Negotiating equity split and structure for Coyote deal

Give me a second. I spent some time going through the straw man they sent over, their org chart. And I think I have an understanding for what entities need to be involved and where they would contribute assets to.

But before I—

before we— I don't think we should actually dive in there. I think we should start with us and then we can dive it over there, or whatever, vice versa, whatever you think. But there's not really— why, why do we have asset cos?

Uh, so we can defer the sales tax cost of the assets, of the acquisition of the assets, right? And I believe it's a liability thing.

How?

I don't know.

I hear you.

I've always thought that as well, but it's like if they're joint and severally liable and named, like how does it limit the liability?

I don't know. That's just me repeating what I've always heard, but it definitely works for the sales tax purposes.

Is there any other reason?

2 families, a C corp.

Forget about 2 family. Like, just because they have asset codes too, and I'm just wondering why. I'm—

I'll ask.

I'll pontificate on that later if I get time. All right. Why don't you talk us through what deliverables you think we should have and be ready for, and I will round out if I disagree.

Are you talking about the response to Stephanie?

I think we need to pick up— sorry, I should— we need to pick up the pace. So I would like us to move to try to bring this to a head as quickly as possible. So I would love to be able to put a structure and maybe we can introduce some valuation concepts.

I don't know.

Basically, I want to figure out how do we shove this thing in the middle and figure out how to get it to go. So that means, yes, answering all of the battery of questions they sent us and probably then some, like just sprinkle in some information they didn't ask for. Some of it will be red herring bullshit, like the board of director bios and bullshit. I think coming up with some semblance of an answer or a framework for where does TR fit into all of this, and that could be as easy as we're going to not contribute them. Like, so it's just not even like something they can, you know what I mean? Or like Sean asked last time, is there anything that you could hold back? That to me is like an opening of like, unless we feel strongly that TR is helpful, there's no— we don't have to contribute it here.

Yeah, I mean, TR— I'm getting feedback on it.

You're getting feedback from me?

Yeah, when I talk, it's coming through. Nope, it went away. Okay. Yeah, TR is only helpful if we're trying to like make Georgia a viable operation because, yes, he already has a viable operation out in Georgia. So I still think TR would be beneficial to have just to make that piece of it viable, especially if you want more of a nationwide footprint.

But, and I want that Tom Brady thing and I think we can grow that Tom Brady thing, right?

Okay, well, just quickly going through what they actually asked for. Let me pull up their, her email and just walk through. I have the lease schedule here that I'll send back. It's just filling in the additional information that they requested. So that one's pretty simple. Okay., headcount, headcount I have here. Can you see this or you need me to go bigger?

I can see it.

Okay, perfect. Um, headcount I have here, so it has Atlanta as well. So that's 99 people, a little under $9 million of total cost, which aligns with what we had sent them.

Uh, insurance cost, make it, can we make a column that like excludes Atlanta?

Yeah, I mean, I have the, where is it? I have the headcount without Atlanta right here. You want me to send that?

Cool, cool, cool, cool, cool. Well, no, I think you can send both and just use it as to kind of like talk about it. And maybe what we do is we float a kind of like, we float, we reiterate maybe in a response in how I positioned it last time, that we have this— TR is like this, like, associate company that we've kept more or less in limbo, um, because the capital structures didn't jive. Okay. But we have, like, you know, I don't know. You can figure it out anyway.

Okay. Um, insurance cost breakdown. I sent it broken out, um, across Avon Pro. I usually refer to it as transportation LA, Pro Supplies, and transportation ATL. Probably call us Pro Supplies and Locations. Um, so that's broken out. That was their question. They wanted an insurance cost breakdown. Um, Other operating costs in the P&L, I broke those out. So that's there. The fifth one is just, does your payroll line in the PLs provided include the fully burdened payroll costs? So the answer to that is yes. I'm not gonna send like detail around that. Six, pro supplies, breakdown of revenue between bathrooms and pro supplies and comms. I gave them a little extra and broke out the locations and then the other activities as well. Versatile stage is included in there,, but it's not because they asked about it, but I'm just saying that is de minimis and not broken out until November of 2025. So this is an estimated amount from July to December, but it's not a big portion of it all. Um, and then the debt overview I sent, I have this, um, with personal—

you sent, do you mean you sent this already?

No, I'm sorry. I keep saying that.

Okay.

