October 1, 2010...Do You Apply Extinguishment or Modification Accounting? Is there an extinguishment...
Transcript of October 1, 2010...Do You Apply Extinguishment or Modification Accounting? Is there an extinguishment...
October 1, 2010
October 1, 2010
What Accounting Applies? Troubled Debt Extinguishment Modification
Restructuring Accounting Accounting
Is Debtor
experiencing
financial
difficulty?
Has Creditor
Granted a
Concession?
ASC 470-60
Troubled Debt
Restructuring
Apply
Modification
Accounting
per
ASC 470-50-40
Yes
Yes
No
Gain/Loss on
Extinguishment of
Debt
ASC 405-20-40 OR
ASC 470-50-40
Was there an
exchange of
cash/assets to
settle Debt
obligation?
No
Yes
No
Yes
Contemporaneous
exchange between same
debtor & creditor?
Substantial Change in
Terms of Debt per ASC
470-50-40 or 470-50-40-21?
No
Yes
No
Troubled Debt Restructuring,
Extinguishment, or
Modification?
�Satisfaction of existing debt obligation?
�How was it satisfied ?
� Issuance of new debt obligation?
� Is transaction troubled debt
restructuring?
�Contemporaneous exchange?
�Between same debtor and creditor?
�Do instruments have substantially
different terms?
Troubled Debt Restructuring,
Extinguishment, or
Modification? (cont’d)
Is it Troubled Debt Restructuring?
�Is debtor experiencing financial
difficulties? AND
�Creditor deemed to have granted a
concession ?
� Apply guidance in ASC 470-60
� Accounting from Debtor’s perspective.
Troubled Debt Restructuring
May include:
�Foreclosure / Repossession
�Issuance or granting of
equity interest to creditor
Troubled Debt Restructuring (cont’d)
May include (cont’d):
�Modification of terms of following:
�Reduction of interest rate
�Stated interest rate < current market
rate w/ similar risk
�Reduction of face or maturity $ of
original debt
�Reduction of accrued interest.
Creditor Concession: Is it Troubled Debt Restructuring?
Creditor granted concession if:
�New effective borrowing rate < prior .
�Effective rate of restructured debt
includes:
�New or revised sweeteners
�Projected cash flows w/ new terms
impacting effective rate
�Consider recent earlier restructuring
TDR Considerations:
Effective Interest Rate & Sweeteners
What are sweeteners?
�Options
�Warrants
�Guarantees
�Letters of credit
TDR Considerations:
Effective Interest Rate & Sweeteners
Determining effect of new/revised
sweeteners:
�Current value of new
�Change in FV of revised
� Include in day-one cash flows
�Consider exercisability of instruments in
FV estimate.
Is it Troubled Debt Restructuring?Troubled Debt Extinguishment Modification
Restructuring Accounting Accounting
Is Debtor
experiencing
financial
difficulty?
Has Creditor
Granted a
Concession?
ASC 470-60
Troubled Debt
Restructuring
Yes
Yes
No
No
Accounting for TDR
Record gains/losses on:
�Restructuring of Payables
�Debt Carrying $ less FV assets given
�Transfer of Assets-
� Carrying $ of transferred assets less
FV of transferred assets
Do You Apply Extinguishment
or Modification Accounting?
� Is there an extinguishment or modification for accounting purposes?
� If NOT TDR per ASC 470-60.
� Apply guidance in:
� ASC 405-20-40-1: exchange of cash by debtor to acquire or settle debt obligation
� ASC 470-50-40: changes/exchanges non-revolving debt.
� ASC 470-50-40-21: changes/exchanges lines-of-credit & revolving debt arrangements
Extinguishment of Liability?
� Exchange of cash to settle Debt obligation?
�Modification/Exchange of debt?
� Between same debtor and creditor?
� 3rd party principal or agent involved?
