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Cupcake chain files for Chapter 7

Cupcake maker Crumbs said on July 7 that it will cease operations and file for Chapter 7 bankruptcy. The action will allow the company, which rode the wave of the popularity of cupcakes and had competition in Arkansas and around the country, to liquidate its assets and discharge any remaining unsecured debt. This comes after the company lost $3.8 million over the three-month period that ended on March 31 and lost $2 million in that same period a year ago. The notification that the company was going to be ceasing operations came just days after it was delisted from NASDAQ.

Crumbs was founded in 2003 and went public in 2011. The company had 65 locations in a dozen states as well as Washington, D.C., and it boasted 655 part-time employees and 155 full-time employees at the end of 2013.

However, the company would not say how many locations were still open or how many employees feel the effects of the closure. The company was known for making large cupcakes containing flavors such as thin mint and cookie dough. In May, the company notified the Securities and Exchange Commission that it may need to take such action if its cash flow did not increase in the near future.

When a company is unable to meet its obligations, it may choose to file for Chapter 7 bankruptcy. As opposed to a Chapter 11 reorganization, which allows a company to remain in operations while it attempts to restructure its debts, Chapter 7 provides for a liquidation of assets and a cessation of activities. It appears that company management, in connection with its bankruptcy lawyers and other advisers, made the determination that a liquidation was the only prudent course for Crumbs.

Source: ABC 13, "Crumbs crumbles: Cupcake store chain shuts down", July 08, 2014

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