But, um, First source and then the investor debt. And then that total is $36 million. And then 7, I'll need to pull that, our most recent org chart down. And then, yeah, that is the full response they asked for. They didn't give us actually anything of substance. So I don't have a way to put up like asset— they didn't give us the carrying values of their assets, so we don't actually know how much they'd be contributing. So the main point of what we were asking for didn't actually come through. So if we want to talk to it, what are we speaking to? We're speaking to like our, our offer revolves around what we're contributing in the moment versus what the ongoing business actually is able to do. What work— what you're contributing is going to need— we need to understand, like, what is the actual tangible value of the assets on the open market in a liquidation scenario? Because that is really the only way you'd be able to monetize these assets because you're losing money right now. So that is your contribution to this agreement. So if you're— if we agree that you're also contributing, like, the leases and all the obligations associated with it, your ability to get out of it then we're not going to— we're going to call it, uh, like an eye for an eye. We are putting this debt on the books, you're putting all of your obligations, but you're washing your hands of it and we're taking it over. So call those both equal. Now what assets are we contributing to this? Um, let's say that Coyote ends up saying, well, they say we're going to do $60 million. That comes from the summary output. That 14% that we originally talked about with them with the capital partner probably gets a little higher, but still gets to 18.7% with the capital partner. And before the capital partner—

I like this. I like this approach.

It'd be 23.7. And if we were ignoring the— we weren't giving them a penalty for the losses, we were giving asset only and then not talking about, um, maximum. Yeah, 46.8%. Let me think about how I would actually say this. This, like, defensibility analysis, the way that you can kind of come up with a range of what the valuation should be is what the enterprise value of what you're contributing is. In that scenario, you would be worth 0%. If we're talking about what your assets that you're contributing are versus the assets—

this is interesting.

What? This range tool.

Did you build this? Yeah, this is what I had sent you like a week ago.

I mean, I pulled it up the other day, but I didn't actually— I don't think I actually understood what this was, but hearing you talk about it now.

Yeah. So, all right. Well, then let's just start from the beginning here. So, If we are saying that the asset contribution basis is like, it just follows what we were talking about. Yeah, yeah, yeah. So you do that and then you talk about the enterprise value. Packet Co is profitable and generating revenue. Q is not. So from that perspective, we should be 100 to 0. But you talk about a blended amount there. Let's say that they're putting 60, we're putting 40 in, then it would still be close to a 50-50 split because the enterprise value of what we are contributing. I change this to 60, but originally why I'd sent it, it was 40 and 40. So assuming we are putting the same, uh, value of assets in, so that would put us at like a roughly 1/3, 2/3 split. And then you talk about all the actual post-transaction value that is being accrued to the business, we should be, uh, getting credit for that because we're the ones actually doing the work there. So that is the summary output of Basically, we're doing the work, we're taking the risk, doing the— yeah, doing the work and taking the risk. So that makes it 82.5 to 17. Then I put in a 4A just because we're trying to get to 80/20. I've just put like a fill goodwill switch to get them to 20%, and then a capital partner dilution. And that I should probably say is not necessarily a fixed number, because if we're talking about it being less than 30, Right now it's at 30, and that would put them at 56 and 14%. So then you talk about the defensibility analysis. So what is the maximum that we feel like Coyote could argue that they're putting into this? Well, the hard value of the assets is if we ignore the losses and say, all right, the the assets they're contributing to the deal, the vehicles, the transportation equipment, all of that.

I have an extraordinarily hard time letting that fly, right?

That's what I'm saying. That is the top end of the range.

But I'm asking you to steelman the assets, because if you tell me it's the trucks, I'm like, okay, like, I'll play, I'll play with you on that. If you say the trucks and the trailers, or if you say, if they start screaming about the trailers, it's like, what are you talking about?

Well, yeah, I agree with you, but—

No, no, no, don't.

Steel man the trailers.

Take the trucks out of it because they probably don't think about it that way. They're not thinking, they don't like trucks. No one else thinks about trucks the way that we think about trucks. So steelman, what do you steelman their side on trailers?

Uh, trailers do have a market. Um, there are people that would be willing—

what kind of market?

Like a resale market? Yeah, resale market. There are people who buy these trailers. There's people who are, uh, we'll pick these up for 20, 30 cents on the dollar, we can go liquidate them now. And especially the ones that are the solar, the ones that are in better condition.

There are—

if we put all of our sales resources into finding new homes for this, whether it is in the studio industry or whether it's in any adjacent industry where these things can be valuable, we can go find a market for these and sell them for 20, 30 cents on the dollar. To say that there's zero value in this means there's no market for anything like this, which is just not true.

I, I just said— so you're, you're attributing value to these because of a, of a to-be-discovered secondary market wherein we find a viable and sustainable liquidation channel to, like, offload more than half of the cash trailer assets you're contributing?

No.

Like, try again. Um, well, I No, I, I'm going to push back on that because we know that the, like, disaster industry needs these trailers, um, for, like, FEMA. Yeah, any of the contractors that work for FEMA. The point being, like, if it is, if it is someone's full-time job to go sell these and they are incentivized to find any buyer that will go out, like whether we're putting them in Australia or putting them in Mexico or sending them overseas.

