[ sighs ] lemonis and the Company Still doesnt understand just how much trouble theyre in. The reason were going through this process is because youre being accused of fraud. If i cant help them face reality and find a way out of their jam. You sort of just make up numbers. David im not making up a number, so lets go back to lemonis youve made up numbers the whole time since i met you. This Cookie Company will crumble. Rachel [ voice breaking ] this is too much pressure. Lemonis my name is marcus lemonis, and i risk my own money to save struggling businesses. Were not gonna wake up every morning wondering if we have a job. Were gonna wake up every morning wondering how many jobs we have to do. Its not always pretty. Everythings gonna change. Everything. But i do it to save jobs, and i do it to make money. This. Lets go to work. Is the profit. Im headed to compton, california, to the manufacturing facility. And after watching her video application. Rachel hi. Im rachel galant, and im the owner and c. E. O. Of jackies cookie connection. Lemonis . Finding out how successful jackies cookies have been in the past. Rachel my mom, whos jackie, opened up cookie stores. These were her original recipes. She was voted Family Circle best cookie. Lemonis . Im excited to taste the cookies. Hi. How are you . Michael hey. How you doing . Michael good. How are you . Lemonis im marcus. Michael marcus, im mike. Nice to meet you. Lemonis mike . Nice to meet you. What do you do here . Michael im just helping my cousin rachel out. Lemonis oh, very cool. Michael just giving her some advice on some financial stuff. Lemonis how you doing, sir . Im marcus. David hello. Nice to meet you. Lemonis nice to meet you. What do you do here . David i handle the sales and marketing for the company. Lemonis okay. How many different varieties are there . David weve got nine traditional varieties and five glutenfree, vegan varieties. Lemonis okay. Rachel hi. Lemonis how are you . Im marcus. Rachel good im so happy to see you. Lemonis nice to meet you. Now, is this the assortment . Rachel yes. Our top seller is chocolate chip. Have you tried the cookies . Lemonis i havent. Rachel oh. Lemonis i love that theyre crunchy. Rachel yeah, its a crunchy so its a sixmonth shelf life. Lemonis okay. Rachel but this is our snickerdoodle. Lemonis that ones good. Rachel yeah. Do you like Double Chocolate . Do you like peppermint . Lemonis yes. Thats my favorite. Rachel isnt that amazing . Lemonis these are actually pretty spectacular. Michael boysenberry chocolate chip. Rachel which is not a its a seasonal. Lemonis this actually just moved up into number two. Is everything mini . David everything is approximately that size. Lemonis everything . David well, we do still have our little bakery in santa monica, where we still make the original cookies that rachels mom, jackie, made. Lemonis okay. And what is this . Rachel thats my bakery. Thats the one i opened up in santa monica. Lemonis you mean a storefront . Rachel storefront with a kitchen. Lemonis oh, so this is what the first step was. Rachel this was the first step. David we had been old friends. He was working for another project in marketing. I said, do you want to help me market it . And so, as we were growing this business, we decided to sell to stores. So i came up with the babies and lemonis babies being rachel the babies. These. Im sorry. This is the baby. Lemonis not your kid not your babies. Rachel not my babies. The babies. Lemonis okay. Okay. Rachel and that was the pivotal turn i made. Lemonis i love the size. Love the size. I think the packagings very clever, cause i can see the product, and i know what it is, so. I think the cookies are amazing. Rachel thank you. Lemonis can we see the factory . Probably need to put a hair net or something. Rachel yeah, and ill give you a coat. Lemonis okay, listen, if i learned anything throughout my entire time with jackies cookies, its how not to wear a hair net. Okay . So that it doesnt look like the pillsbury doughboy wore a hair net, and all of a sudden, it was a poof on my head. Im cool, too. So, ive kind of figured out you got to roll it back, and then you got to pull it down. Push back, pull down. Say it with me now. Should we make that a song . Push back, pull down. Push back, pull down. So, if i ever go into a Food Manufacturing facility, im gonna sing this song. Push back, pull down. Remember that next time you go into a kitchen. Rachel so, its a 20,000squarefoot facility. Lemonis wow. As i enter the manufacturing space, im shocked by how big it is. But whats odd for me is i look at where the Raw Materials are, and it looks like the stores out of food. Like, theres literally nothing to make any product. Rachel so, this flour. Lemonis like, i do have to ask like, theres no inventory here. Rachel no. Its horrible. Im telling you, every day, i go to costco and buy my ingredients, and i have him deliver it, and i had him drive his car to arizona to pick up butter to bring it back here. Lemonis well, why do you have to buy it there . Why cant you buy it here . Rachel cause you got to find it on sale. Lemonis wait, you mean at the Grocery Store . David right. Lemonis come on. David im going in the car tomorrow. You can take a ride with me. Lemonis no. Rachel so, its like, nuts. Lemonis but what about from a distributor . Rachel if i want to get my butter from the distributor for a lower price, then i have to buy 5,000 pounds of it at a time, which is lemonis you have the space for it, not the money for it. Rachel right. Lemonis okay. As i go through the factory, im really starting to get nervous about what the actual overhead could be. I mean, how does all this get paid for . So, how much is your total revenue . Michael so, if you look at last year, we did 700,000 in revenue. And thats through supply chain restraint. Lemonis and people waiting for their orders. Michael waiting for orders, canceling