�Extinguishment accounting
� If Obligation Settled with Cash or Assets
� If Obligation Settled with New Creditor
�Apply ASC 405-20 Liabilities: Extinguishment
of Liabilities
Extinguishment of Liability
Accounting Troubled Debt Extinguishment Modification
Restructuring Accounting Accounting
Is Debtor
experiencing
financial
difficulty?
Has Creditor
Granted a
Concession?
ASC 470-60
Troubled Debt
Restructuring
Yes
Yes
No
Gain/Loss on
Extinguishment of
Debt
ASC 405-20-40 OR
ASC 470-50-40
Was there an
exchange of
cash/assets to
settle Debt
obligation?
No
No
Yes
Extinguishment or Modification?
�Modification/Exchange of new debt
obligation?
�Between same debtor and creditor !
�Substantially different terms?
�ASC 470-50 Debt: Modification and
Extinguishment
Extinguishment or Modification?
�Debt changes/exchanges “Substantial”?
�Substantial = Extinguishment
Gain/Loss
�Non-substantial = Modification
Accounting
�More than1 creditor?
�ASC 470-50 Debt: Modification and
Extinguishment
What is a substantial change?
“Substantial” =
- PV of amended/new debt cash flows >
10% different PV of old debt remaining
cash flows.
�Use effective interest rate of original debt
Components of Substantial
Change Analysis
Cash flows affected by changes in:
�Principal $
� Interest rates
�Maturity dates
�Fees between debtor & creditor
Components of Substantial
Change Analysis (cont’d)
�Fees :
�Cash
�Options/warrants
�Stock
�Change in BC feature
�Guarantees
�Other
�Changes to Conversion Features
� 2 step approach
� If 10% CF test is “modification”- add step#2
� Step #2-Change in FV of conversion option
> 10%= Extinguishment OR
� Substantive conversion option
removed=Extinguishment
� Increase in FV charged to debt.
Components of Substantial
Change Analysis (cont’d)
Components of Substantial
Change Analysis (cont’d)
�Other modifications / changes w/in 1 year � AND not deemed substantially different
�Debt terms existing year ago used for 10% test.
�Callable (by issuer) or puttable (by holder) � Separate cash flow analyses performed
� Cash flow test w/ smaller % change= threshold
“Extinguishment” Accounting
for Changes/Exchanges of Debt
� “Substantial” change w/ same lender
� > 10% change
�Regardless of legal form
�Extinguishment of original debt
�New debt recorded at FV.
Extinguishment Gain or Loss
�Net Carrying Amount of extinguished debt
less Reacquisition Price
�Reacquisition price is:
� FV of new debt +
� Call premium +
� Costs paid/given to lenders +
� FV of any securities issued
Extinguishment Gain or Loss (cont’d)
�Net Carrying Amount is:
�Carrying value of debt +� including unamortized discounts/premiums :
� extinguished debt
� bifurcated derivatives
� beneficial conversion feature
� allocation due to warrants issued w/ debt
�Any bifurcated derivatives --
�Unamortized debt issue costs
What Accounting Applies? Troubled Debt Extinguishment Modification
Restructuring Accounting Accounting
Is Debtor
experiencing
financial
difficulty?
Has Creditor
Granted a
Concession?
ASC 470-60
Troubled Debt
Restructuring
Apply
Modification
Accounting
per
ASC 470-50-40
Yes
Yes
No
Gain/Loss on
Extinguishment
of Debt
Was there an
exchange of
cash/assets to
settle Debt
obligation?
No
Yes
No
Yes
Contemporaneous
exchange between same
debtor & creditor?
Substantial Change in
Terms of Debt per ASC
470-50-40 or 470-50-40-21?
No
Yes
No
Accounting for Debt Modification
�Debt is not substantially different
�Original debt continues to be outstanding
�New effective interest rate is determined
�Consider carrying $ of original debt
�Revised cash flows
�Sweeteners
�Amortize over new term, (if applicable)
October 1, 2010
October 1, 2010
Modification of Debt
Instruments� A significant modification of a debt
instrument under Reg. 1.1001-3 results in a
deemed exchange of a new debt for the
original debt.