I'm gonna stop you because here's what I hear. A person responsible for selling them, so some semblance of comp, to sell them for 20 to 30 cents on the dollar, which is not gonna happen overnight. So there's going to be a carry cost, even if you deregister and take them off of insurance, there's still a real estate cost underlying it, plus the cost of just moving them if you actually find a fucking buyer for them. And then there's still 500 that have to get sold. And we're not even talking about the ones that are working. And I'm like, I guess I'm not trying to be difficult. What I'm trying to do here is explore how someone could in good faith attribute positive value to the cash trailers. I am surprised to hear you take that path first because what I would have done is say, yes, these, like, there's a ton of them. Like, just before I moved to this, if you sell these trailers somewhere, they will make it back into the hands of someone that will ultimately rent them out from under you. If you sell, unless you are moving them to Australia or like truly fuck an oil field, like, you know what I mean? Like there will be leakage. And I think that is difficult to refute. But I would feel, I think it's a harder time poking holes in We are contributing 300, like, okay, we have 800, you're gonna kill 500 of them. That gives 300 that are working. They are generating revenue and they have built-in customers and people like them. And they are out there generating probably the fucking lion's share of their $6 to $8 million a quarter of transportation revenue. And those trailers probably generate more than Avon on a standalone basis in transportation revenue.

Well, the reason they can't defend that revenue is because they are not doing it profitably. Like, okay, the reason I'm defaulting to the sales value is because that is not— that's just cash in their pocket. That's not something that requires them to have an ongoing operation to support.

Okay, so I'm gonna just remember I am not that smart. So what you're saying there is that they can't just— they can't— I don't want to say in good faith, but with a straight face, hold that revenue up because it is not profitable for them today, we think, or it's not as profitable as it might be.

Is transportation profitable for them?

Uh, it's break-even before admin. Like slightly negative before admin.

Okay.

So because it's not profitable. And even though it would be profitable in SuperCo, we— they don't get credit for that. Correct. Because that is not— so the— but like the framework or the heuristic we're establishing there is you don't get credit for what happens after SuperCo is established. Correct.

Correct.

Are we trying to do that anywhere else? Yes, we are trying to do that in the, like, we're going to go take on all of this risk and all this stuff. Our operational excellence is what is going to unlock all of the value embedded in these worthless assets. Yes, correct. I don't know if we can do that. I mean, like, look, I think that that's the core of kind of like the special situation, but I don't— they have not demonstrated they're going to just be willing to truly roll over like this. And let us get away with that. I think we can try. And I would say we should flag this concept as almost like a red flag for us in the negotiation of just like, how do we position this? How do we get away with it? And/or like, Is there a better way? Is there a different way?

I think I'm losing the thread a little bit. I don't— what is your ultimate takeaway?

We're saying they don't get— I asked you to steelman their side as it relates to the cast trailer assets they're contributing. Setting your asset value, secondary market asset value, like liquidation scenario aside. When I brought up the revenue that the CAT trailers they're contributing are generating, you said they are not, like, that's not their default. They're not, basically what you got to is like, they don't get credit for that because what they're contributing is running at a loss. And it is only through the operational efficiencies and improvements of SuperCo, of our contribution to SuperCo, that it is improved. So they should not get credit for it, but our response to them not getting credit for it is we are bringing the value to unlock that. And elsewhere in this— elsewhere as it relates to the equity breakdown. We are saying our operational efficiencies on the other side of this transaction are what we're taking credit for as to why we have such a bigger equity stake.

Do you get what I mean? We're okay.

You're contributing to have revenue.

Here's the question. We're contributing operational know-how.

Here's the—

you don't get credit for revenue, which is very helpful to but we do because it's of our operational know-how.

Does this make sense? It's like saying they can't use the framework or the heuristic that we're ourselves using.

Okay, so here is the— all right, so basically you either get the credit, you get what the two companies are in the moment, and that's how you decide for the valuation, or you get what it is after the fact. What we're like, what we are proposing is actually good faith, because if we said it's what the two companies are doing right now, they should be giving this to us.

I see what you're saying. Okay, okay, okay.

All right, cool.

Um, and that's why when you see like, when you see step 3 here, really what we're establishing as kind of like a negotiating landscape is a couple of different, like, frameworks, but what we have to be careful of is not allowing those frameworks to be blended almost.

Is that fair? Um, those frameworks be blended? The frameworks can be blended. I think they have to pick their poison here. They either say like, well, look at what we're contributing, like it's worth more than this. And if they say that, it's like, but this is a loss-making operation that you're contributing, and we're contributing a positive operation. So if your company lost $20 million last year, and even on— after all the adjustments that you're talking about, you still lost $10 million, and the entities that we're contributing are worth $4 million, or made $4 million of EBITDA, why would you get a stake in this if we're talking about from an enterprise value perspective? Because yours is a value creation or a value destruction-like entity, and ours is a value creation entity. So like, if that is the path that you want to use as like the base of the valuation, then you should be getting zero. We're willing to forego that, like, that mindset because I understand that that leaves you with zero, and you guys, we think you deserve a piece of this, but you're not going to get— that is going to be a result of what assets you're contributing versus the assets we're contributing, and then what is the value that's actually being accrued to the business after the assets are contributed and who is taking on the risk. So you can either do a pre-contribution valuation, which would net you zero, or a blend.

