Here's an interesting anecdote from our President and Founder relating to the "nuts and bolts" of asset-based financing.

When a company producing very large valves went public, they appropriately filed their Form 10K with the SEC.  At the time, I was working with a large, national accounting firm contracted to audit the valve company's financial reports.  A close look at the statement showed a $10 million asset in the form of "Pinning Labor".  Curiosity took us down to the factory floor to get a closer look at the Pinning Department.

To our surprise, we discovered the "pinning labor" was a department of only two men who looked about as busy as the Maytag repairman!  When queried about the extent of the pinning labor, they advised that twenty years ago the company had changed the manufacturing process from a manual to mechanical one and that the pinning labor had become almost non-existent.

Unfortunately, the company had carried the cost forward every year, and this resulted in an erroneous financial statement at a very critical point in their corporate development.  The result was that the company's public offering was held up in order for them to re-file their Form 10K.  A small oversight can have a great effect on any business.  In most cases an audit provides the tools to move the company forward towards its desired success.  It always pays, in the long run, to know exactly where the assets are and their true value.