Situation

A $30M publicly held tech company had established a competitive advantage by producing next generation, leading edge devices through its patented technology. However, startup-type volumes, very low manufacturing yields, and increased product development overhead related to a new line of business had caused poor operating results and a massive cash burn. The company entered into a $6M debt agreement to raise cash to continue operations. However, existing management did not improve the operating results causing the company’s inability to service the debt, which was later called by the creditors. The CFO left the company and the CEO was terminated by the Board.

Solution

The Board brought in an experienced CFO and turnaround consultant, now a NextLevel team executive, to serve as Acting CFO of the company to rectify the considerable financial issues confronting the insolvent company while they searched for a new CEO. Due to the urgency of the situation, the CFO immediately re-engaged in negotiations with the debt holders, began several cost-cutting initiatives and started formulating a complete turnaround plan. The new CEO came aboard two months later and together they solidified the plan and directed its implementation.

This plan included the elimination of the additional line of business effort; a streamlining of personnel that were not integral to a successful turnaround; shutdown of the company’s redundant West Coast headquarters and relocation of all remaining job positions to existing available office space at the East Coast manufacturing plant; initiating a strong finance/operations effort to achieve improved production yields; implementation of timely financial and performance monitoring processes; and a renewed shareholder/public relations effort which would prove integral to the resolution of the debt issue.

Results

Over the acting CFO’s 13-month period of engagement, the company earned its first positive operating cash flow and first profitable quarter in its 10-year history. These improved operating results attracted an existing shareholder to backstop the takeout of the debt through a company equity raise. With the considerable initial problems solved, the foundation was set for a large revenue and profit increase over the next several years. During a two+ year period the stock price went from under $.50 per share to almost $10 per share.

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