So in that case, all of the, like, kind of special situation whistle and bells, like they need to be a minority stake. Not only do they need to be a minority stake, they need to not be able to exert or have the appearance of exerting undue influence over the operation. They want to shore off all risk. Actually, no. So wanting to shore off all risk, I would say, is a very compelling reason for why they are taking less of a minority stake. I would almost say that I understood where you were going and now I want to just— I'm trying to back the house, which is what it triggered because it is no longer— up to this point, we have had these kind of like 3 building blocks. They need to stop reporting on it. To do that, they need to be at a minority stake. They want to, they need to understand the economies, but they want to shore off the risk because they want to do X, Y, and Z. Those are all going to get set aside in just like a pure commercial negotiation where like, because it's business, even though it's a special situation, like they're just going to want to negotiate there. And it doesn't matter that these things over here are true.

They can bluff and be like, they can fake walk and those types of things.

Like, so the crux of it is you're contributing. We're not saying that these assets don't have value. They have some. They have a lot more value because of what we're contributing to SuperPro. Like, the reason— like, I'm trying to get more— I'm trying to steel man the super low equity position for them. And what I'm hearing out of this is like, it's the most tangible thing that I feel like we can grab onto is like, you don't want the risk. If you want the risk, we can like explore something like closer to 50. You know what I mean? If you want to, like, if you want to start, if we want to evaluate it as the just like the assets on a standalone basis, it's like 80/20 thing. And then we go out and see with capital partner what like then we agree on what kind of use, like basically sources and uses. Is going to be, and you want to write a first refusal on that to be able to capitalize the business, and let's say it's not $30, it's $25 or $15 or $20 million, and I mean, you want to capitalize the business that way, fine. But like, it was our understanding you don't want the risk. Therefore, why should you get a risk premium for contributing something that is net negative to the enterprise.

Yeah, I think that's a fair line of like, or a fine train of thought. If like 80/20 based on what you're contributing, if you want a higher portion of it, if you capitalize the like company with cash in, yeah, then that like is justifiable.

But you're asking, you're throwing us a grenade and saying we don't, we don't want this if it blows.

We don't want to be scorched if this blows up.

Right. And ultimately, this whole thing is me trying to— because, like, it's me trying to find kind of like the one thing that we can hold on to that is very difficult to refute. Because I think if we actually engage in a— it's finding like the place that's— it's finding like our strongest position. Because I think if we engage in like an asset for asset valuation, like kind of thing, that just like it gets out of control pretty quickly.

Yeah, I agree. I've never liked the like here's what our assets are, here's what your assets are, this is what it should be.

And we telegraphed that the whole time. It's like, if you want to go hubcap for hubcap, like, then this just doesn't fucking—

that doesn't make any sense.

We're not saying it's worth nothing. And your 20% is worth whatever we collectively agree that Enterprise is worth. You want it to be worth a quarter of a billion dollars?

Right.

Your stake's worth $50 million. Yes. That's technically $0.10 on the dollar for you.

Right.

Right.

No, not even because they still have the stages and they still have the grip and lighting.

Yeah. They can say whatever. They can make the value of that whatever they want it to be. Well, yeah, they can make whatever they want to be, but like, yeah, that's a fair point.

Okay, so let's, let's slip back into the—

like, we've, we've got the structure, right?

We've got— no one knows 721 tax-free reorgs better than the Capital Shack, so they're on our home turf. Right.

But like, let's slip back into the, like, PR negotiations, if you will, of where it's like, it doesn't matter what the valuation is.

Like, you guys are asking for things like, because it just like, because there's no cash changing hands here, you guys are asking for certain things like that have no cash value but are material.

Right.

So I don't know. I'm trying to figure out— it's like, I don't think they know. They don't have this framework. Right.

They don't know how these deals work.

So they're still going to be approaching this from a pure, just used car lot type vibe when it comes to the assets. Um, so maybe what we do is, in order to— like, it's like, we don't care what you value your shit for, right? Like, whatever number you put on your stuff, we are going to put a— like, it's the same thing we did with TR. It's like whatever multiple you assign yourself, we're going to also assign this to our stuff. Yeah. And it's going to have the same effect. So how do we do that here? Because I felt that every time— like, we did that in both TR and HDR, and it kind of like steel traps them. In effect, we tricked them. We especially—

in effect, yeah, right.