� Two part analysis:
� Is there a modification?
� Change in legal rights and obligations
� If so, was the modification a "significant
modification"?
Modification of Debt
Instruments� Step 1 – Is there a modification?
� Is there any alteration in the legal
rights or obligations of the borrower or
lender under the debt instrument.
� Changes pursuant to the operation of
the terms of the debt are generally not
modifications
Modification of Debt
Instruments� Step 2 – Is the modification significant?
� Specific tests
� Change in yield
� Deferral of payments
� Change in obligor
� Change in recourse nature of the instrument
� Change in accounting/financial covenants
� General rule in Treas. Reg. § 1.1001-
3(e)(1)
� Economically significant
Consequences of Debt Modification
�New debt considered to have been issued
in exchange for property (i.e., the old
debt).
�Determine issue price of new debt.
� IRC § 1274 applies for non-traded debt.
� IRC § 1273 applies for traded debt.
� If stated interest is at or above the Applicable
Federal Rates (AFR), issue price equals principal
� If neither the modified nor the original debt is
publicly traded and the stated interest rate is equal
to or greater than the applicable federal rate (AFR),
then there is no COD income unless principal is
reduced or made contingent.
Consequences of Debt Modification
� Bottom Line
� Non-publicly traded debt
� interest rate equal to or greater than AFR
� principle amount same
� NO COD INCOME
Consequences of Debt Modification
October 1, 2010
Taxation of Cancellation of Debt� Cancellation of debt (COD) is taxable as ordinary
income
� Unless Bankrupt
� Or Insolvent
� Or Qualified Real Property Business Indebtedness
Qualified Real Property
Indebtedness� Sec 108(a)(1)(D) allows basis in depreciable real property to be reduced in lieu of recognizing COD income.
� Applies primarily to rental real estate with a debt restructuring.
� Debt must be secured by real estate.
� Not available to C Corporations.
Homeowners� Qualified Principal Residence Indebtedness –
108(a)(1)(E)
� Maximum debt excluded $2,000,000 and must be
acquisition indebtedness.
� Taxpayer must apply excluded amount to reduce
basis of the principal residence but not below zero.
Cancellation of Debt – Bankrupt
or Insolvent Taxpayer
� Under IRC § 108(a), COD income is excluded from
gross income.
� In the case of a partnership, the determination is
made at partner level.
� For corporations, the determination is made
without regard to shareholder status.
Cancellation of Debt – Bankruptcy
� Discharge of debt occurs under the jurisdiction of
the court in a case filed under Title 11 of the U.S.
Bankruptcy Code.
� All discharged debt is excluded from taxable gross
income.
� Tax attributes of the taxpayer are transferred to the
bankruptcy estate.
Bankruptcy Example
� Corporation A owns one asset, unencumbered
land with a FMV of $500,000
� Corporation A also has unsecured debt of
$750,000, which is discharged under a Chapter
7 Bankruptcy case
� How much is included in Corporation A’s gross
income upon cancellation of debt?
Bankruptcy Example, cont’d
Zero
All discharged debt from bankruptcy is
excluded from income under IRC § 108
Cancellation of Debt – Insolvency
� COD income is only excluded from taxable gross
income to the extent of insolvency before the debt
discharge transaction.
� Any COD income in excess of insolvency may be
taxable.
� Insolvency is the excess of total liabilities over the
FMV of assets immediately before the debt is
discharged.
Determining Insolvency � All assets of the entity are included – including
assets exempt from creditors at FMV.
� Nonrecourse debt is only treated as a liability to the
extent of the FMV of the property securing the debt.
� Contingent liabilities are only included in the
determination of insolvency if “it is more probable
than not” that the taxpayer will be called on to pay
the liability.
Insolvency Example� Taxpayer owns one asset, unencumbered land with
a FMV of $500,000.