orders. Lemonis and so, when i see all of this, im like, the revenue sounds like it should be infinitely bigger. David we absolutely could have done 2 million. Lemonis could it have done 2 million . Michael no. This year, weve already lost over 1 million, and itll likely lose another couple hundred thousand in the next few weeks. Lemonis what do you think the breakeven is right now . What does it need to do to break even . Michael somewhere around 400,000 to 500,000 a month in revenue. Lemonis why is that number so high . Michael running the operations here without her taking salary or anything like that is over 100,000 a month. Lemonis thats rent, the employees, not including cogs. Michael not including cogs. Its including the equipment, right, which is all leased, the rent. Lemonis the company is bleeding money because the overhead established for the revenue, you cant outrun it. What i wouldve expected rachel to do through the process is start out, probably, making cookies at home and then go commercial kitchen, where other people can actually share the expense. If she outgrew the commercial kitchen, she would start making phone calls to copackers. Its a way to increase production and not have to take on the burden of expense. The next thing i would expect her to do is start to research the idea of manufacturing herself. And then at some point, when shes 20 million or 25 million, she would build her own factory. Heres the problem the middle steps, she just leapfrogged over and went right to thinking she was betty crocker. So, how much equity do you have today . Rachel i have 90 . Lemonis who has the other 10 . Rachel friends and family gave me 100,000. Lemonis okay. Rachel but i put in most of the money. Lemonis so, you got the facility. Rachel right. Thats when i had to i needed more money. Lemonis and how much did it cost you to make the place look like this . Rachel 780,000. Lemonis 780,000 . Where did that money come from . Rachel these guys came to help me with finances. That was the investors. Lemonis you had people come in . Rachel yeah, and they gave me debt. And i said, i know im gonna need more for working capital, so now i have like 1 million in debt. Lemonis in addition to the 780,000 . Rachel yeah. Lemonis and is there any other debt in addition to that . Rachel yeah, a little bit well, not a little bit. Michael theres some Credit Card Debt of about 100,000, and then on top of all of that, theres some loans from different commercial entities for another 100,000. Lemonis the company has a ton of debt. Im stunned by how much debt they have. Can i spend a minute with her by myself, guys . David yes. Lemonis yeah, thanks. What is your relationship with those two . Rachel so, michael is my cousin. Lemonis okay. Rachel he went through my books and my numbers. Lemonis did you pay him . Rachel no. Lemonis okay. Rachel and then, david has worked for me forever, and hes an unbelievable marketing lemonis does he work for free, too . Rachel almost. Hes with me, so were together now, so. Lemonis oh, you guys are dating . Okay. Rachel i have so many people that are, like, counting on me to make this not to have made a bad decision. Lemonis you feel like youre closer to closing than people realize . Rachel if you look at my books, i am. Lemonis so, why did you start this business . Rachel you know, i have two children, and my husband worked, and i wanted to do something. And thank god i did, because my husband passed away, so, it was, like, a crazy, outofnowhere, so. Lemonis really . Rachel yeah. Lemonis how old was he . Rachel he was 47 and just dropped dead, so. He was a great dad, and it was a real, real rocky, crazy lemonis how did he end up passing . I mean, what rachel we think it was a heart attack. I had a call on the freeway that pull over. I have something to tell you. I think that first year, i was in a blur. I have two kids. They had to start school in a week. Just had to go. Lemonis you just have to go into survival mode, right . I have to take care of my kids, and i have to, like rachel its just wild. Lemonis im really sorry, by the way. Rachel yeah, thank you. Lemonis i really respect rachel and the fact that she lost her husband, shes raising kids, and shes running a business, and it shows me that shes willing to do whatever it takes. And for me, thats enough to actually dig in. So, the Balance Sheets pretty interesting. When you go to the revenue 2016, 230,000. But then you go to cogs. Rachel right, its a lot. Lemonis . And 484,000 means it was costing you more to make the product than you generated. Rachel right, yes. Lemonis in 2017, 701,000, and it was costing you more to make the product than you generated, which is why the business loses money. Rachel right. Lemonis you have a really bad cost of goods problem. Really bad. Like, you dont have any margin. Like zero. Rachel right. Lemonis if the margin was 50 , you still wouldve lost 700 grand. So you have a cogs problem and a revenue problem. Since you opened in 2016, the business has lost 3. 6 million. Rachel right. Right. Lemonis how much money have you put into the business . Rachel 1. 