Well, I think we've already spoken to that. We've already Maybe continue to beat them over the head with it, but like, it's not about what the value of the equipment is that you are contributing to it. It's about the value relative to what we bring to the table. It's almost like we can't, like we can't say you get, we can't justify our ownership split because of the intangible value it brings to them necessarily, because like that is for them to decide. It's more about like—

wait, so that's what I was saying earlier. That's what I was trying to say earlier.

Well, I'm, I'm trying to, trying to use your argument in this, like, in this thought experiment. Um, If they are, if they are taking the approach that I'm trying to make sure I Do you want to take a beat and try and write it down or something? No, no, that's not, that's not what I need. I'm just trying to get my, my thoughts around if you're trying to make it what an HDR valuation comp and a TR valuation comp. I'm just trying not to repeat myself because I feel like we've already said this. It's like, it's not about the value of what you're bringing to the table. It's the value of what you bring relative to what you're emerging into, what you are actually contributing and getting a piece of the bigger picture. That is the, that is the value. I don't know if we can, like, I don't know if we can, they're going to have to come to that. Like, we can tell them, they're going to have to get comfortable with that on their own. There's nothing we can put on a piece of paper that's going to be like, well, I guess this makes sense because like, here's everything that we're getting out of it.

Okay.

I'm out. And this is for you as much as it is like the note-taker bot. But like, let us not forget that not 2 years ago. Is that right? A year and a half ago, they tried to pillage our entire trailer maintenance team and Ivan and tried to pay him $2 million.

To buy his used trailers to come back, right?

Meaning that there is definitely value in what we have.

Meaning that they understand that value.

It's this—

it's what I said to Victor in the first meeting, right?

But what does that, what does that mean for Stephanie? What does it mean? Because I'm just thinking about it in terms of like, how do we put together a term sheet that they're going to be confident taking to their side?

It's why I'm trying to— it's why I'm ultimately trying to swat a lot of this stuff away. We can convince Stephanie and Sean and Mark even. But like, at the end of the day, we're talking to like a Larry Shapley almost. Like we're talking to just someone that is going to like— we can spend all of this time and I'm not even trying to undo my thing here. I'm trying to get us to a place where trying to make sure that we are negotiating against the likely framework that he will kind of be thinking about this on. Or I'll put differently, that what we're putting in front of them, when it gets in front of him, he's like, okay, I can live with that. Moving on. I have a lot of other things on my mind. I'm not trying to necessarily maximize value here, although we should expect for him to come back with like some type of outrageous effort to maximize value against some like metric or some type of thing or whistle and bell. Right, right. Like, and so what does that mean here? It means that we need to It needs to be simple. It can't lean too heavily on the, like, special situation underpinning the whole context. So what does that mean? That means, like, they need to be at a minority stake. Like, all of the things that they are actually trying all of the kind of intangible things, non-monetary, that they get out of this. Those are bullet points for their people to say.

Right, right. That's their way of pitching the deal, not necessarily things we're putting on a piece of paper.

Or alternatively, it's just something that is established as this overarching objective of the parties, right? Okay. But that guy, his share price is currently trading under $1 before split. Everything is dying. He's already approved a 300 assets for 3 years of free rent transaction, right?

Yeah. He's already gotten on board with, like, payment.

Just get it the fuck out of here.

Right. For less headache.

Okay. I do think that whatever the fuck he's been talking about the two times I've talked to him where there's this like cash flow thing that comes to them, that's not a revenue share, apparently. That probably gets revealed what he meant by that. So it's probably that.

Yeah. Okay.

All right. That is Good. So using this approach, it almost neutralizes the tax consideration of this, wherein the value— like, because there's no valuation necessarily being established in this, and like the valuation can be established in one that is like if it has to be tax advantaged for one of the parties, you can do that, right?

But it has to be tax advantaged for one of the parties.

I'm not saying if it has to be. I'm saying like you wouldn't want to value it either. You wouldn't want to value it super high almost. If you didn't have to, because that could create some type of— Right.

Yeah.

Situation.

Right.

There's a vanity number versus like a tax efficiency number. I don't believe— Yeah, it would not be in your best interest to mark that up high. Whether there is any downside to marking it up high, I don't actually know. But, you know, there's no— like, the only upside to marking it up high is vanity, but it could also cause tax implications. Of which we don't know yet. Um, they're gonna know better than we will because we don't know their full scope. But our recommendation would be to just mark it down as low as possible and push off.

I think that's a mutual thing. It's like, if we contribute to this and it's like our 50% stake is $250 million, it's like, oh, fuck, right?

Right. Well, as soon as they pass a wealth tax, then you're fucked.

But yeah, but what I mean, there's like, does that—

doesn't that create like a—

wouldn't that create a tax liability somewhere?

I don't think so, just because it's a— it's not a cash transaction. There's no cash actually valuing it and no one's selling their equity. So there's no like capital gain.

Okay, so it doesn't matter to us, and for them it would only matter if like they were looking to mark it at some level internally on their side, right?

