The parent company of Carpinteria-based Global Feet appears to be facing problems, including a plunging stock price, tapped out credit lines, lax financial reporting controls, missing accounting records and a threat from the OTC Bulletin Board to quit quoting the company, according to SEC filings.
Global Feet is the company formed by Killick Datta, the former chief executive of footwear firm Global Brand Marketing, or GBMI.
Once heralded as one of the region’s success stories, GBMI cut most of its employees late last year after one of its biggest brands filed a multi-million-dollar lawsuit against it.
Publicly traded Titan Global Holdings, based in Texas, bought GBMI last December for about $8 million.
By June, it launched Global Feet, formed by Datta and several members of GBMI’s former executive team, and announced “aggressive product-line expansion” at the new division.
Meanwhile, several of GBMI’s employees who weren’t brought aboard went on to form their own companies, such as Santa Barbara-based Limelight Public Relations and B&L Distribution in Carpinteria.
Global Feet’s retail store in Santa Barbara has remained closed since at least Aug. 25. A sign posted at the store on State Street real estate, says the location is “closed for inventory.” Calls to Global Feet’s other retail locations in Camarillo and Las Vegas were not returned, and the phone number listed for the company’s Carpinteria headquarters was disconnected.
Although Titan’s problems cast a light of uncertainty over Global Feet’s future, Datta appeared to be pushing forward with the new company. In June and July, it announced the launch of new NOMASS and Hendrix by NOMASS collections for the spring 2009 season and a licensing agreement with A.B.S. by Allen Schwartz.
Since it bought GBMI last December, Titan’s stock price has declined 82 percent, from the $1.50 range to the 25-cent range. In the nine months ended May 31, Titan reported a net loss of $34 million.
In February, after its shares had begun to plunge, Titan announced a reorganization plan that included either selling Global Feet or taking it public as its own company. Neither option has materialized.
“With respect to [Global Feet], Titan intends to divest the unit either through a sale to a strategic buyer or as an IPO as a separate public company,” Titan said in a February news release.
Titan’s most recent quarterly report, released in July, suggests Global Feet had tapped out its credit lines. When Titan acquired the company in December, it set up a “credit facility” that included a $14 million line of revolving credit, which functions much like a consumer credit card, and a loan of up to $2 million.
Based on the agreement, credit would be advanced based on Global Feet’s inventory and accounts receivable. By the end of May, it had used $5.7 million on its credit line and $1.8 million on its term loan. It had no available credit.
In the same quarterly report, Titan told investors that it couldn’t plot Global Feet’s performance because GBMI had not supplied the accounting records it needed.
“The pro forma operating results for [Global Feet] are not included because the predecessor company does not have the accounting records necessary to produce financial statements for the necessary periods,” Titan’s SEC filings read. Titan also warned investors that its financial reporting controls might be lax.
“Due to inherent limitations, internal control over financial reporting may not prevent or detect misstatements,” the report reads.
According to the documents, the problems included “insufficient” documentation for board of directors meetings and the company’s accounting for acquisition prices, among other issues.
In a Jan. 23 letter, the OTC Bulletin Board told Titan it was ineligible to be quoted because it had filed to meet SEC deadlines three times over two years, according to SEC documents.
The company requested a hearing, which puts off any potential removal until a panel makes a decision.
Bryan Chance, Titan Global Holdings chief executive officer, did not return voice mails requesting comment.