6 million. Lemonis and where did that come from . Rachel my husband. When he was around, he had done well, and so we had money. But when he passed, then we really didnt. And thats when we got the investors. Lemonis so, the company between credit cards, payables, po financing, commercial notes, loans for the realestate deposit, the investor loans the company has 2 million of liabilities that are substantial. About 2 million has come in, and its all considered debt, so im not sure why rachel keeps referring to them as investors. Theyre lenders. And then when you go on the asset side of things, 112,000 of cash, very little accounts receivable, which is why are the accounts receivable so low . Rachel i have all these pos that i cant fill. David we have a variety of Retail Partners that are lining up, that are filling the pipeline. My getting more sales in the door is not a problem. Turning this into a business thats got 10 million, 20 million, 50 million a year of revenue, thats not a problem. The problem is, is we cant get the plane off the runway. Lemonis have you been out there, trying to raise money . Rachel yes, nonstop. Originally, i thought that the people that were my investors were going to help me. Lemonis did they tell you they were going to . Rachel yes. Michael some of them are fairly confrontational, and its lemonis in what sense . Give me an example. Michael theyve sent these guys letters and emails that are. More than just sort of your standard, youre in default of our loan. Lemonis whats the Interest Rate that theyre charging you . Michael the cheapest is 12 . Some of it is, call it 36 , because it was intended to be like a 30day loan. Lemonis fastmoney loan, yeah. As an investor in a business, i dont want to invest into a black hole. Michael well, she got the email. Lemonis want to read it to me . Rachel as i told mike, im going to go after you and david personally. Batten down the hatches. Get ready for the worst moments of your life. Lemonis i dont want to invest into a black hole. Wthe Natural Light is amazing. Hardwood floors. There is a bit of a clogging problem. clog dancing at least geico makes it easy to bundle our renters and Car Insurance. Yeah, helping us save us even more. For bundling made easy, go to geico. Com capital one knows life doesnt update you about your credit card. So meet eno. 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Download the Xfinity Stream app today to stream the entertainment you love. The best entertainment experience. S xfinity x1. Id like to invest into jackies cookies with a copacker with his sales ability, with you telling us if were making money or not. If you sat down, and you showed anybody your balance sheet, theyd be like, uhoh. Rachel right. Lemonis i dont want to pay them off, so then i hold the bag. What i wanted to do is change my role in this particular business in the short term to more of a mediator and a negotiator rather than an investor just yet. You say to everybody thats got debt in the capital structure, youre converting to equity, and were pivoting to a copacker, because, while youve done an amazing job i mean, like wonder woman it isnt your core competency. Rachel no. Lemonis so what you to sit down and say to them is, marcus wont put money in the Company Unless you convert all of your debt to equity. If not, we dont have a deal with him. Michael right. Lemonis its literally that simple. Okay, guys. Rachel thank you. David thank you very much. Lemonis thank you. Really nice meeting you. Michael yep, absolutely. Lemonis nice meeting you. Thank you, guys. Rachel thank you. Lemonis so, let me tell you why im bringing you here first. The young lady that owns the place, her name is athena, and athena really understands the process. All right, lets head in. Rachel all right. Great. Lemonis while were waiting to hear if the lenders are willing to turn the debt into equity, i want to make sure that rachel gets focused on how to manufacture and how to do it for less. In my opinion, going to a copacker like this is the perfect solution. Rachel im rachel. Athena im athena. Rachel nice to meet you. Athena nice to meet you, too. Rachel this is david. David hi. Im david. Hello. Athena hi, david. Lemonis the goal here was to have athena take rachel through the commercial baking process, for her to see the efficiency and how the cost could be lower. But instead of rachel having an open mind and learning. Rachel i use fresh eggs, so i dont know if you athena eggs come pasteurized in boxes. Rachel oh, oh, no. So, we use the fresh, and we have a machine that cracks them all. Lemonis . Shes arguing about the eggs. Rachel i have tried those eggs, and they dont taste as good. Athena no one will taste the difference. Rachel all right. Well see. Well see. Lemonis . And the butter. Rachel i use salted butter, by the way. Athena you do salted butter . Were gonna get rid of that. Rachel no, it makes it so good, im telling you. Athena but you dont want to add that to you can control it. Rachel i know i add it, too. I add salt, too. Lemonis . Which doesnt sound very constructive to me. Athena were gonna do two versions of this. Lemonis were gonna do her version and your version. Athena yes. Lemonis she assumed you wouldnt have bleached flour. Athena no, we dont. Lemonis . And real eggs. Athena . cause then you have to declare bleach on your label. Lemonis oh, did you know that . Rachel yeah. Lemonis do you declare bleach on your label . Rachel yeah. Athena no, they dont. I looked. Your label is illegal right now. David no, no, no, it works in the other direction. Rachel if its bleached, its okay. If its unbleached athena no, the other way. The other way. Rachel thats the way we david when i read the fda rules, it said, if you are using unbleached flour, you have to list that. Athena im surprised that costco allows that. cause thats totally illegal. Rachel no, see, weve checked with the fda, so i dont know. Athena sweetie, im telling you, its illegal. David we will check again. Rachel yes, we will check again. Lemonis the first thing i noticed is that rachels asking david, whos the salesperson, about labeling and compliance. News flash its not a sales question. David it says, when any optional bleaching ingredient is used, the word bleached shall immediately and conspicuously precede or follow such name of product. Rachel all right, well athena thank you rachel so now we need to put that on there. Lemonis and second, david gave her incorrect information, and rachel just blindly accepted it. You can turn around. Okay. Rachel mmhmm. Lemonis both good . Rachel yeah. The second one seems maybe more mine. Lemonis that last cookie was not yours. Rachel but its not a huge difference. Lemonis you couldnt tell. Rachel