Amp’d Bankruptcy: By The Numbers: ‘Liquidity Crisis’ Due, In Part, To 80,000 Non-Paying Customers

38 Comments

When a company files for bankruptcy, details that have been kept on the inside — or sometimes provided without any way for the the listener to verify, suddenly become available as the company tries to justify the filing and its need for various approvals. Amp’d Mobile needs permission to use its bank accounts, to pay salaries, to do everything that keeping a company running during bankruptcy entails. Monday’s filings in U.S. Bankruptcy Court for the District of Delaware, the first follow-up to the actual bankruptcy petition filed late Friday, include subscription numbers, funding amounts, spending and more:

— Amp’d raised a total of about $350 million in equity investment through June 1 and approximately $31 million of secured and unsecured debt investments. Kings Road Investment holds an April 2 promissory note in the amount of $30 million.

— Customer acquisition was “extremely low” following the December 2005 launch and through the first half of 2006; an aggressive ad campaign helped lead to a boost in subscribers. Amp’d hit about 100,000 subs by the end of 2006 with “unprecedented growth” from November ’06 through February ’07. (I have not yet seen a current subscriber total.) A source familiar with the situation says Amp’d had more than 200,000 subs at the time of the filing.

— That dovetailed with customer collection items “at rates higher than industry norms.” Approximately 90 percent of the customers were on 18-month contracts. “The debtor began to find a host of credit and collections problems and contributed ultimately to a liquidity crisis.” By late May, the company realized its non-paying customers approached 80,000.

— The bi-monthly (the filing says bi-monthly; it’s twice monthly) payroll for some 229 U.S. employees averages approximately $987,000 — nearly $2 million a month. (I’ve confirmed this with a source familiar with the numbers.) Monthly employee expenses run $175-200,000. Health benefits run about $119,000 a month; various insurance benefits run $5,000 a month. As of the petition date, the company estimates it owed less than $70,000 with no one employee scheduled to get more than $10,000. Just over $37,000 in employee 401K funds have yet to be paid; that’s one of the things the company wants approval to do.

— Amp’d estimates that it has no less than $6 million in accrued but unpaid sales, use and other taxes.

— As of June 1, the company held $992,000 in unused airtime for prepaid plans and customers are owed $778,000 in rebates.

— Amp’d has been averaging $500,000 a month on product protection and replacement plans. Customers owe a total of $2 million in program fees.

— Amp’d served more than four million games, videos and songs in 1Q07, more than twice the amount of the previous quarter. Overall, the company has delivered more than 6 million downloads.

Update: Finally had time to check out Kings Road Investments; it’s a wholly owned subsidiary of Polygon Global Opportunities Master Fund. Polygon first invested in Amp’d as part of the $150 million third round. I would not be surprised to see Polygon provide the Debtor-in-Possession (DIP) funding.

Update II: About the 80,000 non-paying subs. Given what we know of Amp’d’s billing issues, the better question may be how many were billed at all.

38 Comments

Sam

Vengroff, Williams & Associates, INC. are spreading the love. I received my "IMPORTANT NOTICE" today and I'm positively unthrilled!
In my case I had received bogus data charges from 3rd party companies on my bill. I disputed the charges and got no results so I went ahead and paid them to keep my credit from being affected. The charges were over $250.00. Weeks after this balance was paid off Amp'd mobile corporate contacted me to let me know I would be receiving a credit of $200.00 because they found I was not responsible for the data charges. The corp lady went on to say they were in error. This all occured 2 months prior to Amp'd shutting down. I only used about $130.00 of the credit before they were gone for good and they actually owed me $25.00 dollars.
I called customer service when I got the text stating service would be terminated on July 24, 2007 & the person I talked to said he would send me an e-mail linking me to a website that I would need to go through to get my money refunded. I saved that e-mail, thankfully. I didn't want to mess with $25.00 or so bucks so I left it alone.
Now, I'm being bothered with something that shouldn't even be an issue. I don't know what's going on but I am really frustrated. I have called that 1- 800 # and left messages, which go unanswered. Perhaps if enough people keep getting hit for these inaccurate charges and speak up and get this situation the attention it needs we could get these contracted bullies off our backs. Any suggestions?

Henning

Just got one of those letters, unable to get hold of anyone personally. But their fax is working. Perhaps this is the way to go in addition to a certified letter. It may be annoying for them to get lots of faxes.
Did anyone ever got a response ?

