Chandler:
I know this is a very long post, but you need to understand this situation if you are going to be an investor in this company. Read it and understand what the big picture is. Lets not blow WOTD out of the water just yet. Read this and offer me some suggestions for solutions.
Understand, WOTD has a very viable concept, CVIA is a very empty shell. Mr. Anderson and I have done a significant amount of research on this whole situation. We also bring a lot of experience to the table, he has an extensive background in running a very profitable company and I have a background in the commercial real estate business. I market and lease our properties and prepare in depth internal rate of return analysis on properties we are considering buying. We try to purchase 2 projects a year, thus, I know the commercial (retail) market. I was part of a lease deal that was signed last week which involved the nations second largest private tire retailer. Their business has doubled since last year, the margins looked great. WOTD wants to consolidate existing profitable (tire) businesses that want to be consolidated (in other words they want to sell). Being in the real estate business, I know there are ligament cases were people are dying to sell their businesses, but can not sell. The number one reason is the IRS, unless you can find an "IRS - 1031 like kind exchange", your tax consequences can take ALL of your profit. The last shopping center we bought in Michigan, the seller had to come out of pocket over $100,000 to sell the property in order to pay the IRS capital gains tax. Let me make it real clear for you, he owned the property for over 15 years, he sold the property, (he made a BIG boo boo, he did not check with his CPA about the tax consequences before he committed himself to the PA) after paying off the balance due on the mortgage, adjusting his basis (from depreciation) his tax was $100,000 more than the profit he made. Think it is impossible, happens all the time my friend! The IRS always wins, and collects first.
So what does that have to do with WOTD....
If you understand what WOTD sees as an opportunity, people that have held, operated and built their business for several years are also in this very bad "upside down" position. If they sell, they may literally have to hand over nearly all the money they made to the IRS. They bought the land many years ago (for a very low price by today's standards), they have depreciated every last penny out of their real assets, they unwittingly have set themselves up for a huge IRS rape job.
BUT WAIT... WOTD to the rescue. They can give them stock, and very little cash for their business so it will not trigger a taxable event in the eyes of the IRS. DO YOU GET THE PICTURE! I work with these issues everyday, if these MOM & POP can not hand this business down to a family member, they are screwed into the ground by the IRS.
So do not discount what WOTD brings to the table, do not burn a bridge just yet. WOTD is in a position of great strength when it comes to purchasing these assets of these MOM & POP operations and they should be able to buy at a discount because they can offer a unbelievable tax advantage to MOM & POP who are dying for an out, sidestepping the IRS, allowing them to retire.
Give Jack some credit for finding such a great opportunity for CVIA, as for the way they tried to treat the shareholders, I think that was a huge oversight on their part, but they can fix that. They realize it was a BOO BOO, but they also want to figure out something that will work for both sides. We have to be careful because timing is a very important factor to closing these deals WOTD has lined up. We do not want to damage each others position needlessly. WOTD also has creditability at stake with the people the have negotiated deals with. We have to work to turn this into a win win situation. They now realize it is important to have the shareholders on board, and to accomplish their goals, they have to make some adjustments we can all live with.
A reverse split must happen, does anybody have any suggestions how to structure it so it works for all parties.
My Email: bobhil@ameritech.net
Lets start working on some solutions.
Robert |