no. Lemonis i like the fact that youve been openminded to go through this process. In this environment, with the business being under attack, if you had to change things, you could, and i think you demonstrated for me that you were open to it. Did this process at least make you feel more comfortable that its possible . Rachel yes. Completely. Lemonis thank you so much were excited to start. Rachel i appreciate it. David appreciate it. Thank you. Lemonis so, i asked rachel to meet me over at her bakery in santa monica. Part of my goal of visiting this location was primarily to check in with rachel on the response from the lenders. Oh, wow. This is nice. Rachel hi. How are you . David hi. How are you . Lemonis good to see you again. Rachel hi. Lemonis how are you . Rachel ah, not great. Lemonis what are those giant things . Rachel thats very large. Jackie hi. Lemonis is that your mom . Rachel this is my mom, yeah. Lemonis we got to meet mom. Im marcus. Jackie hi, marcus. Jackie. Lemonis nice to meet you. Youre jackie. Jackie i am. Lemonis so, this is originally your idea, right . Jackie it was my idea. Lemonis your daughters changed the business quite a bit. Jackie its amazing, yes. Lemonis maybe we can talk in the back. Rachel okay. Lemonis this is awesome. Michael good morning. Lemonis good morning. How are you . Michael good to see you. Lemonis so, do you guys want to fill me in on whats happening . Michael sure. Well, she got the email. Lemonis okay, you want to read it to me . Rachel sure. Rachel, i will make this very simple and clear. I have nothing more to say to you. I have no reason to meet with you unless you have a cashiers check for the money due me in full. I just dont have time for this bull[bleep] any longer. Ive thrown away enough of my money and time on you and your company. As i told mike, im going to go after you and david personally. Batten down the hatches. Brace for the worst, because when im pissed, i dont give up, and i dont back down until i accomplish my goal. Get ready for the worst moments of your life. [ sighs ] [ crying ] i dont do business like this. All ive done is put money in and put money in so that they dont lose their money. [ crying ] i just this is too much pressure. Lemonis based on this email, its clear to me that these lenders are pissed. Why theyre pissed . Well, im gonna get to the bottom of it. But right now, what i need rachel to do is clear her brain and stick with the facts, not emotion. When we think about the scenarios, right now, they have three choices, actually, three choices. And you guys should probably write them down, cause i want you to have a bit of a script. Choice one is everybody converts to equity, and more money comes in, and we go to a copacker, and we go the right way. Michael at least one debtor has basically said hes not interested in number one. Lemonis okay, scenario two is you do a deed in lieu of foreclosure, which means you sign over the assets to them in lieu of them foreclosing. And so, you could almost call them and say, you guys want the company, you can have it. Here. And you start over. You cant start over as jackies cookie connection. Thats their asset. Youd have to modify your recipe a little bit. Thats their asset. The logo, the brand, the babies on board, the jackies all of that would belong to them. And number three. Is bankruptcy. You put the company into bankruptcy, and they all lose their money. Including you, unfortunately. Rachel a lender wrote back and said, you have committed fraud. Lemonis ever play hot potato . David yes. Lemonis the potatos on fire right now. Lemonis and number three. Is bankruptcy. There are times when our need to connect really matters. To keep customers and employees in the know. To keep business moving. Comcast business is prepared for times like these. Powered by the nations largest gigspeed network. To help give you the speed, reliability, and security you need. Tools to manage your business from any device, anywhere. And a team of experts here for you 24 7. Weve always believed in the power of working together. Thats why, when every connection counts. You can count on us. Thats why working together ist more important than ever. At t is committed to keeping you connected. So you can keep your patients cared for. Your customers served. Your students inspired. And your employees closer than ever. Our network is resilient. Our people are strong. Our job is to keep your business connected. Its what weve always done. Its what well always do. To deliver your mail and packages and the peace of mind of knowing that essentials like prescriptions are on their way. Every day, all across america, we deliver for you. And we always will. And weve upgraded her with a sonic shield and holographicmapping drones. Impressive. There is one more thing. Ah. Jake from state farm. Heres the deal with the drive safe and save app youll save up to 30 for being a safe driver, and get a discount just for signing up. Well played, jake from state farm. As usual. When you want the real deal like a good neighbor, state farm is there. ® when you want the real deal you put the company into bankruptcy, and they all lose their money. Including you, unfortunately. You could technically not have anything left of jackies cookie connection. Look, there are really three options that are available. The first option is that everybody converts their debt, and new money comes in from me. The second option is that she hands the company over to the lenders so that they can actually get the collateral that theyve already been granted. And the third option is that everybody loses, and the company goes into bankruptcy. David the whole thing is just somewhat insane to me because lemonis but why is it insane . David because if everybody were just working together to actually make this work, this could work, you know . I dont feel like we have a ship thats at the bottom of the ocean that