grumley nano tech. minutes of meeting with cfo rapid growth outstripped prior auditors prior...

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Grumley Nano Tech

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Minutes of meeting with CFO Primary accounting estimates Inventory obsolence Allowance for uncollectible accounts Growth has outstripped the abilities of the revenue cycle system ---- Therefore CEO and VP Sales allowed to override the controls Debt covenantdebt to equity < 123%

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Page 1: Grumley Nano Tech. Minutes of meeting with CFO Rapid growth outstripped prior auditors Prior auditors inability in the international arena Prior auditors

Grumley Nano Tech

Page 2: Grumley Nano Tech. Minutes of meeting with CFO Rapid growth outstripped prior auditors Prior auditors inability in the international arena Prior auditors

Minutes of meeting with CFO

• Rapid growth outstripped prior auditors• Prior auditors inability in the international arena• Prior auditors took a conservative approach to GAAP• Growth and profit targets are a stretch• Equipment – 12 year operating lease• $47 M sale through the CEO’s cousin – older products– Unconditional 90 day right of return

Page 3: Grumley Nano Tech. Minutes of meeting with CFO Rapid growth outstripped prior auditors Prior auditors inability in the international arena Prior auditors

Minutes of meeting with CFO

Primary accounting estimatesInventory obsolenceAllowance for uncollectible accounts

Growth has outstripped the abilities of the revenue cycle system ---- Therefore CEO and VP Sales allowed to override the controls

Debt covenant debt to equity < 123%

Page 4: Grumley Nano Tech. Minutes of meeting with CFO Rapid growth outstripped prior auditors Prior auditors inability in the international arena Prior auditors

Letter from Predecessor

Aggressive approach to GAAP – challengesReorganization chargesGrumley growing Strategic intent to service mid-sized clientsHe will be out of the country extending his firm’s international capabilities

Page 5: Grumley Nano Tech. Minutes of meeting with CFO Rapid growth outstripped prior auditors Prior auditors inability in the international arena Prior auditors

08 Summary of Sales & Returns

08 Tad's Summary of Sales and Returnsthru

first second third three 33.33% projected

sales 554,883 671,016 693,193 1,919,092 639,697 2,558,789returns 118,992 73,121 34,660 226,773 75,591 302,364Net Sales 435,891 597,895 658,533 1,692,319 564,106 2,256,425

Page 6: Grumley Nano Tech. Minutes of meeting with CFO Rapid growth outstripped prior auditors Prior auditors inability in the international arena Prior auditors

12 Select Financial Datawith w/o restructure 0

2,009

Sales 4.4% 2,543,993 1.6% 2,477,529 0.7% 2,454,187 2,437,721Cost of sales 2.9% 1,904,802 2.1% 1,890,250 -0.1% 1,849,411 1,850,766Gross Profit 8.9% 639,191 0.1% 587,279 3.0% 604,776 586,955Operating exp -21.2% 279,553 -4.9% 337,336 -6.7% 331,034 354,841R&D -32.3% 113,739 -38.8% 102,823 -12.7% 146,661 167,998Restructure 0 0 0 0Operating Income 245,899 147,120 127,081 64,116Restructure 0 0 97,562 30,744something missing 23,543 17,164 26,350 10,732Before tax 222,356 129,956 3,169 22,640Income tax 35,922 21,319 5,746 0Net Income 186,434 108,637 -2,577 22,640

2012 2011 2010

Page 7: Grumley Nano Tech. Minutes of meeting with CFO Rapid growth outstripped prior auditors Prior auditors inability in the international arena Prior auditors

12 Select Financial Datawith w/o restructure 1

2,009

Sales 4.4% 2,543,993 1.6% 2,477,529 0.7% 2,454,187 2,437,721Cost of sales 2.9% 1,904,802 2.1% 1,890,250 -0.1% 1,849,411 1,850,766Gross Profit 8.9% 639,191 0.1% 587,279 3.0% 604,776 586,955Operating exp -16.6% 296,053 -2.7% 345,436 -6.7% 331,034 354,841R&D -32.3% 113,739 -38.8% 102,823 -12.7% 146,661 167,998Restructure -16,500 -8,100 0 0Operating Income 245,899 147,120 127,081 64,116Restructure 0 0 97,562 30,744something missing 23,543 17,164 26,350 10,732Before tax 222,356 129,956 3,169 22,640Income tax 35,922 21,319 5,746 0Net Income 186,434 108,637 -2,577 22,640

2012 2011 2010

Page 8: Grumley Nano Tech. Minutes of meeting with CFO Rapid growth outstripped prior auditors Prior auditors inability in the international arena Prior auditors

12 Select Financial Datawith w/o restructure 2

2,009

Sales 4.4% 2,543,993 1.6% 2,477,529 0.7% 2,454,187 2,437,721Cost of sales 2.9% 1,904,802 2.1% 1,890,250 -0.1% 1,849,411 1,850,766Gross Profit 8.9% 639,191 0.1% 587,279 3.0% 604,776 586,955Operating exp -16.6% 296,053 -2.7% 345,436 -6.7% 331,034 354,841R&D -32.3% 113,739 -38.8% 102,823 -12.7% 146,661 167,998Restructure 0 0 0 0Operating Income 229,399 139,020 127,081 64,116Restructure -16,500 -8,100 97,562 30,744something missing 23,543 17,164 26,350 10,732Before tax 222,356 129,956 3,169 22,640Income tax 35,922 21,319 5,746 0Net Income 186,434 108,637 -2,577 22,640

2012 2011 2010

Page 9: Grumley Nano Tech. Minutes of meeting with CFO Rapid growth outstripped prior auditors Prior auditors inability in the international arena Prior auditors

Debt to Equitywithout saleto cousin

663,975 663,975611,019 611,019

1,274,994 1,274,9941,062,495 47,000 1,015,495

debt to equity 1.200 1.256

Page 10: Grumley Nano Tech. Minutes of meeting with CFO Rapid growth outstripped prior auditors Prior auditors inability in the international arena Prior auditors