� Taxpayer has unsecured debt of $750,000.
� The bank discharges $350,000 of the debt in a
voluntary workout.
� How much of the discharge does the taxpayer
include in taxable income?
Insolvency Example (cont)
� The total amount of the discharge excludable
under IRC § 108 is:
$250,000
Insolvency Example (cont)
� Just before the debt discharge, the taxpayer was
insolvent by $250,000 ($750,000 of debt) less land
with a FMV of $500,000.
� Taxpayer will have $100,000 of ordinary income as
a result of the COD income.
Deferral of taxable COD income
� AJJA added a provision that allows the deferral of
COD income arising from the reacquisition of an
applicable debt instrument in 2009 or 2010.
�When elected, the taxation of the COD income is
deferred until 2014, and then included in income
ratably between 2014 and 2018.
Deferral of taxable COD income (cont’d)
� “Applicable Debt Instrument” is broadly
defined.
� “Reacquisition” includes:
� The purchase for cash or equity
� Exchange or substantial modification of debt
instrument
� Complete forgiveness of the debt instrument
Deferral of taxable COD income (cont’d)
Deferred COD income is accelerated:
� If the taxpayer dies
� Liquidates or substantially sells all of its
assets
� Ceases to do business
Reduction of Tax Attributes
No Free Lunch
� Discharged debt can be excluded from taxable gross income by bankrupt and insolvent taxpayers, certain tax attributes may be lost.
� In most cases, tax attributes are reduced dollar for dollar to the extent of excluded COD income.
Planning for Attribute Reduction
� Taxable income or loss is computed with out regard
to excluded COD Income.
� All attributes are available for use in year of
discharge.
� NOL’s & other carryforwards first offset other taxable
income before being reduced.
� Depreciation is allowed up to time of disposition.
� Property sales during year are not subject to basis
reductions.
Reporting of Reduction of Tax Attributes Due
to Discharge of Indebtedness
� Form 982
� Under IRC §1017, may elect to reduce basis of depreciable property first
� Reduction occurs first day of the tax year following
discharge.
Ordering of Reduction of Tax
Attributes� Amounts excluded from income must reduce certain
tax attributes in the following order:
1.Current NOL or NOL carryover
2.General business credit allowable under IRC §38
3.Minimum tax credit allowable under IRC §53(b)
4.Capital loss carryover
5.Basis reduction of property
6.PAL and credit carryovers
7.Foreign tax credit carryovers
Ordering of Basis Reductions in
Business Property1. Real property used in trade or business or
held for investment that is used to secure
debt
2. Personal property used in trade or
business or held for investment that
secured debt
Ordering of Basis Reductions in
Business Property (cont’d)3. Basis of remaining trade or business property,
other than inventory, accounts receivable, or notes
receivable, to extent discharge exceeds above asset
classes.
4. Adjusted basis of inventory (including real property
held as inventory), accounts receivable, and notes
receivable
5. Any remaining business or investment property
Partnership vs. S CorpPartnership
� Income inclusion or exclusion
is determined at the partner
level
� Depends on each individual’s
circumstances
� Partnership recognizes full
income
� Partner can elect to reduce
basis in entity’s depreciable
property to extent of
ownership interest in that
property
S Corporation
� Income inclusion or exclusion
is determined at the entity
level
� Income excluded does not
increase the basis of any
shareholder (See: D.A. Gitlitz
v Commissioner)
October 1, 2010
Type of Debt� Recourse
� All assets of the entity are subject to claims of the creditor.
� Non-Recourse
� Creditor can only obtain the collateral subject to the debt.
� Guarantee
� Does not impact the type of debt.
Debt Discharge with Property Transfers -
Non - Recourse Debt� There will never be COD income!
� Debt satisfied by a transfer of property is
treated as a sale of the property.
� Sales price is amount of outstanding debt.
� Gain or loss is recognized and is not excludible
from income.