were trying to pull back out of the ocean. I feel like we have a ship with some big holes in it that we can still plug up, and we can get the ship moving again. Michael look, we know there are bills that are due. We dont have capital to pay that. So, i guess in your description, i mean, it feels like we were certainly kind of the holes are so big right now, its turning into a submarine. Lemonis i continue to hear a level of optimism from david as opposed to living in the moment and understanding the crisis that the companys in. And i felt compelled to get to the bottom of who actually arranged for these loans and who actually felt that there was a need to do all this stuff. Who actually raised all the money from the lenders . David probably me. Lemonis you . Okay. And now im learning that it was david. You are the eternal optimist, that theres millions of pos ready to just be done, and i think that optimism is what got this business in trouble. The end of the day, if all they want to do is take the company from you, they can. If they do that, they have to actually run the business. And then if you choose to start over, youre permitted to do that. While this is happening, what you guys have to decide is, whats the parallel path . All right . Rachel all right. Thank you, marcus. Lemonis okay, thank you, guys. David thanks. [ sighs ] lemonis so, this is a really good rep group. They have really good reach. Okay . David yeah. Lemonis lets go. All right. I appreciate that rachel hired david to lead the Sales Organization, but its clear that that hasnt necessarily worked out. So im taking her to a food broker in chicago so she can see exactly how good or big the possibilities could be. Rachel so, yeah, id love to know a little bit about what you guys do. Al were like the gobetween between the manufacturer and the retailers. So, manufacturers that dont want to have their own sales force for whatever reason, they hire us, and we take products to market. Walgreens and cvs. We do publix. We do myer. We do giant eagle, shopko. We also do target and walmart, as well. We have a pretty national coverage. Rachel a little back story from me, i was just a stayathome mom not just. Big job. But and wanted to start this business. And then, in the interim, my husband passed away, and it was out of nowhere, so we really had a tough road. And i have two little boys lemonis how old were the kids . Rachel one was 11, and the other one was 7. I was kind of left with the idea that i really needed to step this up. It was really important that i have something for them and for myself. Gina your storys very inspiring, so im happy to see the success youve had so far. What have you guys done marketingwise to i mean, is it just do you do anything to get people to want to purchase the product . Rachel weve done demos in stores that really, definitely i mean, weve spent marketing dollars at the store level. David now, if youll take a look, theres a passive demo bowl there. And when we first started, we would provide free demo bulk to the locations. Lemonis from my perspective, they havent done anything truly innovative on the marketing side. Al youve got a great product, greattasting product. And the packaging is great. And were not only manufacturers reps brokers, but, you know, we do investing with some of our vendors and partners, so maybe we can get together, maybe get a little skin in the game and help you out that way, as well. Lemonis thank you so much. Rachel thank you. Al thank you. Rachel i appreciate it. Lemonis now that a relationship has been established between rachel and the food brokers, whether the lenders are onboard are not, i want to talk to the three of them directly so the of this relationsh. Michael the advantage of getting a group like this is now you get lots of megaphones out there, and theres lots of people that can go tell the story versus the relatively few. Rachel right. Just that im not in control of it. Having somebody outside, where its not a direct channel, where im not able to, you know, kind of control i dont know who the rep, you know, and what theyre doing on a daily basis is probably a negative. Lemonis rachel, the fact that you do want to control that process is essentially why the companys in trouble. Really is. The step that you took to try to manufacture yourself, because you wanted to control it, is 1 million of cash that went into a buildout that youll never see again. My other motivation for having somebody like contemporary involved is that we learn that the unbleached versus bleached was actually a mistake on our label. And what this ultimately gives me a little bit of schmuck insurance on is that i dont wake up one day and find out that we mislabeled something. Theyre going to almost act as a set of eyes, because it is their reputation at stake, as well, if theyre repping it to somebody. David let me try to say it a different way. Ive gotten to talk to every customer, and now i cant do that anymore, and theres a little bit of discomfort, i guess, in that. And, yeah, letting go a little bit is not all that easy, i guess. Lemonis did you ever play hot potato . David yes. Lemonis the potatos on fire right now, and the two of you dont recognize that the potato is literally melting. And you stay optimistic about all the good things, but i think that there is a moment where that selfassessment has to be more critical. [ phone line ringing ] rachel. Rachel hi, marcus. How are you . Lemonis good. I wanted to get an update, if you have one. I get a random phone call from rachel that she received new information from her lenders. Rachel a lender who we wrote to wrote back and just was very hostile and said, lets be clear. The loans were tied to specific purchase orders and not repaid as written. You misappropriated those funds. Thats a fact. Next stop for me is my lawyer and the authorities. I have every email and promise from you and david. You have