Officials at Redline Performance Products, Inc. (AMEX: RED), which was engaged in the design, engineering and marketing of Redline snowmobiles, said the company has filed a voluntary petition for relief under Chapter 7 of the United States Bankruptcy Code with the United States Bankruptcy Court, District of Minnesota.
A Chapter 7 filing usually leads to liquidation of the company’s assets. Under a Chapter 11 filing, the company gets protection from creditors so that it can reorganize its operations and continue as an ongoing business.
Redline leaders say they have determined that the company, which employed 25 people full-time as of March, does not have sufficient resources to continue its operations and has been unable to secure additional financing required to produce its snowmobiles and fund its operating activities.
According to the bankruptcy documents, filed Aug. 27, the company had total assets of $4.2 million and total liabilities of $7.2 million. The liabilities included $2.6 million in secured claims, $548,393 in unsecured priority claims and $4.1 million in unsecured non-priority claims. Assets included $1 million in property and equipment, $2.8 million in inventory and patents worth nearly $73,000.
The company will need to pay off its secured claims first, mainly banks and financiers. After that, employees may see up to $4,925 each. The 319 unsecured, non-priority claimants may or may not see any money. These claims range from less than $20 to more than $200,000 — the largest going to Tech Fab in Gilroy, Calif., for $244,866.
All business activity and operations have ceased. Also, all directors, officers and employees have resigned except Mark Payne, the company’s president and CEO, who will remain to facilitate the transition to a court-appointed trustee. Redline was started in 2000 by Kent Harle and Chris Rodewald. Payne recently took over as CEO after serving as chief financial officer since 2002.
Redline raised $10 million in an initial public offering (IPO)in May, 2003, when shares sold for $4.50. Throughout the company’s history, shares did not surpass the $6 mark. Stock trading ceased on Aug. 24, with shares selling at $1.
Reporting on its fiscal year ended in March, the company posted a loss of $8.8 million. Furthermore, the company did not file its quarterly report on Form 10-QSB for the quarter ended June 30, 2004, and does not intend to make such a filing.
Trading of Redline’s common stock has halted, and the company cancelled the annual meeting of shareholders scheduled for Sept. 10, 2004.
The fate of the 53 units shipped to dealers is unknown.
Calls from Powersports Business to Redline were not returned.
Copyright 2004 Powersports Business