Andrew

i got one of those letters as well. twice. I sent them a letter stating that they are in error, and that i can provide financial statements that can prove i do not owe. i would love to find out what everyone else has done, before i send bank statements to someone i have no idea about.
email me
andrew_moberg@yahoo.com

Asdr

I just received a letter dealing with VWA. I cannot get through, mail box is full, no return calls. Amp'd mobile owes me money and they are trying to collect on me?
I believe a letter or call to the Attorney General of Florida would help or someone investigate who are the creditors asking for this money. My feeling is that Vengroff, Williams & Associates, INC. are just order takers.

bill

Dealing with collections agencies most do not report to the bureaus due to the time and money involved to remove it if it was incorrectly placed. I would send them a dispute letter via certified mail asking for a complete breakdown of the charges. If they are unable to provide this information then send a cease and desist letter until they can. I would bet they will close their account on their end with no further problems unless the account is sold and you have to repeat the same process again. this time they will almost for certain not have this info. Most agencies are just trying to collect the easy money and move on. I have heard of this company and looking at their better business bureau I see why they have the rating they do.

Johnnh

I also received this later and I have tried to dispute it, but VWA is terrible to deal with. I've requested a copy of the invoice they have to dispute the amount owed, but they keep sending me the same 30 day notice. My email is JohnJohn6025@aol.com if anybody makes any progress with VWA email me please.

hals

Near the end of July I received a text message from Amp'd that my service was going to be shut off in a few days. I called and after waiting forever for a representative they refused to give me information and referred me to their web site, which had a notice that they were going out of business. I received a bill which I promptly paid only to receive ANOTHER bill a few weeks later stating that it was the FINAL STATEMENT. I paid this bill as well, and the check cleared in a few weeks' time.

Just today I received a collections notice from Vengroff, Williams, and Associates, Inc out of Sarasota, Florida, for an amount that was not indicated on either of my final two bills. I called the agency but there is no way to reach an operator and the extension printed on the letter takes me to a voice mailbox that is full, so I can't reach anybody to dispute this charge. I have contacted my attorney to deal with this underhanded agency.

Has anybody else received a collections notice from this or another agency? Does the amount referred to the agency match up to any actual amount owed? Please post your experiences here in this forum; if you would like me to contact you to let you know what comes of my experience so that you may take similar action to preserve your credit rating please post an email address and I will check this page regularly and contact you.

phyllis

Amp'd recently filed bankruptcy and is out of business as of Jul. Son signed up 2 months prior (of course, his first official contract). They screwed up his plan, charging him for text msgs when it should have been unlimited, resulting in 900.00 bill. A call to cust svc said it would take 6 weeks to straighten out, and went out of business 2 weeks later. Still sending him bills, even though we've called, written letters, filed an unsecured creditor claim, etc. I personally consider a company signing people to a 2 year contract when they are aware of an impending closure a MAJOR P.O.S. As a consolation to their customers with time left on their contract, they are "waiving" the balance of (in my sons' case) 22 months' service on the contract. What a great bunch of folks……Anyone with any FCC, legal or creditor background have any suggestions?

lyndsey

I contributed to that portion of subscribers who never paid their bill. I've had amp'd since late November 06 until they finally got the hint and shut me off in May. My outstanding bill is pushing $800 – which of course, I was never sent consistent monthly bill statements and I would end up getting a bill for $300 and be pissed. Customer service never did anything about the problem so I never gave them any money. What's going to happen to us slackers? Are we in the clear or are we going to be slapped with bill collectors?

B.

Yeah, I've had Amp'd since November 06, and I haven't had a single problem, until I find out a week beforehand that I'm about to be phoneless…I just placed my order with Verizon.

Sylvia

So, can we file a complaint with the Bankruptcy court in regards to the rebate most of us DIDN'T receive?

dee

Does this mean we are released from our contracts?? I don't want Amp'd to come back at me with contract cancellation fees. I haven't had service in over a month, so I sent them a letter asking for credit for no service. I just got the bankruptcy letter in the mail. No wonder!! So are we free to go get phones that actually work without any contract cancellation crap??

William

Damm, It Feels Good To Have A Support Group, i Suscribed To AMPD Mobile Back In January, I Loved The Phone And Sort Of Bragged About It, I Signed Up For Their Unlimited Everything Plan For 150 a Month, Which Means I Could Talk Non Stop Anytime, Day Or Night And My Bill Would Be 150. Shortly After I Got A Bill For 700. And The Bill Had No Amounts Next To The Calls Or Texts, So I Called Up, Listened To The Crappy Music And Finally Got Someone, Who Said , I Went Over My Minutes, " Come On Lady, I Have The Damm Unlimited Everything Plan" So Turns Out My Bill Was 300. So I Said Fine, Whatever I Know Somethings Shady Here But What The Hell So I Paid It, On Line… Get This Peoples, I Put In The Pay Amount For 300. And They Took It Out Of My Account 3 Times Totaling 900. So I Called Them Back And The Chick Said She Would Refund, So At That Point I Had A Credit For 900… And Guess What, A Whole 30 Days Went By, And I Got A Bill For 300, And They Subtracted It From The 900, And Another Month went By And I Got A Bill For 672. And They Subtracted In Which Each Month I Kept Calling DEbating The Charges Because I Had The Ulimited Everything Plan For 150. So The Guy Said DOnt Worry About It They Would Take Care OF It And All Owed Money Would Be Credited Back To My Card. So I Let It Slide, And 4 Months Went By And The Bill Got Larger And Larger, And Larger, And I Have Yet To Get A Bill For 150. So I Went To the Verizon Store And Got The 79. Dollar Plan, And For The Past 3 Months My Bill Has Been 79 Dollars. . . .I Hope The Ampt PEople Turn Out Like Duke And Duke From Trading Places

