amazon instead of between 45 to 60 days.
ChannelNews understands that other retail partners are being offered discounts to purchase product on short-window payment terms.
The said that they are proposing to undertake an equity capital raising to raise a minimum of approximately A$6.5 million if an effort to fix their current problems,
Management has also said that they will replace the directors who walked out on the Company on an interim basis with head software engineer Paul Russell and senior e-commerce director Jim Nelson as it searches for permanent replacements.
More to follow.
We are also waiting for Company executives to come back to ChannelNews so that we can discuss their US market sales and statements made to the ASX re the US market.