Debt Discharge with Property Transfers –
Recourse Debt�When a transfer and discharge occurs,
bifurcation between the debt discharge and
the property disposition is required.
� Transfer of property is treated as a sale of the
property for FMV.
� Gain or loss is recognized and is not excludible
from income.
Debt Discharge with Property Transfers –
Recourse Debt� If Debt > FMV then COD.
� COD may be excludible under IRC § 108.
� Timing is an issue
� Supreme Court ruled that the time for fixing a
loss is the foreclosure sale itself. (Helvering v. Hammel, 311 U.S. 504 (1941))
� Other Courts have found exceptions.
COD Income and Importance of
Characterization
� COD Income is always treated as ordinary
income.
� Very important to consider with Recourse
Debt.
� Could wind up with capital loss on sale and
ordinary income from COD.
� Capital Loss would not offset ordinary income.
Other Accounting & Tax Issues:
Extinguishment & Modification of DebtEXTINGUISHMENT MODIFICATION
AccountingIncome
Tax Accounting Income Tax
Unamortized premium/ discount-old (including BCF)
Extinguishment Gain(loss)-old debt
Deduction Amortize (new debt term)
Amortize (new debt term)
Debt issue costs -3rd
parties
Amortize (new debt term)
Amortize (new debt term)
Expensed as incurred
Amortize (new debt term)
Debt issue costs - Lender
Extinguishment Gain(loss)-old debt
Deduction Capitalize & amortize (new debt term)
Amortize (new debt term)
Pre-existing debt issue costs
Extinguishment Gain(loss)-old debt
Deduction Amortize (new debt term)
Amortize (new debt term)
Other Accounting & Tax Issues:
Extinguishment & Modification of Debt (cont’d)
EXTINGUISHMENT MODIFICATION
AccountingIncome
Tax AccountingIncome
Tax
Unamortized premium/ discount-old debt (including BCF)
Gain(loss) on Extinguishment-(old debt)
Deduction Amortize (new debt term)
Amortize (new debt term)
Other Accounting & Tax Issues:
Extinguishment & Modification of Debt (cont’d)
EXTINGUISHMENT MODIFICATION
AccountingIncome
Tax Accounting Income Tax
Debt issue costs -3rd
parties
Amortize (new debt term)
Amortize (new debt term)
Expensed as incurred
Amortize (new debt term)
Other Accounting & Tax Issues:
Extinguishment & Modification of Debt (cont’d)
EXTINGUISHMENT MODIFICATION
AccountingIncome
Tax AccountingIncome
Tax
Debt issue costs -Lender
Extinguishment Gain(loss)-old debt
Deduction Capitalize & amortize (new debt term)
Amortize (new debt term)
Pre-existing debt issue costs
Extinguishment Gain(loss)-old debt
Deduction Amortize (new debt term)
Amortize (new debt term)
October 1, 2010
Foreclosure- Example 1� S Corporation holds real property as an
investment.
� Carrying amount of property is $2,200,000.
� Unpaid principal of debt is $1,800,000.
� Fair market value of property is $1,500,000.
� Taxpayer's adjusted basis in the property is
$2,200,000.
Foreclosure-Example 1 (cont’d)
ACCOUNTING
Gain(Loss) on Transfer
Property:
Carrying amount ($2,200,000)
Fair Value 1,500,000
Loss on transfer ($ 700,000)
Gain on Restructuring of Debt
Debt relieved $1,800,000
Property FV (1,500,000)
$ 300,000
Income Statement
Loss on transfer ($ 700,000)
Gain on restructuring 300,000
Total Net loss ($ 400,000)
TAXATION
Nonrecourse Debt
Amount Realized $1,800,000
Less Asset Basis (2,200,000)
Realized Loss (400,000) (Capital Loss)
Recourse debt
Balance of debt $1,800,000
FMV (1,500,000)
COD Income 300,000 (Ordinary
Income)
FMV $1,500,000
Less AB (2,200,000)
Realized Loss (700,000) (Capital
Transfer of Asset/ Extinguishment / COD-
Example 2
� XYZ, Inc., an S Corp, holds investment
property w/ recourse debt of $1,000,000.
