Flex Deposit and Trade In Risk?

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  • Updated 8 months ago
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I am posting this in a new thread because it did not get clearly answered to my satisfaction before the thread was closed.  This is the original thread.  https://community.flexradio.com/flexradio/topics/shipping-date-for-6600m?topic-reply-list%5Bsettings...

I would like a clear answer to my question.  Sorry Tim but saying that I have nothing to worry about does not tell me what happens with deposit money and returned 6XXX radios if Flex was to face a financial crisis and has to file for bankruptcy.  I have no idea if the money and equipment is legally shielded in a trust from potential creditors or not.  I simply want to know clearly what would happen to my money and equipment in this scenario (even if unlikely).

Here is my original question.  "Not saying it is going to happen or start any rumors but what happens to the deposit money and any Flex 6XXX that might have been sent back against a trade in price on a new 6400/6600 should Flex go insolvent (bankrupt)?  

Would I be correct in assuming we would all be unsecured creditors and get zip back except what might have been paid on a credit card (maybe not if the time stretches out past the credit card providers guidelines for claim filing)?"

To Steve K9ZW and others.  Please hold back from your need to step in and defend or explain for Flex against every post that in your mind you seems negative.  I believe I have a right to a clear answer about what could happen with my money and equipment even if the possibility is remote.  In the end I can make the best informed decision of the risk tolerance I want to take with my money.  Your risk tolerance does not really enter into what is best for me.

I am not sure of the legal requirement for a company such as Flex to disclose to a person depositing money or equipment the potential for loss but certainly when directly asked a complete answer should be given.  Additionally, I do not know if Flex has any financial options or vehicles available to it in which it might protect the deposit money and equipment from such a event (however unlikely).

John K3MA
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John - K3MA

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Posted 8 months ago

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Steve - N5AC, VP Engineering

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Official Response
John, I think we're on equal footing here.  If you place a deposit we have no guarantees that you'll actually buy the radio even though we purchase all the parts and pay for the radio to be built.  We even offer to return your money if you change your mind.  No doubt that if every customer that pre-ordered a radio decided not to buy, it would put us in a difficult position financially.  But we trust that our customers will, in aggregate, do what they say they will.  We would expect that you have the same expectations from us. 

 I've lost money funding a electronics project on kick-starter (https://www.kickstarter.com/projects/kickshark/hydradock-11-port-usb-c-dock-for-apple-macbook/posts/...) but I was sure to invest only what I was OK losing.  I wasn't sore about the project failing and I felt bad for the project's team.  I think their team was young and they just mismanaged their project.

In comparison, we're approaching the 15-year in business mark -- we're no kickstarter.  We've successfully delivered tens of thousands of products, a number of which were on the "place a deposit" style of development.  We decided to do the deposit mode of building products because it helps us predict how many we need to build up front to meet market demand and it ensures we will always build enough for those loyal customers that put money down.  It's a fair system and it's worked well for us.

We do not have your money in a trust. A trust is not an appropriate vehicle and would take considerable time and expense to set up.  We would have to appoint a trustee to oversee the funds and we would have to prove to the trustee that we did, in fact, build a product to your satisfaction before retrieving your deposit.  I don't suspect our customers want us to tack on the cost of establishing a trust and hiring an attorney to oversee our operations.  In short, the market is liquid enough that we feel comfortable telling  customers that we would return their money if they don't want to purchase (other customers who missed the deposit time will purchase what they have decided not to).  I have no idea without sending our accounting and legal team off on a multi-day project, what order you would be in, as a creditor, were something to happen to FlexRadio.  My advice would be not to put any money into a project that you cannot stand to lose if something awful were to happen, but I'm not a financial advisor.  You should consult your financial advisor to get their advice on your personal financial situation and how an unlikely and sudden demise of FlexRadio would affect your finances.
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Gerald - K5SDR, Official Rep

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Official Response
John,

First, let me begin by explaining why we take deposits on new products. This allow us to accurately gauge the commitment level for early production quantities on products where we have no run rate history. We have taken deposits on every new product except one since 2007.

Due to the high peak volumes experienced in early production and the long lead times involved in procuring materials, this allows us to better plan to meet early demand. The one product where we did not take deposits was the FLEX-6300. We under forecasted our initial demand by 100% and were criticized because it took us quite some time to catch up.

We have already sold out our originally planned production for the new radios and have now given our manufacturing partner a nine month rolling forecast. Materials lead times have streatched dramatically this year due to economic growth outpacing new capacity in electronic component manufacturing. This may lead to stock out situations from time to time depending on demand relative to component supply. If you place a pre order this helps us secure a place for you in that supply chain.

As with any transaction, there is always risk. You are placing your trust in people who run companies and provide services. I take your deposit as a personal commitment to deliver. Our team takes your deposite as a personal commitment to deliver. My banker looks at me personally in the same way. We have placed some very large deposits with strategic suppliers in other countries where I look to them in the same way.

All materials are on order and we are waiting for a few of the longest lead time custom items to arrive later this month. The entire team is working hard to prepare for production start up and preparation is going well.

If you are uncomfortable with this answer, you are welcome to have your deposit refunded and wait until after the first of the year when supply and demand balance out to get a radio. Then you will have no risk.

Sincerely,
Gerald