I mean, the only thing I could think like, think about it as if you bought a stock and it appreciated 10x, like you don't owe taxes on it because it went up in value. You only do if you sell or there's a liquidity event.

Can you pull up the org chart? Yes. Okay. I feel like we're in an okay place here.

Agreed. Yeah, I think we're on the same page. I think we've— I think stressed—

I think if we can distill that into bullet points that some of which can get put onto a term sheet of sorts and some of which can be used for us to reference in contextualizing the bullet points. Yeah, that's good. Okay. Do you have any other thoughts on this, or did you have a different approach that you were conceptualizing before we went down that rabbit hole?

No. I mean, I agree with the thought that The intangibles we cannot assign a value to, to make it more beneficial on our end, because the intangibles lie on their side and is motivation to do the deal, not necessarily a reason to justify a lower equity value for them. And I think regardless of the, like, pre-transaction contribution, the post-transaction contribution, we have a defensible way to say what we're offering you is better than either view you would take a look at this from. Because either pre-transaction, your companies were nothing, that your, your assets are worth nothing, they're contributing because of the capital losses. Or post-transaction, all the value and risk is being taken on by us, and the value is being built by us. So like, we're giving you enough of a stake to want to do this deal, but we're not overpaying for the assets you're contributing, I guess. Um, so yeah, I think, I think it, I think it makes sense. It might be tough to wrap their head around just because of like, this confirms how little their company is worth. Like, this is probably the first time they've actually had something on a piece of paper that says your company is worth this little, um, or this operation worth this little. But I think get over that hump, I think it makes the most sense.

Okay. For our purposes, does it matter if they contribute assets to NCNT? But differently, do we need to have like SuperCo Asset Co. LLC established?

No, right? I think maybe yes, just because I would be worried about— it's the same thing where sometimes the DMV to reregister them will say, well, you acquired all these assets, what did you pay for them? And then pay sales tax on them. It might be easier to just say it's being contributed to a new asset company. That, that'd be, that would be a diligence item. It's just what is the most tax efficient and easiest way. It'd be easiest to get all those assets into just one entity. But yeah, I don't know enough to inform on that.

Okay. So we might need to establish a new asset code to minimize initial friction post-transaction other than the DMV? Is there another, is there another reason?

Look, the DMV can't make you pay sales tax on something you didn't pay for. No, but the, and then the DMV and the CDTFA. But I don't know, just about making sure it's as defensible as possible that we do not need to pay sales tax on all items. But is there another reason? Let me just think about our org structure. If you're just contributing MT and all their interests and NCNT acquires it, then— I don't think so. I don't think there may be like from a— no, because first sources is scoped to specific vehicles, not a blanket lease. So that shouldn't matter.

First source is a blanket lease.

Well, then they would have to get— I mean, they would have to get on board regardless.

I guess it's not a major concern.

But Dark Source is going to get on board. Yeah. And Sunset or HPP is going to have no risk. So it doesn't matter. But okay. Open item. Do we need to establish a new asset co? Possible reason for doing so mitigates potential friction with CDTFA and whatever DMV. So from a mechanic standpoint, there's a new drop co, hold co established. The MT parties or the packet co-parties contribute.

We contribute MT Studio services, they contribute Hello.

Oh, my back.

Yeah, you're back. That was weird.

My—

just said I lost connection for a second.

Yeah, it's like you're just really thinking about the, like, administrative headache of losing Silverco. Oh, I understand there's a, like, administrative headache. At the same time, it might solve a lot of— it might shortcut diligence because we're not I mean, the diligence— they're not having to diligence that or structure and get really comfortable with specific indemnities.

I think I missed— why are we getting rid of Silverco?

Why are we conveying it?

Is that a question for me? Yes.

Why are we contributing an LLC with a bunch of successor liability? Doesn't matter that we have insurance policies and all this other shit. I guess just like, why are we contributing it?

Yeah, I don't have a good reason other than the like Xmod insurance?

Xmod's going to be the same regardless.

Okay, I don't think I have a good reason then. Yeah, outside of just the administrative headache, which is— that is, that is definitely accurate.

When has that ever stopped me? Okay, but I hear you. But like, I'm going to flag that as like a potential open item because it could make diligence and/or agreement drafting easier if we're not having to litigate over that. It's just a clean break, right? Okay, MT will contribute all of its assets and entities including Silverco, NC&T Holdings, Two Family Enterprises, HDR LLC, Hollywood Site Services LLC, Globex Transportation LLC, Vias Rentals OpCo LLC. To Holdco Dropco to become wholly owned subsidiaries of Holdco Dropco. Sunset Studio. Let's see. Sunset Studio Services Holdings will contribute all of its assets. Uh, no, they're not gonna be able to do that. Um, Sunset Studio Production Services Holdings will contribute the relevant assets, including contract permits, technical registrations, etc., as will Star Wagon LLC. Sunset Production— Sunset Studios Production Services LLC. EOD Studios LLC. Sunset EOD Holdings LLC. Was Gray mean? New LED Assets ATL. All right. LLC.