committed fraud. Lemonis if your business is in trouble and you need my help, log on to. Especially lately. At farmers weve seen a thing or two. Rachel a lender wrote back and said, weve seen you become sweatpant executives, cat coworkers and pillowfort architects. Weve seen you doing your part. So, farmers will keep seeing you through. With fifteenpercentreduced personal auto premiums and immediate savings through our signal app, which gives a discount for safe driving. And then well do the next thing, and the thing after that, until this is another thing weve seen and done. To deliver your mail and packages and the peace of mind of knowing that essentials like prescriptions are on their way. Every day, all across america, we deliver for you. And we always will. Neutrogena® rapid wrinkle repair®. Weve got the retinol that gives you results in one week. Not just any retinol. Accelerated retinol sa. One week is all it takes. Neutrogena®. [anthony] hey mama, whats up . [mama] im confused. Confused about what, everything ok . Yeah, i only see one price on my phone bill. That doesnt sound confusing mama. Youre on tmobile, taxes and fees are included. Oh come on, theres always extra fees not on tmobile mama. Why cant all my bills be like this . I dont know mama. Bye mama, love you. Anthony . Umph at tmobile, taxes and fees are included. And right now, when you switch your family, get 4 lines of unlimited for just 35 a line. Socially distant, right . I mean, humans need other humans. Even if we cant stand closer than six feet, or touch each other. Theres still ways to. Touch each other. Like picking up food, or supplies, or, dropping them off. After all, cars were invented to bring us closer together. So, carmax is doing everything we can to keep you going. And thats the way it should be. You have committed fraud. Lemonis when people say, youve committed fraud, its like, i dont its a very dangerous allegation. And so, when they say you took money for pos, and you didnt pay it back, and it was specifically for that, what is that . Rachel a year ago, we had purchase orders, and we asked them to finance them, and he did. And i have paid him some back on that based on when they came in. Unfortunately, the money that came in from those purchase orders got taken out from other things that we owed, because i have all these automatic things. But thats not fraud lemonis its not fraud, but it would upset somebody. It appears that what happened is rachel borrowed shortterm money, also known as a bridge loan, to solve a very specific problem. Lets say you get an order for 100,000, and you dont have the cash to actually make the goods. Once that problem is solved, the lender expects you to actually pay them back. Now, i dont know if it would be called fraud if she didnt or bad business, but im definitely uncomfortable with the fact that people think she did something wrong. Heres what i need, okay . I need to get you and david and michael together so we can understand what the company did wrong and what it did right so we understand the path. Rachel hi. Hi, marcus. Good to see you. Lemonis good to see you. The definition of fraud is, a criminal or wrongful deception intended to result in personal or financial gain. I dont think that thats what rachels intent was. But for the lenders to actually make that claim, they must be pissed, and i need to understand why. Just for claritys sake, the reason were going through this process is because youre being accused of fraud. Rachel right. Lemonis and so, were gonna go through those loans to understand it. Rachel yes. Lemonis what i have to do is lay out every single loan document that happened between her and the company, every single correspondence, and understand when it came in and what the money was used for. Rachel so, this is everything. Lemonis this is the whole cap table . Michael yeah. Rachel right. Lemonis so, theres po financing of 312,000. Michael yeah. Lemonis a 78,000 payment has been made. You still owe him 234,000. If you take the money, and you use it for other stuff. Rachel right. Lemonis . Its bigger than any sin. What ultimately happened is the lenders sent the money from their account to her account. And instead of going towards purchase orders, it went towards things like payroll, rent, Raw Materials, utilities. So when the lenders wanted their money back, there wasnt any money to give them back, which is why theyre pissed, and i can understand that. But nothing illegal was done. It was just bad business. Ive seen all the loan documents. Weve gone through it. Its crystal clear. Its a hot mess, but it doesnt look like fraud to me. Up until this point, all of my contact with the lenders has been either through rachel or through emails. I want to meet with them directly and sit down at the table and see if theres actually a deal that can get done. How many orders do you have on the table today that cannot be fulfilled . David its 70,000 or 80,000. Lemonis so theres not that much pentup demand. Thats important to recognize. Its not like were talking about half a Million Dollars of orders that are sitting there. Lets be realistic about whats out there and not oversell it. Im hopeful that it works out. Im hopeful in that people are logical. And if theyre as smart as i think they are, theyll recognize best alternative. Even if theyre mad as hell about it. Okay . Rachel all right. Lets give it a shot. Lemonis after going over the books with rachel and getting more comfortable with it, i reached out to the lenders and asked if we can have a meeting. And they said yes, but theres one catch we want it to be you and you only, no rachel and no david. Rachel i am just anxious to hear whats happening, and i hate not knowing. Its nervewracking that hes in there without me. This is my company. Lemonis well, that was an interesting day. Rachel what happened . Lemonis what do you think happened . Rachel i dont know. Lemonis they said