RF Update 5-8-06, Final Creditors Report

[Ron Earp]

Dear Forum Members,

To keep those affected and interested in being informed about the Roaring Forties situation the administrators have granted permission to post the Report to Creditors dated April 13th 2006. It is matter of public record in Australia thus is free for public consumption. I've placed the document as an attachment to this post, bearing in mind it is a PDF document and will require Adobe Acrobat to read. I can't imagine someone not having Adobe Acrobat Reader in this day and age but if you don't a link is here http://www.adobe.com/products/acrobat/readstep2.html


Clearly, I don't take responsibility for information in the document or responsibility for ramifications from the information in the document. It is in the public domain in Australia now, as normal for information pertaining to a company that is under investigation. I didn't write it nor have no way to verify the information, but the information contained is factual as far as the Administrators looking into the Roaring Forties situation is concerned. I think there are some errors in the document but by and large based on my information from multiple sources it seems to be correct.


I'd like to have more time to write up some points in the document but I've got to go to Disney again for round two.

Ron

 

[Steve Kulper]

1 million in debt WOW! I was estimating 700-800k in debt, either way it's a lot of other peoples money that was spent. I'm guessing the assets have been sold for around the 200-230k mark, minus the administrators cost and secured creditors (staff) I'm thinking there will be 85k in cost minus say 200k will leave 115k for creditors. About 10c in the dollar, that really sux for everyone who has lost the money.

Steve

 

[Keith]

What a mess, is all I can say. Sad too.

 

[Doug S.]

Well, the good news is that they seem to have made the determination that RF did trade while insolvent, so if that holds true it sounds like they can pursue Mr. and Mrs. Logan's private properties.

We are all hoping that this situation will work out for our forum friends who lost their $$ and their dreams in this unfortunate situation. We'll be pulling for you!

Doug

 

[Mark Worthington]

So one of the "assets" is a $500,000 claim against CAMCO. I got the impression that CAMCO never had any assets to speak of, so I guess that $500,000 asset isn't worth the paper it's printed on. It is interesting to read some of the things that really drained RF's resources:

• Legal fees and settlement with Gordon Levy,
• Development of 4.6 DOHC emissions certification, and most importantly,
• Pissing away almost everything trying to get CAMCO up and running.

It's a pity that RF didn't remain in Australia and continue to develop and build their product. They might not have realized the same sales volume but they probably would've stayed in business. It is obvious that Robert Logan grossly miscalculated the cost of moving operations to South Africa.

Reading between the lines in this report, some of the stuff that Robert posted last year, and even in Andre's posts, it seems to me that CAMCO failed miserably and was a large part of RF's demise. The other part, of course, was Robert's ineptitude in running the financial side of the business.

I am curious to find out who ends up purchasing RF's material assets, to the extent the jigs and moulds haven't already sprouted legs and walked out of CAMCO's facility in South Africa.

 

[Mike Christian]

Interesting that they were insolvent back in mid-2005 basically.

Also, looking at the financials - makes you see whay it is a rough business to be in...not much margin at all.

 

[Trevor Booth]

Read further between the lines, pages 10-13. Then analyse what Camco did for the bucks sent. No bucks = no product. The claim against Camco will be a regular SF. This wont be over for a long time.

trevor

 

[Keith]

Hi Trevor, I don't really understand your comment re: no bucks = no product. From a cursory read, my take is that funds that should have been used for actually producing vehicles, went towards setting up Camco and it's infrastructure leaving none for production, or is that what you were saying? Because they certainly had lots of bucks.

It also appears they didn't use a red cent of their own money either.

If that's the case then it's an odd strategy - outsourcing manufacture to another country and then paying to set up a company you are not part of or financially involved with. Hmmmm...

 

[Trevor Booth]

Keith, you are correct. the funds went for establishment of a manufacturing "line" leaving insufficient to complete the orders. Camco did put in their own money, from memory about AUD 50 or 80 K. The product that is still sitting in camco premises need parts and labour to finish. RF did not set up nor pay for the company infrastructure, that was already in existence, camco made all the jigs, tooling etc to manufacture the product for which RF was to pay for. Camco did all that and made 4 cars, 2 of which went to the UK, 2 still at camco + 4 chassis (panelled?) in a period of about 5 months. The process was that camco were to manufacture product for RF using tooling etc owned by RF. In essence there were two different scenarious, (a) manufacture of tooling (b) manufacture of product. It is the jigs tooling moulds and product that is the subject of the claim against Camco, no doubt camco will counter that with some claim of their own.

Trevor

 

[Keith]

I'm obliged for your lucid explanation. Thanks.

 

[Ron Earp]

I think what has been said has been spot on, but one must remember that the funds intended for production of GT40s, i.e., the deposits, were never sent to Camco - at least 100% of them were not sent to Camco. The RF Group took in over $500,000 USD of deposits, but very little ever went to SA.

According to the creditors report of 4/13/06 $252,000 AUS dollars went to Camco, as well as $103,000 AUS in parts, or $363,000 AUS. RF Claims that with travel etc. $415 AUS went into Camco. That is about $321,000 USD that went into Camco, or about 60% of the deposits.

