Omaha, Nebraska-based company Mail Order Comics has filed for bankruptcy in federal court, citing assets of $43,790 and liabilities of $969,101.  The assets listed in the petition consist of $1290 in cash, 250,000 comics valued at a dime apiece, 1500 graphic novels valued at $5 each, and a few odds and ends. 

With nearly a million dollars in liabilities, and sales, according to the petition, of around $1.7 million annually in 2012 and 2011, the company was heavily leveraged.  The liabilities include $496,501 in secured loans, $99,600 in priority claims, and $373,000 in unsecured nonpriority claims. 

The secured debt of around a half million dollars was from two lenders:  Wells Fargo’s SBA Lending division, and AdvanceMe, a company that makes typically high interest "merchant cash advances" and then takes a portion of the company’s credit card sales until the debt is repaid.  The effective annual interest rates on “merchant cash advances” can be as high as 50% a year or more, and they’re typically used when there are few other options for cash.

The priority claims of around $100,000 were made up primarily of unpaid payroll taxes, with some sales tax and a small amount of salary included.

Diamond Comic Distributors was the second largest creditor and the largest unsecured creditor, with $325,000 owed, according to the petition. 

Signs of website trouble were scattered throughout the petition, with a disputed $48,000 fee for website design in the liabilities section, and the value of potential litigation for “breach of contract and software malfunction” against another web developer listed in the assets section. 

The small amount of income information showed the seeds of the company’s problems.  Sales declined 7% between 2011 and 2012, while the market was growing, and losses grew, with $22,341 in losses in 2011 and $88,294 in losses in 2012.  The combination of the operating losses and declining sales (especially in a business in which revenues are collected before the inventory is paid for) undoubtedly caused a severe cash crunch, especially if those trends continued into 2013.

As of January 23, internet comic retailing giant Discount Comic Book Service offered to fulfill preorders from Mail Order Comics’ customers, and did so without requiring any new payment from customers that had prepaid Mail Order Comics.