they felt very good about the product. They felt very good about you. And then they felt like the wheels fell off the bus. They are extremely fond of mike. David wow. Lemonis but they said there was one issue that came up. They have a lot of opinions about you. A lot. Rachel right. Lemonis they felt like you would tell them one thing, and Something Different would happen, about shortterm money and bridge loans. David that has never been mentioned to me once. Lemonis oh. I think theres a personality conflict more than there is anything else between you and them. I made it clear to them that i validated that youve taken no money out of the business. They acknowledge that. They believe in the brand, and they truly do believe in you. Rachel well, thats nice to hear. Lemonis i think they feel like youve been given bad advice by david. What i said to them is, okay, how do we move forward . There wasnt fraud. There was mistakes. Rachel right. Lemonis the couple of points that are important to them is, one, they agreed to convert to equity. Two, they think you should have 25 of the equity. Rachel that doesnt make sense to me. Lemonis but wait a second, rachel. I mean, just be objective about this, right. The fact of the matter is, is that money came in that was supposed to be bridge loans, and you guys didnt give it back to them. And theyre pissed. And they have a right to be. Rachel ive put in what theyve put in, moneywise, plus more time, and im gonna get less than them, collectively. Lemonis so, do you want me to call them and tell them that 25 is no good . Rachel yeah. Lemonis okay. But i need to know what im going back with. I said 25 , you said, [bleep] no. Rachel right. Lemonis you said, ill just burn the place to the ground. Rachel right. So, 35 . Lemonis okay. Let me call them. Rachel okay. Lemonis let me just give you a summary of where were at. David they wont sit in a room with us, but theyll make accusations. They tell him stuff thats not factually accurate, okay . And yet, youre supposed to negotiate based on all of that craziness. Lemonis okay. Im comfortable with it if you are. The best deals are when everybody walks away a little unhappy. I think 30 s probably something that we can get to. Rachel so, theyre just pretty much pushing me in the corner, so. Lemonis is that the way you see it, though . Rachel i do. Lemonis so, what do you want me to tell them . You sort of just make up numbers. David im not making up a number, so lets go back to lemonis youve made up numbers the whole time since i met you. Rachel i dont agree with that. [sniffing] dont get mad. Get e trade and get more than just trading. Investing. Banking. Guidance. Gethats a zzzquil pure zzzs sleep. An just trading. Our gummies contain a unique botanical blend, while an optimal melatonin level means no nextday grogginess. Zzzquil pure zzzs. Naturally superior sleep. [anthony] hey mama, whats up . [mama] im confused. Confused about what, everything ok . Yeah, i only see one price on my phone bill. That doesnt sound confusing mama. Youre on tmobile, taxes and fees are included. Oh come on, theres always extra fees not on tmobile mama. Why cant all my bills be like this . I dont know mama. Bye mama, love you. Anthony . Umph at tmobile, taxes and fees are included. And right now, when you switch your family, get 4 lines of unlimited for just 35 a line. Original crown molding, walk in closets. We do have a ratt problem. Round and round with love well find a way, just give it time. At least geico makes bundling our home and Car Insurance easy. It does help us save. Round and round with love well find a way, just give it time. Round and round what comes around, goes around. For bundling made easy, go to geico. Com dimitris on it. Eating right. And getting those steps in . 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Ask your doctor about jardiance. On it with jardiance. We aint stoppin believe me go straight till the morning look like we wont wait, were taking everything we wanted we can do it all strength, no sweat rachel yes. Lemonis so, got to line up the copackers, and they should Start Building inventory. Im happy that it looks like theres a deal in place, but with the two of them, i always worry, do i have all the information . Is there any other surprises . Its almost like im relieved and nervous, which is a weird way to feel after you make a deal. So, lets put this plan together, and ill see you while im here, okay . David thank you. Rachel thank you so much. Lemonis thank you. See you soon. Rachel how are you . Lemonis how are you . Rachel good. Good to see you. Michael hey, marcus. Good to see you. Lemonis mike, how you been . Lemonis before we shift the business to a copacker, i want to make sure that the remaining orders get filled, and that means that were gonna have to keep manufacturing going out of her current facility for a little bit longer. So, today, i want to sit down and map out a way to do that in the most costeffective manner possible. How many orders do you have today in dollars . Rachel right this second is david so, open pos right now 5,800. Lemonis i thought there was a lot more. I thought that you said there was 70,000 of pos right now. David were of the i dont keep reference rachel yeah, thats the count. Lemonis so, youre david right, but we literally have orders coming in, approximately 8,000 that are gonna be needed for holiday sales. Lemonis david, you told me specifically there was 70,000 worth of pos. David i actually said there would be 70,000. My words were this is what i remember saying that if i were to call tomorrow, that we have orders that literally would come in the same day. Lemonis 5,800 is a long way from 70,000. And now im feeling the same way the lenders feel annoyed and deceived. And honestly, i dont trust one thing that these guys tell me anymore. Where are you at with your landlord . Rachel at compton . Lemonis mmhmm. Rachel you