The rest of the money appears to have gone to pay off 4.6L DOHC certification, which I understand to be well over $100,000 USD, and attorney/legal/settlement fees with Levy racing which is relatively small compared to the rest of the expenditures at something like <$100,000 USD - settlement plus the legal fees listed on the balance sheets shown. RF customers didn't care about either of these two items and these monies should have gone into setting up the company and getting production rolling.

In fact, RF had quite a bit of working capital early on in the process. Using data provided to me from US customers about when their deposits were sent in I was able to construct a cash flow time line for US deposits shown below:

Now clearly I can't know if this is 100% accurate since I don't have details of RF's books, but it is close for the US customers since we have been involved with proxy forms, dates of deposits, etc. throughout this entire legal saga. A lot of money flowed into RF from US customers early on and the company was fairly well funded, particularily from the viewpoint of it being well-established in Australia and supposedly on stable financial footing. This might not have been the case according to the administrators and the company might have been insolvent from June 2005.

Using this data, plus statements made on the public forum by RL, I was able to put together another sort of time line that reflects my very basic understanding of what was happening with RF from the customer's point of view.

I know that is sort of hard to read so you can download a larger version here:
http://www.gt40s.com/images/RFTimelineLarge.jpg

Again, I can't vouch for this being 100% accurate since I'm using the forum,data from customers, and info from administators to put this together.

I suppose what I am trying to convey here is that we as customers were definitely not told the truth about what was happening in SA/Roaring Forties Australia. The agents were fed the same lines as we were and operating on the same information as evidenced by the posts on the forum. As customers, we don't really care what happened in SA or what was happening in SA - we only ordered cars and expected to receive cars of described quality - didn't matter to me if it was built in Australia or on the moon. In the end, we all got nothing.

I still don't know what is going to happen in this saga or how it'll play out. I understand there is an offer for the RF assets that has been taken and quite naturally, the new purchasers got a bargain. So, in my opinion, in effect your lost money has funding a new start up company that will be involved in building GT40s, probably with the worldwide market in eye since a single car company needs to sell outside of Australia, IMHO, to survive. It remains to be seen if forum members, future GT40 customers and buyers in the North American/UK/Europe will be willing to purchase cars from the new company or not.

 

[Peter Delaney]

Hi Ron,

This is the first time I have disgreed with you !

Quote .........

"So, in my opinion, in effect your lost money has funding a new start up company that will be involved in building GT40s, probably with the worldwide market in eye since a single car company needs to sell outside of Australia, IMHO, to survive. It remains to be seen if forum members, future GT40 customers and buyers in the North American/UK/Europe will be willing to purchase cars from the new company or not."

Unquote.......

With respect, can I suggest that the "lost money" did not actually fund a new start-up company, but was consumed by an ill-fated & badly managed attempt to expand RF. Upon liquidation, a line has been drawn in the sand - there is the "past" & there is the "future". The reasons that there is the carcass of a potential GT40 manufacturer on the market have nothing at all to do with its potential new owners.

To think otherwise would pre-suppose that any new owners would see an obligation to pay back the deposits, etc - clearly not feasible, given the earning potential of the business (nor legally or morally required) - otherwise, there would be no bids for the on-going business & it would just be an asset-strip sale that would benefit no-one.

Don't get me wrong - I am completely appalled at the outcome of the RF fiasco, and am very upset for the guys who lost deposits. All I am trying to do is point out that "that was then" & "this is now" - two totally different scenarios.

In my mind, there is little doubt that "Australian Manufacturers" will take a big hit in terms of confidance from overseas buyers - it is now up to Peter Ransom (GT40 Australia) to leverage off his impecable track record, and for the new owners of RF to establish a their bona-fides - first at home, then maybe o/s. In truth, neither should be coloured by the fate of the old RF.

Kind Regards,

Peter D.

 

[Ron Earp]

Hi Peter,

The only reason I say that is that I feel that RF wasn't spending customer deposits to fund the 4.6L certification, as well as buying all the parts that the new owners will now own, then RF might have gone under much eariler or have not bought the parts and/or not certified the 4.6L motor. I assume the new owners will be using all the parts and using the certification to build new cars. Doesn't really matter much, the end result is the same, a bad end for RF and customers.

A small point really, a shade of grey, but I can tell you that many of the former RF customers, myself included, can't help but feel that a control arm, a oil pan, crank shaft, etc. that the new owners now possess was paid for in part by their funds. Whilst not absolutely true, the feelings will be there to some extent. Natually, nobody expects the new owners to be obligated to the former RF customers, that is impossible and I think everyone clearly sees and accepts that. Oops, just noticed I used the wrong tense for the word fund in my post.

I didn't mean the post to stir folks up or to suggest the new company has any obligation or has done anything wrong, but it must have hit a nerve as judged by my email on the subject. I agree with you that neither Austalian company should be colored by RF and I don't think they will be, in my opinion, as far as quality of product etc. goes.

And bear in mind the data I present is surely not 100% correct as it comes from multiple sources I have pooled together as best I can. Certainly, I can affirm this - the posts Robert Logan made in reference to the company, production, etc. were not 100% correct, that I surely know. Anyway, I do hope that people continue to look for answers, post information they find, and help each other find anything at all positive in all of this.