� Bank repossesses property with $500,000 FV
on 11/1/xx.
� Bank later sells property for $600,000 on
12/15/xx.
� XYZ pays bank $100,000 cash.
� Bank forgives excess recourse debt of $300,000.
*XYZ has not changed ownership since inception
Transfer of Asset/ Extinguishment / COD
Example 2 (cont’d)
At date of discharge, XYZ B/S was as follows:Assets:
Cash $ 100,000
Inventory 100,000
Investment property 1,000,000
$ 1,200,000
Total Liabilities $ 1,400,000
Shareholder Deficit $ 200,000
Other taxpayer information:
AAA ($ 3,000,000)
Capital Stock/APIC $2,800,000
Transfer of Asset/ Extinguishment/
COD Example 2– ACCOUNTING
Gain(Loss) on Transfer
Investment Property:
Carrying amount($1,000,000)
Fair Value 500,000
Loss on transfer ($ 500,000)
Gain on Restructuring of Payables
Debt relieved $ 900,000
Property FV ( 500,000)
$ 400,000
Income Statement
Loss on transfer ($ 500,000)
Gain on restructuring 400,000
($ 100,000)
Transfer of Asset/ Extinguishment / COD
Example 2 – INCOME TAXES
Transfer of Asset/ Extinguishment / COD
Example 2 – INCOME TAXES
�Reduction in Attributes-� Suspended loss- $200,000
� Capital loss- $400,000 (no basis to take)
� Inventory -$100,000
Debt Modification or
Extinguishment?- Example 3
�Modified terms of 2 convertible
debentures:
� deferral of principal & interest
payments,
� extension of principal maturity,
� increased interest rate to 20%
� Issued 6.5 million shares of common
stock to lender
Debt Modification or
Extinguishment?- Example 3a
Debenture Modification Analysis A B C ((B+C)-A)
PRIOR AFTER at $0.10
Debentures Modified:
Principal O/S
Principal + Accr Interest
PV of Cash Flow
PV of Cash Flow
Stock Issued
FV Stock
Modification CF and other
consideration
$ Change %
New Debt FV
$1,000,000 Debenture 953,750 1,178,127 1,035,774 1,251,858 2,600,000 260,000 1,511,858 476,084 46% 1,100,000
$1,500,000 Debenture 1,500,000 1,821,873 1,702,957 1,904,588 3,900,000 390,000 2,294,588 591,631 35% 1,560,000
2,453,750 3,000,000 2,738,731 3,156,446 6,500,000 650,000 3,806,446 2,660,000
Debt Modification or
Extinguishment?- Example 3
�What is the Loss on Extinguishment:�$ 310,000
� ($3m CV debt-$2.66m FV new debt+.65m
stock FV)
�How would you record this transaction?Conv Debenture $340,000
Extinguishment loss 310,000
C/S $650,000
�What are the income tax implications?
October 1, 2010
Complex Debt Extinguishment
& COD -ExerciseFacts:
�Deal, Inc., a privately-held C Corp, held:
� Assets w/ CV= $25.3m
� Liabilities =$ 45.8 million
�Major lender sold $40 million of notes payable +
$2m of accrued interest to 3rd Party Lender.
Complex Debt Extinguishment &
COD Exercise (Cont’d)Facts (cont’d):
� Deal, Inc. exchanged $15 million note payable to 3rd Party
Lender in exchange for 3rd Party Lender’s forgiveness of
$25 million of $40 million note purchased from Major
Lender + $2 million accrued interest payable
� Deal, Inc. has $12 million of NOL carryforwards
(including year of debt forgiveness).
� Fees Paid:� 10,000,000 warrants w/ FV of $250,000 to 3rd Party Lender.