know what . Theres some discrepancy in rent. You know, hes showing the property right now, so. Because we had filed a petition against his eviction. Lemonis you were served for eviction notices. Well, how come you didnt tell me about the eviction notice . Rachel im sure i told you that ive been served. I mean, maybe i didnt. I dont know. But. Its it is true. Lemonis you could literally be in the middle of production, and he could lock the door. Rachel right, technically. Lemonis as im sitting here, im kind of wondering why im still sitting here. This is not a charity case for me. The problem is this labyrinth of craziness is big, because it isnt just the lenders. Its the equipment leases and the personal guarantees. And its not a personal attack on david, but, im sorry, his optimism led you to these decisions. Because you sort of just make up numbers. David im not making up a number, so lets go back to lemonis youve made up numbers the whole time since i met you. Rachel i dont agree with that. That Liberty Mutual customizes your insurance, i just love hitting the open road and telling people lemonis and its not a personal attack on david, so you only pay for what you need [squawks] only pay for what you need. Liberty. Liberty. Liberty. Liberty. Looking to repair dry, damaged hair without weighing it down . Try pantene daily moisture renewal conditioner. Its colorsafe formula uses smart conditioners to microtarget damage helping to repair hair without weighing it down. Try pantene. I heard there guwere fleas out here. R . And ttttticks and mosquitoooooooooooes listen up, scaredy cats. We all have k9 advantix ii to protect us. It kills and repels fleas, ticks and mosquitoes, too. Laso you can enjoy it even ifst youre sensitive. Se. Yet some say it isnt real milk. I guess those cows must actually be big dogs. Sit i said sit we are running our covid19 Technology Response on teams. Teams has given us the possibility to continue to innovate. I can bring them in, i can actually share my screen and show the x rays. We can do that in a visit like this. Were living on teams. Its as simple as that. Theryoure not good enough. Hard to control. But i am enough. And i know what im made of. Put your skin in the game. With a razor that puts your skin first. But, im sorry, his optimism led you to these decisions. Because you sort of just make up numbers. David im not making up a number, so lets go back to lemonis youve made up numbers the whole time since i met you. David okay. Lemonis sorry. Rachel i dont agree with that. Lemonis of course you dont, because you cant see it clearly cause youre in a relationship. You cant see the fact that he has led you down this path with this optimistic Sales Organization that doesnt exist. Rachel i have been very upfront, and so has he and yes, he is an optimist, and we all know he is, so, okay. But you know what . Go talk to a buyer. Just go talk to them and see what kind of person he is who has worked his ass off to help me in this business. Lemonis this is not a personal rachel its just frustrating to me. Lemonis i know, but its not nobody is saying anything about david as an individual, as a human being. But its not good for you guys to work together, because instead of you being logical, you become emotional. I think the fact that the company has been served an eviction notice it definitely changed my opinion about making anything. Im not investing into something that i cant get the truth, and i cant get the answers. The business is gonna go through some sort of cleansing. Thats a fact. Therell probably be an organized process with the other lenders. Rachel are you sure these people are gonna do it . Because, right now, my expectations are that nothing good will happen, and that it will not happen. Lemonis i have a big fear that the lenders are gonna pull out, because as part of that agreement, i was gonna be investing. Michael the question in my mind is, is it time to start seeking bankruptcy protections, right . Thats an option. But if we go forward, youre gonna be basically set up with a new Business Plan that actually makes sense. Lemonis since the day i met you, like, the angry people arent so angry anymore, and you didnt need that in your life. Rachel no. Lemonis and so, maybe its not perfect, but. Michael getting that behind everyone . Lemonis [ sighs ] rachel that would be so nice. Less stress. Lemonis it is. You just got to let it play out. Rachel all right. Lemonis okay . Rachel yes. Lemonis i think at this point, they have two options work out things with the lenders or go through a bankruptcy process. But i know for sure i dont want my money in the deal, cause i dont trust them. A few days later, i got a phone call from rachel, and i think as the dust settled, they had no choice but to go into bankruptcy. The landlord was trying to foreclose on the property. The lenders basically backed out of the deal that they had on the table. I hope that rachel recognizes that she probably needs to go back to square one and start over, cause i know shes capable, and i know shes smart enough, and shes got a great product. Lemonis who would like to try acome on down. . Tonight, on the profit. Finia now im the macaron queen. Lemonis one womans quest to become macaron royalty. What are we shooting for . Why dont you tell me . Finia we are shooting for the moon lemonis . Resulted in a perfect dessert. Nina this is caramel chocolate. Mindy oh, my god, thats so good. Lemonis but her handson Business Plan is wrecking her health. Nina can you hold on one second . Are you sweating . Are you okay . Finia yes, its. I had a heart surgery two years ago. Lemonis . And creating an obligation for her daughter to fulfill. Are you happy, yes or no . Nina if you asked my husband, hed say no. Lemonis nina. If she cant learn to trust. Are we using a recipe book . Finia no, the recipe is here. Nina waiting for our mixer. Lemonis . Her empire will never grow