Best,
Ron

 

[Doug S.]

Ron, I for one share your ire! It seems to me that the $$ was spent for things other than that represented to the customers who paid their hard earned $$ for deposits, not to mention the misrepresentations provided when those depositors asked for information. It went for something--or if it didn't, RL ought to be under indictment for embezlement (I know it's misspelled, but it was the only way I could get the word to print without the snoring icon).

IMHO, the bottom line is that somebody will surface from this selloff of assets with toolings that will enable them to operate a GT40 replica manufacturing business and may seemingly be able to do so without the level of R & D outlay that the other replica manufacturers have had to endure to enter the same market. It sure looks like the deposits of those US and UK individuals may have financed that advantage in some way.

As we all say, this is a sad state of affairs. IMHO, those of us who are familiar with this whole fiasco will be more than reluctant to send out $$ overseas for quite a while--I know mine will stay in the US as long as there is a competitive product available here.

My 2 cents worth--thus endeth my rant.

Doug

 

[colin artus]

Perhaps the way to look at it is that the discount obtained on the manufacturing assets is offset by the negative goodwill that goes with them?

Colin Artus

 

[Trevor Booth]

I had the opportunity to visit the RF factory with a prospective purchasor (unsucessful in the end) and make the following comment.

The deposit money did not all go to buying spare parts if at all, there was insufficient value and quantity plus the ordinary trade suppliers were owed a lot of money, check the figures in earlier posts by Ron Earp.

If you look at the list of spare parts it is not hard to work out that there was not sufficient to build the cars on order. In some instances there was an oversupply situation.
There was however a lot of stuff not related to production that had been collected by RF over the years, The mono tub from NZ for instance plus a lot of engine performance parts. The mono tub would have cost more than one years profit by the company!!

All of the jigs and tooling including workshop machinery were of good quality it wasnt mega bucks "Rolls Royce" but adequate for the job. Most of this would have been in existence prior to the bulk of the deposit funds being recd,but no doubt some would have been spent on tooling or paying old debts for tooling.

The 4.6l engine certification, well that may have consumed some but not that much, an emission test cost circa AUD 3500, yes a few were conducted that I do know. The emission testing was really borne out of bad advice or sheer stubborness on RF part in going it alone (with emissions testing.)
RF was applying for DOT (aust) compliance for the whole of the car, emission testing is but a part of that process.

Then there is the Camco story,
The 103 k AUD in parts does not line up with camco advice. They recd (according to them) a body, drawings , build manual and some other bits I cant recall. The body was used to make the plug for new moulds and subsequently fitted to a car. A body in Oz costs AUD 5500

AUD 252000 (cash transfer) went to Camco over a period, and that lines up with camco figures. BUT, some of that was used for new body moulds, jigs,tooling, wheel patterns etc and for the production of some cars. 2 went to UK, 2 still at camco, 4 chassis still at camco. The two cars at camco require very few parts to complete. camco owe money to suppliers and to a SA lender that tipped in some funds to keep camco going whilst awaiting funds from RF that never came . Camco claim they are owed 100-150k USD by RF. just suppose the 150 is the figure then add the 200 sent = USD 350k.
That got jigs, tooling etc, 4 cars and 4 chassis.
So that is where a lot of the deposits went.

The claim against camco detailed in the admin report will be interesting. It sure does not line up with advice from camco as above

It is obvious from the trading statements that the company could not finance R&D nor the expansion into SA, expansion can only come from profit and the company did not generate any! The company went down for AUD 1million, that did not happen in 5 minutes or 5 months.

There is no doubt that some of the deposit monies were used to pay debts in the ordinary course of business, thats obvious from the trading statements.

In time the administrator will reveal all, until then speculation is not warranted.

 

[Keith]

In time the administrator will reveal all, until then speculation is not warranted.

Well, I'll be a naughty boy It was speculation which first alerted members here to the liklihood of an impending disaster whilst many were still bestowing rock-star status on said RL.

Speculation is entirely warranted on just about any subject in a free society, or do you know something we don't?

 

[Malcolm]

Interesting about DOT compliance. GTD financial troubles (?) a long time ago began shortly after they began work on type approval. Maybe replica manufacture and ambition to car manufacturer are not compatible?

 

[Trevor Booth]

Perhaps I should have said 'Further' speculation as to "who did what and why for" is not warranted, any Forum member can collect all of the information, read all the reports, telephone camco, telephone the Administrator, its all in the public domain. Speculation as to the outcome ? any body can if they choose, but why waste the energy.

Speculation, rumour and inuendo in the past has unjustly maligned some people and or created unfounded suspicion.

There is only one person to blame for the disaster.

In terms of the RF saga, I do not know any more than what I have posted

 

[Ron Earp]

Recent note from our attorney in Australia indicates the deal will be closing soon for the sale of Roaring Forties. Price was indicated to be in the neighborhood of $200,000. I assume that is Australian, thus about $152,000 USD. Sale includes jigs, molds, tooling, etc. as well as the Dave Brown mono chassis and various engine parts, chassis parts, etc.