New—

is that IED or LED?

LED. New LED Assets Atlanta. And then New LED Productions LLC.

Uh-huh.

New LED Assets Atlanta, ATL LLC. New LED— oh God, thank you. Yes. New LED Productions LLC. New RSD Studio Rentals LLC. Transfo Man LLC.

Transfo Man.

ZenOps ATL LLC. Go back to their legend. Yeah, wheat and GL. Now why would there be GL inside of Star Wagon LLC?

Because Wagoneer got a red herring one time and fell in the GNL drop. Yeah, because it helps them sell trailers.

In exchange for said contributions, parties will receive consideration the membership interests denoted in Exhibit A. And then, and then, and then, until we know whether or not, until we know whether or not we're contributing to NC&T or establishing a new asset co.

Yeah, I do think it actually just comes down to the administrative burden of trying to get all the titles changed over to new co. Doesn't mean it can't be done. It's just that is, that is the holdup.

I guess. Okay. But what are we saying there? That like it's— you're not going to have the same thing. Oh, right. Because what the way they actually— where you actually affect that is they set up a clean entity Immediately pre-transaction transfer the assets.

No, I mean, we could transfer all the assets into one entity or you could just have—

hang on, I'm trying to think through why they— how this is avoided differently. Because what we're contributing, the entities, but these entities, some of them that have these assets, are also going to have union agreements that we don't necessarily want contributed. Right. And the cleanest way without having to do a ton of— or without having to craft a specific indemnity, is for them to just contribute the assets. How is it avoided by setting up a new asset co? Are you saying that this is avoided otherwise if Star Wagons LLC contributes, or if, I'm just gonna abbreviate it, SSPSH, is, contributes Star Wagons LLC in its entirety?

Like, I don't know if it can contribute Star Wagons LLC in its entirety. Why?

Because of the union agreements. No, forget about that. We're talking about this in the context of reducing administrative friction.

So how does—[No speech] Damn it, I lost connection again. Sorry, my connection dropped again.

I'm back.

What is your internet connection?

Spectrum, whatever the normal spectrum is. I don't usually have issues. I'm right under the router. This is new for me.

How is this avoided otherwise, is the question. What, the internet? No. How do we avoid having to retitle everything otherwise? Do they contribute the entities so that you're not having to retitle them? Do you get what I'm saying?

It's like you're saying, okay, yeah, that would be how you do it. Yeah. I mean, there's two— it's basically two options. You either contribute the entities or you contribute the assets inside of the entity that you want to, um, that you want to actually come along with it to the new co. And you figure out the— I'm just trying to think if there is a, like, capital gain or, like, a taxable event. Shouldn't. I mean, there could be. No, I don't think there would be because you're not exchanging for cash. Um, yeah, you either contribute the assets, you contribute the entity itself, regardless of the administrative burden. Like, forget about that because you can throw money at that problem and get it solved for it. Just add it to the—

like, we're gonna take over all your accounting.

You're never gonna Right. Put a line item in integration costs for that. Um, but I think it probably is cleanest, coming full circle, just to not, uh, to contribute the assets you want out of it to a clean entity rather than trying to contribute the entity itself because of any potential, like you said, success or liability on the Silver Coast side and the union and everything else that comes Okay, so we are proposing that the parties contribute everything to a new, to be established, new opco in a more or less to be established new asset co where possible, correct?

Because we don't want to contribute NC&T as an entity.

It's not that we want to— don't want to contribute NC&T, it's that, yeah, there's no problem with contributing NC&T. I think it's just cleaner to have everything in one new company if we're asking if they're asking us if we're asking them.

Here's why we don't have— here's why. Here's why. Because Star Wagons LLC has apparently trailers and lights. So you're already going to have to like— there's something out here. Like, you already have that entity, are comfortable with whatever the fuck is inside of that. And In lieu of us going and diligencing that entity, or spending a bunch of time structuring indemnities for these entities, like, we are proposing, like, just we go through and we designate the assets which we would, which are relevant to the transaction in that entity. And that is what is contributed to New Asset Co.

NC&T is getting all of its assets contributed in its entirety. It has no employees.

And in short, and like short of the like, you know, ongoing and pending litigation on Exhibit F, like really no other liabilities.

Tax.

It has tax liabilities. It has sales tax liabilities. Yeah. And there's the— yeah, the basis on the vehicles. I don't know if we can just get rid of that. That is, I guess, the crux of the issue.

Okay, so we're asking them contribute everything.

We're saying to us, we're setting up a new asset code and then we're just dealing with the administrative headache about. Right.

