BOSTON (BRAIN) — The trustee for bankrupt Massachusetts retailer CrimsonBikes has asked the court to convert the bankruptcy case from Chapter 11 back to Chapter 7, which would lead more quickly to liquidating assets and preclude any chance of the business reorganizing and continuing. After a hearing, which has not been scheduled, a judge must still approve the motion by Chapter 11 trustee John Aquino, who was appointed in July to oversee the case.
In a filing Tuesday, Aquino told the court that CrimsonBikes' income is insufficient to meet expenses and the business has only operated in recent years by accruing debt.
"The Debtor (CrimsonBikes) has been engaged in the business of the online sale of bicycles and related accessories," Aquino told the court. "A review of the Debtor’s financial history reflects that the Debtor has not operated on a profitable basis at any time in its recent past. The Debtor’s online sales of bicycles and related products have been driven by very high advertising costs which leave insufficient revenues to satisfy other operating expenses and costs of goods sold. The Debtor’s schedules reflect a business enterprise that has maintained a continued existence by virtue of accrual of unpaid obligations."
Aquino said the operation had sales revenues for July, August, September, and October were $26,953, $21,445, $7,268, and $2,239, respectively, for total sales revenues during the four-month period of $57,905.
"In light of the anemic post-petition monthly sales results, it is clear that the Debtor’s continued operations do not provide a basis for a reasonable likelihood of rehabilitation, but rather portend continuing diminution of estate assets," he said.
Last year SmartEtailing sued the Cambridge store in a Minnesota court to recover at least $400,000 in credit card chargebacks.
In March SmartEtailing and two other creditors filed an involuntary Chapter 7 petition against the retailer. SmartEtailing, which said it was by then owed about $650,000, was joined by a Massachusetts consumer who said he paid $1,061 for a bike he never received, and CVI-TCB Commercial, the owner of a Boston-area nonprofit real estate development organization. In the petition, CVI-TCB said CrimsonBikes owed it $200,000 and was in breach of contract.
A Chapter 7 bankruptcy would have led quickly to liquidation of the business, but in May the court granted CrimsonBikes' request to convert the case to Chapter 11 and appointed Aquino at the request of creditors, who include SmartEtailing, Giant Bicycle, and other industry suppliers. Unsecured industry creditors include Bikeco (owed $44,000), Bern ($3,000), and Tifosi Optics ($1,100).
According to a summary of assets and liabilities filed with the court June 15, CrimsonBikes has property worth $745,000. Claims secured by property total $597,000. Priority unsecured claims total $50,000 and non-priority unsecured claims total $1.8 million.