Trish

My son and I both have Ampd. We have been having problems with our phones for a couple weeks now. I have been trying to contact tech service for over a week and they don't even answer there phone. How frustrating!! Back in June I paid over $400 dollors to Ampd to carry me over the summer months, last night I got a message from them that I owed them money – well bullsh*t! I am going to wash my hands of Ampd. They suck! My mistake for trusting in them.

Phil

I just go a text from Ampd saying that my service may be cut off on the 23rd. Anyone know if they will get this fixed or should I just go back to sucky Virgin Mobile?

j-dub1980

hey jo,
I agree witrh you and it scares me, first of all My g/f and i subscribed to ampd mobile in march and the problems began then. We didnt recive a bill until 2 months into our service and the bill wasnt itemized, it was missing callls that shouldve been listed and extra charges were tacked on bringing our total to $400. we made our payments then next thing you know our service was interuppted. after hours on hold we finally get things cleared up and the same thing happens last week. MY g/f paid the bill on june25th, then the phone get turned off july2nd! ARGH! we have been tryin to reach someone at customer service for the past 2 days! what happens to the customers if they go belly up? does anyone know how long it will be like this?

jo

At this point, Ampd can kiss my ass. My service was suspended on June 26–they say for non-payment, but they have cashed my 141.77 dollar check! I have tried for three days to get someone on the phone–when someone did finally answer as an hour listening to their crappy music, my service was supposedly restored. NOT! now no one will answer. When I call the number they gave for non-payment I actually got a live voice! Yeah, cuz someone will answer if they think you are sending in MONEY! That person said the tech support number doesn't work anymore .I can't get anyone on tech support. When .I have another phone company working for me to try to port the number…THEY can't even get anyone one the damn phone! Is anyone even there! I think by Monday morning, July 2—the offices will be EMPTY—-Everybody better change their numbers over NOW!

jo

At this point, Ampd can kiss my ass. My service was suspended on June 26–they say for non-payment, but they have cashed my 141.77 dollar check! I have tried for three days to get someone on the phone–when someone did finally answer as an hour listening to their crappy music, my service was supposedly restored. NOT! now no one will answer..I can't get anyone on tech support. When .I have another phone company working for me to try to port the number…they can't even get anyone one the damn phone! Is anyone even there! I think by Monday morning, July 2—the offices will be EMPTY—-

Slacker 1

When uh company files fo' bankruptcy, details dat gots been kept on da inside-or sometimes provided without any way fo' da the listener ta verify, suddenly become available as da company tries ta justify da filing an' its need fo' various approvals. Amp’d Mobile needs permission ta use its bank accounts, ta pay salaries, ta do everything dat keeping uh company running during bankruptcy entails. Monday’s filings in U.S. Bankruptcy Court fo' da District o' Delaware, da first follow-up ta da actual bankruptcy petition filed late Friday, include subscription numbers, funding amounts, spending an' more:

— Amp’d raised uh total o' about $350 million in equity investment through June 1 an' approximately $31 million o' secured an' unsecured debt investments. Kings Road Investment holds an April 2 promissory note in da amount o' $30 million.

— Customer acquisition wuz “extremely low” following da December 2005 launch an' through da first half o' 2006; an aggressive ad campaign helped lead ta uh boost in subscribers. Amp’d hit about 100,000 subs by da end o' 2006 wiff “unprecedented growth” from November ’06 through February ’07. (I gots not yet seen uh current subscriber total.) A source familiar wiff da shit says Amp’d had mo' than 200,000 subs at da tyme o' da filing.

— That dovetailed wiff customer collection items “at rates higher than industry norms.” Approximately 90 percent o' da customers wuz on 18-month contracts. “The debtor began ta find uh host o' credit an' collections problems an' contributed ultimately ta uh liquidity crisis.” By late May, da company realized its non-paying customers approached 80,000.