But for us, we're just doing that. Now back to the opco. From an org design standpoint, and maybe what would be helpful is if we spend a couple of minutes having them explain it to us, and for our part, we can explain what we've done.

Yeah, yeah.

I mean, they're going to be there. They'll have more knowledge on this. Like, they'll be able to give us information rather than speculation. We— I mean, we can propose this structure and then they might say, well, who knows if Stephanie knows this or not, but like, well, we have all this built-in gain or XYZ. Like, it would be— it's not feasible for us to move these assets.

Okay, so what the talk track there is This is what we're proposing until we are able to, like, until we are able to see what, like, possible tax implications this could have for the parties. Right. Okay. So what is the landscape across which we're discussing this on then? It is We should be setting this up as what is most advantageous from an administrative and org design standpoint. Yes. Until told otherwise. So that's NC&T, Hollywood Site Services. Do we need VS Rentals OpCo?

Um, VS terminals opco was set up to contribute the assets from Versatel or VersaGroup when that transaction ultimately goes through, and that's what the MSA is tied to.

Um, but why do we need it?

We don't know.

We don't need it necessarily. Then we shouldn't contribute it.

That's fine.

Okay, and then Hollywood Site Services has assets. Why are we contributing Hollywood Depot Rentals? Because it also has assets, correct?

Right. I mean, V.S. Reynolds does have those assets from Better Call Paul, but it's minimal.

Okay, the assets get contributed, but the entity does not. Right, right, there you go. The entity becomes a disregarded entity. Yeah. Okay, so to keep this from becoming less FTX against, although I, I really want to build one. Like, we— it's like, I'm pretty sure we want as few tax returns as possible.

Well, we will only have one tax return if it's all—

I get it.

If it's consolidated.

But there is a C corp getting contributed, so. Right.

There's at least two. Okay.

We need to know where the New York and Atlanta and LA commercial employees and union agreements are.

Yes. That's an open question. We need to have an— we need to figure out, are we stepping into the agreements, or are we looking to reestablish our own in New York?

In New York. Okay. I was going to say we definitely don't want to step into them if we can avoid it, but yes.

I'm going to take a bite of something real quick. Okay. What questions do you have or thoughts do you have?

I think the— where do the union agreements stand? Where do the union— yeah, where, how are they scoped? I don't know. This is like, this is probably what I'm the worst at is just this org design piece.

Because if—

how do those union contracts actually read? Because is there any, like, potential liability that could be remaining if they contribute these assets and they're just left with a shell company that has a union agreement that has some, like, expenses that are still ongoing related to those contracts?

Well, for all we know, they will still maintain a grip and lighting department. Grip and lighting has a union deal. That's true. So there's 4 union deals, 3 of which are theoretically relevant. The LA commercial group, the New York commercial group, and I can't remember what the 3rd one was.

Oh, fleet. Um, and the fleet are two different ones. Sorry, LA commercial and fleet are two separate union agreements. All right, because one is warehouse-related and one is transport-related.

No, one is transport-related. One is— they're both transport-related, I should say.

Okay. Okay.

On day 1, the entities will theoretically have revenue, which on day negative 1— sorry, on day 0, their entities The NCU will have revenue that on day -1 was governed by a union agreement.

Right.

Right. As it pertains to the commercial vehicle side, our best chance of resetting terms is in ambushing them. Why ambushing instead of being proactive? If we proactively go to them and say, hey, this is happening and we want to set up new terms, they're going to be like, why don't you just use the terms you already have? Like, why did they theoretically work over here, but they won't work over here?

Well, because they didn't work over here. Theoretically. Okay, but what'd you say? Yeah, because they theoretically don't work over there. But yeah, I get your point. They're going to be like, well, that's— they signed the deal. Like, okay.

And now you're saying it's not going to work over here. Like, why? Right. Because it's too expensive. Then why are you doing this deal? But there's revenue in New York and Los Angeles that are— that is subject to a union deal, right?

Okay, so for that piece, what is the goal here? Are we trying to figure out our side of this and how it works for us? Are we just trying to propose— make sure that whatever we propose actually works?

I'm trying to solve for— I would stay. That this is an intangible benefit that they are ultimately getting, is being able to walk away from this as well. And honestly, potentially something worth another feather as to why this is worth— because this is the risk that they're getting to shore themselves off from.

Right.

Do you mind if I take 2 minutes to just scarf this down and then—

Yeah, I gotta use the restroom anyway, so I'll be right back. Or civilians.

Test.

All right, I'm back. Sorry, Penny just woke up, so I said night-night.

I wish we had Acidr. That's the problem with Venable is that we don't have Acidr. Or like an Acidr-type creature.

To just bounce these kind of things off of?

To just get all the stupid fucking questions out of the way on.

Right. Is your—

does your program let you review transcripts or drive any kind of outcomes midstream, if you will?

No, but I can pause here.