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As an interim CEO, we were given the task of oversight while a publicly traded business went through a restructuring process. What we found was a company in disorder. The management was dysfunctional, operations were chaotic and expenses excessive. The management team was replaced, operations and expenses were brought under control, and the business put on a smooth running basis. The business was sold in a Court supervised auction.

As an interim Chief Operating and Finance Officer

A Silicon Valley Optical Character Recognition (OCR) software developer had run through its initial ($13 million) and secondary funding ($4 million), experienced two management turnovers, and had filed Chapter 11 bankruptcy. The initial product development efforts produced a technologically superior product. However, for the two years prior to the bankruptcy filing, they had been focused on a major OCR product, which did not have an established market acceptance. The bankruptcy was caused by the product focus. When engaged, there were only five of the fifty-five full time employees left. Sales were close to zero and marketable OCR product development had not been maintained for some time (product development was done in the US and by a major Asian University). The assignment was to facilitate the rebuilding of development, marketing, and administrative elements of the company, while fashioning a confirmable a plan of reorganization.

Operations were restarted and refocused on the basic product line. During the twenty months of involvement, monthly sales increased by 100% over the proceeding year and operations went from a net loss of $2 million to a net income of $200 thousand. During the twenty-month period, the operations were entirely self-supporting. After securing new capital commitments of $1.5 million and resolving the intellectual property issues, the reorganization plan was confirmed. The company regained its position as a technical leader in the OCR software development and production business.

As a Consultant in an Out of Court Restructuring

This involved a publicly traded, bio-medical company with a worldwide market. The objective was to convert trade debt to equity while the company searched for new investor capital. There was no financial institution debt but the trade creditors did include some educational institutions. Our negotiations with the creditors involved understanding the business, the current equity market and the SEC requirements involved in the proposed stock issue. After a three-month negotiation process, sufficient debt conversion was obtained and subsequently, the company secured the necessary equity investment.  

As Receiver for a major West Coast bank

An eighteen year old, $20+ million sales, wood products manufacturing company had exhausted the patience of its trade creditors and bank (which had all of the real and personal property as collateral for its $4+ million loan). The work force had been laid off and the assignment was to evaluate the situation and if possible, restart the operations. Within the first two weeks of our engagement, the plant was reopened. Profitable and positive cash flow operations were achieved within the first month. Operating problems with suppliers, customers and a union were resolved and the operations continued to achieve positive results for five months. The assignment concluded when the secured creditor and the unsecured creditors could not agree on a plan of resolution for the company. An involuntary Chapter 11 action was filed and the production facility was turned over to the Trustee in good operating condition along with $740 thousand in net liquid assets (net of all of the costs of operations and administration).

As a Special Master

This case involved a dispute between the minority shareholder and President of a Reference Laboratory and the party representing the majority shareholder. The allegations and accusations reached a point where the Superior Court Judge had three questions to be answered. They were 1) what is going on, 2) what should be going on and 3) who really owns the company? Within a few weeks, the first two questions were answered. The operations were in such disorder that the report filed with the Court recommended a complete shutdown. The major risk in continued operations was that a test(s) would be improperly done with inaccurate or wrong results being reported to the attending physician. The Special Master’s report concluded with specific steps to be taken and the Court Ordered the Special Master to do exactly what was recommended.

The ownership issue was moot.

As Trustee

The business was developing and manufacturing peripheral and printer sharing systems that were use as a stand-alone system or as a part of a LAN. When the Trustee was appointed, the current management resigned and operations were effectively shutdown. There was no cash and more than a few disgruntled customers. Operations were restarted and with very limited resources, profitable and positive cash flow results were achieved within seven months. The company was turned over to the Unsecured Creditors Committee as part of their confirmed plan of reorganization.

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