— The bi-monthly (the filing says bi-monthly; it’s twice monthly) payroll fo' some 229 U.S. employees averages approximately $987,000-nearly $2 million uh month. (I’ve confirmed dis here wiff uh source familiar wiff da numbers.) Monthly employee expenses run $175-200,000. Health benefits run about $119,000 uh month; various insurance benefits run $5,000 uh month. As o' da petition date, da company estimates it owed less than $70,000 wiff nahh one employee scheduled ta git mo' than $10,000. Just over $37,000 in employee 401K funds gots yet ta be paid; that’s one o' da things da company wants approval ta do.

— Amp’d estimates dat it has nahh less than $6 million in accrued but unpaid sales, use an' other taxes.

— As o' June 1, da company held $992,000 in unused airtime fo' prepaid plans an' customers iz owed $778,000 in rebates.

— Amp’d has been averaging $500,000 uh month on product protection an' replacement plans. Customers owe uh total o' $2 million in program fees.

— Amp’d served mo' than four million games, videos an' songs in 1Q07, mo' than twice da amount o' da previous quarter. Overall, da company has delivered mo' than 6 million downloads.

Update: Finally had tyme ta check out Kings Road Investments; it’s uh wholly owned subsidiary o' Polygon Global Opportunities Master Fund. Polygon first invested in Amp’d as part o' da $150 million third round. I would not be surprised ta see Polygon provide da Debtor-in-Possession (DIP) funding.

Update II: About da 80,000 non-paying subs. Given what we's know o' Amp’d’s billing issues, da bettah queshun may be how many wuz billed at all.

Don't make me come ovah there bitch…

Slacker 1

You mean I gots ta pay muh ma fin bill? what 'chew trippin foo'
I'd rather pay off muh ma fuckin drug dealerthen pay amp'd! all ye damn hood ratz..

jay lieb

I didnt get billed for my dealer line till I called the company. The idea of text messaging and emailing bills was a disaster. I think that many subs never got billed and probably thought they had a free ride. You cant hand these guys a $700 bill months after activation. The company had a product that was liked and was popular. It should survive in some form. At this point if they start over, they have a working technology that took alot of money and time to develop, and they may even have about 100k active paying customers. They decided in February to slow down paying commissions so they would have money for some phones. They really needed to get their billing and commission software working. Should be interesting to see if Verizon shuts off service.

Bruce Braun

Amp'd never had a sub base of 175,000. Subscribers pay you. The reality was they only had 95,000 subs. Considering they have apparently gone through around $350M plus owing another $100M to gain 175,000 of sign-ups, it has cost Amp'd around $2600 per sub (or non-sub)! At those sorts of acquisition costs, how could anyone think there was a business there? How dumb are the VC's to have not discovered those sort of flawed basics? Unless, the books were being cooked.

ACOM

For those of you that don't fully understand what actually happens at the retail level in wireless, note that a "non-paying customer" is more often an "enterprising" independent retailer or distributor that is gaming the sales incentive system by preactivating phones to generate the competitively high commissions that were being paid to generate the sales. It is a double edge sword – without paying a higher commission, Amp'd could not get the shelf space or salesperson's attention. With it, it invites the vultures for a feeding frenzy.

MobileWizz

This really is an incredible set of numbers. How could the VC's be so incredulously blind to the numbers of the business whilst pumping in millions upon millions of dollars? Didnt the numbers actually communicate anything to these seasoned, learned professionals? The demog of AMP'd and other youth targeted MVNO's and mobile businesses on the whole lends itself to bad debt. Wasn't this in the business plan? Wasn't the risk outlined or did stakeholders overlook the risk? I would say that this unfortunate situation comes down to mismanagement and allocation of VC funds. 220 staff at $1m in payroll needs income of double that to support the basic model. Where did they think they were going to get it from? Profits too lean and ultimate non-control of the network (VZW) means a uphill push until breaking point.

Marc Cohen

The number of non-paying customers is a juicy nugget. Good find. I think this may be the death knell for Amp'd. Better credit policies will slow growth. I always wondered how Amp'd's young target audience could afford the high ARPU Amp'd was touting. I guess the answer is they couldn't. Check out the Ad-Supported Music Central blog:
http://ad-supported-music.blogspot.com/

Staci D. Kramer

We are using PACER, a federal filing system, to obtain the documents; they aren't freely available online. http://pacer.psc.uscourts.gov/

On the pay question, I was looking at that again and then saw your note. The affidavit says bi-monthly but the way it was worded suggested twice a month. I'm going to strike through the second part of that until I can clarify. Thanks.

Jon Fortt

If that's really the bi-monthly payroll, it would be nearly $500,000 a month. You probably meant bi-weekly.

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