Dot Dot Smile files for Chapter 11 bankruptcy
Twoand a half months after it canned its MLM opportunity and went wholesale, Dot Dot Smile has filed for bankruptcy.
Dot Dot Smile initiated Chapter 11 proceedings in California on September 3rd.
As per Dot Dot Smile’s filing, the company has $4.4 million in assets and is $5.6 million in debt.
Dot Dot Smile’s largest creditors are:
- Gary Thompson (appears to be a family loan) – $200,000
- CloudFund LLC (debt relief company) – $325,000
- Mirror Fashion Co. Hong Kong – $1.5 million
- Nano (no information provided) – $600,000
- Network Ventures LLC (breach of contract) – $353,846
Nothing MLM related, at least outside of the corporate side of things, appears on Dot Dot Smile’s filing.
A BerhindMLM reader claimed, as of July 31st, 2022, that
No one has been paid since may. Some people are owed thousands of dollars. They laid off all of their staff.
The cynic in me is having a hard time seeing Dot Dot Smile’s bankruptcy as anything but planned.
Company owners Nicole and Jeff Thompson (right) likely knew bankruptcy was coming, and figured they had to dispose of the MLM business before filing.
There was probably no actual intent to ever continue Dot Dot Smile without the MLM opportunity.
I could be wrong but Dot Dot Smile all of a sudden finding itself $5.6 million in debt over the past three months doesn’t seem plausible.
I’m not sure how this all works out legally. Even if everything is above-board though, it still reflects poorly on the Thompsons with respect to transparency and Dot Dot Smile’s distributors.
Looking forward, Dot Dot Smile’s State of Financial affairs filing is due on September 19th. A meeting of creditors has been scheduled for October 12th.
Dot Dot Smile is tied to LuLaRoe by way of Nicole Thompson being the daughter of co-founders DeAnne and Mark Stidham.
Whether Dot Dot Smile filing for bankruptcy has had or will have any impact on LuLaRoe’s business operations is unclear.
Update 13th December 2022 – Dot Dot Smile has filed its Chapter 11 Plan, revealing how they intend to operate going forward.
Update 16th February 2024 – On January 23rd a Dismissal Order was filed, dismissing Dot Dot Smile’s Chapter 11 bankruptcy.
I’m not 100% on bankruptcy law but I believe this is the end of bankruptcy proceedings with respect to Dot Dot Smile.
Chapter 11 is “reorganization,” wherein the company continues operating while working out a plan to pay off creditors.
My bold prediction: chapter 7 (liquidation) within the next 6 months.
I agree with Oz: this whole thing reeks of a preconceived plan. Chapter 7 leaves creditors holding the bag; hence, my prediction.
I’m not sure on the liquidation. Depends what’s in the financial report.
They could just try to sever the MLM liabilities (dunno what that looks like legally) and keep what is profitable in the company afloat.
Whatever allows them to keep the most money I guess. Bankruptcy and tax are the two areas of US law that do my head in 😀
Put simply, if a company files for bankruptcy under chapter 11 of the bankruptcy code, they’re sending the message that they want to pay off their debts and continue as a viable company down the road.
General Motors went through that process (famously) in 2009, receiving loans from the federal government, yada yada. If you Google “gmc chapter 11” you can find a Wiki article about it.
If a company files under chapter 7, they’re sending the message they do not believe their company is viable anymore, and creditors should expect partial payment at best, after liquidation of the company’s assets.
Companies often end up in chapter 7 bankruptcy by way of chapter 11; the corporate message being, “Hey, at least we tried to make it work.” Sometimes the company is dissolved directly under chapter 11, as happened (infamously) with Enron.
But yeah, it can get pretty convoluted. Dot Dot Smile may decide on their own to go chapter 7, or one or more creditors may petition the court to go that route if they determine it’s their best bet for getting at least some of the money they’re owed.
My point being: I don’t think Dot Dot Smile is going to be around much longer.
Article updated to note conclusion of Dot Dot Smile’s Chapter 11 bankruptcy.