� Fees of $250,000 paid to 3rd Party Lender.
Complex Debt Extinguishment & COD
Exercise (cont’d)
Deal, Inc. Balance Sheet, day of transaction:
Total Assets $25,300,000
Total Liabilities 45,800,000
Shareholder Deficit 20,500,000
Other Info:� FV of total assets $18,650,000
� Carrying $ of Old Debt + interest $41,350,000
� ($40m- $.650m)
� Face/FV of New Debt $15,000,000
� Additional costs of reacquisition of debt
� Modification for leases ($ 7,000,000)
� Leased inventory assets $ 1,000,000
Complex Debt Extinguishment & COD
Exercise (cont’d)
�Major Lender- Filed bankruptcy.
� 3rd Party Lender's purchase of Debt due to this
fact.
�Deal Inc. executed a) loan modification
agreement, and c) stock warrant and registration
rights agreements.
� 3rd Party Lender executed a) an asset purchase
agreement, and b) loan modification agreement
Complex Debt Extinguishment & COD
Exercise (cont’d)
�Deal, Inc’s assets after the forgiveness of debt included:� $ 4m of inventory
� $ 13m of finance receivables
� $ 600k of fixed assets
� $ 450k of cash
� $ 350k of other assets
Complex Debt Extinguishment & COD
Exercise (cont’d)
1.Is Extinguishment Accounting appropriate? Why?
2.What is the Accounting Gain on Extinguishment
of Debt?
3.How should Gain be classified in Statement of
Operations?
Complex Debt Extinguishment & COD
Exercise (cont’d)
5. How insolvent was Deal, Inc on date of
transaction?
6. Should Deal, Inc. recognize COD Income for
Income tax purposes?
7. If so, how much COD income can be excluded?
8. What tax attributes, if any, should Deal, Inc.
reduce?
Complex Debt Extinguishment &
COD Exercise (cont’d)- INSOLVENCYDEAL, INC.
Insolvency Computation
Insolvency as of Date of Debt
Forgiveness
Solvency Subsequent to Debt
Forgiveness
Consolidated
Balances
Fair Value
Adjustments Adjusted
Consolidated
(Date of
Forgiveness)
Forgiveness
Transaction
Adjustments
Balances
Subsequent to
Forgiveness
Transaction
Assets
Cash 700,000 700,000 700,000 (250,000) 450,000
Financing
Receivables 20,000,000 (7,000,000) 13,000,000 20,000,000 (7,000,000) 13,000,000
Deferred fin costs 650,000 (650,000) - 650,000 (650,000) -
Inventory 3,000,000 1,000,000 4,000,000 3,000,000 1,000,000 4,000,000
Fixed Assets 600,000 600,000 600,000 600,000
Oth Assets 350,000 350,000 350,000 350,000
25,300,000 (6,650,000) 18,650,000 25,300,000 18,400,000
Liabilities
AP/Accruals (3,000,000) (3,000,000) (3,000,000) 2,000,000 (1,000,000)
Notes Pay- Old (40,000,000) (40,000,000) (40,000,000) 40,000,000 -
Notes Pay-New - - (15,000,000) (15,000,000)
Other Notes
Payable (2,500,000) (2,500,000) (2,500,000) (2,500,000)
Other Liab (300,000) (300,000) (300,000) (300,000)
-
(45,800,000) (45,800,000) (45,800,000) (18,800,000)
(Equity) Deficit 20,500,000 6,650,000 27,150,000 20,500,000 (20,100,000) 400,000
-
Complex Debt Extinguishment & COD
Exercise (cont’d)
1.-
2.-
3.-
4.-
5.-
6.-
7.-
8.-
91
Questions?Questions?Questions?Questions?
Contact InformationBarry M. Weins, CPA Cherry, Bekaert, & Holland
813-251-1010
[email protected] Diane J. Reich, CPA
Reich CPA, LLC
813-405-6164