Company agrees to a sale and reorganization.

According to a Bloomberg report, the company has not shipped up to $20 million in products already sold, it owes more than $30 million in debt, and is behind in $5.87 million in sales tax payments. In a news release, the company says that it has been trying to cut costs. This includes laying off about 50 people, reports Bloomberg. The company has 60 full-time employees left to service 250,000 subscribers.

"We have worked diligently to overcome challenges with our capital structure, along with legacy issues the Company has been struggling with for the past 18 months. We are very pleased with our progress from an operational efficiency standpoint, however, the company still faces liquidity issues," said Loot Crate CEO Chris Davis.

"After careful review of a wide range of available options, management determined that a sale of the Company is in the best interests of all parties, including our valued Looters (customers) and employees,” Davis added.

The company has gotten a loan of $10 million from Money Chest LLC, a Loot Crate investor. The company plans to use this financing and subscription revenue to continue normal operations. Davis said that the company has the resources it needs to fulfill its subscription orders and to provide “high-quality service and support.”

“Daily operations will continue as usual, unique and exciting fan items will be purchased, crates will be shipped, and all aspects of the business will go on as before the Chapter 11 filing. Our employees will continue to be paid as usual during this transaction,” Davis said.

“This transaction represents good news for our employees, our customers, and our other constituents. It will provide Loot Crate with greater access to the financial resources necessary to continue to prosper and grow. By utilizing the Chapter 11 process, we are able to ensure an expedited and orderly transition,” said Davis.

Loot Crate was started in 2012. Since its launch, the company has delivered more than 32 million crates to fans in 35 countries and territories around the world. A monthly subscription is $24.99, plus shipping and handling, and includes four or more items from pop culture franchises like Hello Kitty, Lord of the Rings, Deadpool and Marvel. Each subscription box has a value of $45 or more, and includes licensed items, exclusive collectibles, gear, action figures and more. In addition to the subscriptions, customers can push individual items or past boxes that aren’t yet sold out.

Insider Take:

Loot Crate was an early adopter of the subscription box model, but seven years in, the company has more liabilities than assets. We wonder what went wrong. Did they scale too quickly? Did they buy more inventory than they could sell? Did they fail to attract or retain enough subscribers to be sustainable? Or maybe a combination of the above. Hopefully, a new owner can come in and rightsize the operations to get Loot Crate back on track.

Dana Neuts is Subscription Insider's Senior Staff Writer, covering our daily subscription news as well as member features, case studies, and reports.  

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