Armanino is among Silicon Valley’s most experienced restructuring specialists for investors, creditors, boards, and executive management of financially distressed technology companies. Some of our restructuring clients are listed below:
Affymax, Inc. (NASDAQ:AFFY) was a public biopharma company with a single drug, OMONTYS, that aided blood thinning problems experienced by dialysis patients. The company had been public for a year and was growing rapidly until a series of sudden patient deaths caused the company to voluntarily remove the drug from the market, pending a full investigation in concert with the FDA.
Because the drug was its only source of revenue, the company was forced into a significant restructure to survive long enough for the investigation to finish and hopefully receive FDA approval to re-introduce the drug. The company’s cash position was marginally insolvent given all its obligations, and the company was quickly beset by multiple shareholder class action lawsuits, which were expected to be expensive and prolonged.
The company retained Armanino to act as Chief Restructure Officer reporting to the Board, and during the next three months our restructure team accomplished the following:
Once the company was successfully restructured, the Armanino team took on Officer and Director roles to manage the inactive but solvent company through the FDA investigation and open litigation, which was ultimately settled. Should the FDA investigation permit re-release of the drug, Armanino would work with the Board to manage the restart of the company by seeking fresh capital and turning the company over to a new management team.
Unfortunately, the results of the FDA investigation were inconclusive, which precluded re-release approval from the FDA. At that point, the company had few good options and the Board elected to solicit M&A or takeover bids from select third parties. Approximately 18 months after the engagement began, the Board and shareholders agreed to give control of the company to an investor group who took over, replaced the Board with their own slate, and continues to control the company today.
Armanino was engaged to assist this software and communications services provider in restructuring its operations. In cooperation with QS management, all liabilities and debt were recorded, and operations revamped. Substantial debt workout plans were established with creditors and the operation was able to downsize its facilities costs through return of space to its property owner.
Eventually the company ran out of cash and sold off its software assets to one firm, and its communications services business to another for nominal values. Armanino was retained to manage the shell corporation through termination, including the company’s transition of assets to the two firms purchasing the assets of the company.
To effect the termination plan, an Armanino professional became CEO of QS and two additional professionals were assigned CFO and Controller duties. From the beginning, major issues arose, including a scarcity of cash to effect the termination and vendor settlements, and continued issues with the condition of records and liabilities not on the books. Despite that, QS was successfully terminated without additional infusion of shareholder cash.
A CFO and a Controller from Armanino were engaged by this early-stage public biopharma company to assist the board and shareholders in managing the company through a Chapter 11 debtor in possession bankruptcy.
The team worked with insolvency counsel, interfaced with the trustee, and represented the company on numerous occasions in bankruptcy court in Delaware to provide senior finance and accounting support through the Chapter 11 process. In addition, the team provided operational support for the company as it reorganized, relocated, and restarted with fresh capital and newly acquired drug technology under court supervision.
The Board of Directors of Axon, confronted with a number of lawsuits and major issues between the board and management, elected to file Chapter 7 bankruptcy. Axon operated several semiconductor foundries in which millions of dollars had been invested.
Armanino was hired to assist insolvency counsel in the preparation of bankruptcy petition documents and be the company representative to the appointed bankruptcy trustee once the Chapter 7 petition was approved.
The Armanino team supervised the creation of the documents needed for the bankruptcy filing, inspected company facilities, obtained keys and other assets of the company, and with the assistance of Murray and Murray Law, filed the bankruptcy petition. This was a difficult engagement due to very poorly maintained accounting records.
Secret was a high profile social media site that raised significant institutional capital. Unfortunately, the founders and board were dissatisfied with the direction of the company’s evolution and elected to shut down the site, wind down the company, resolve all creditor claims, and return unused capital to investors.
Having received shareholder approval to do so, the company retained Armanino to take on officer and director roles and manage the orderly wind down of the company.
In accordance with Delaware statute, Armanino executed the wind down, communicated with all creditors, settled all open and approved claims, filed all the required dissolution paperwork and final taxes, and ultimately distributed $13M to the investors.
GreenVolts was a promising solar technology company backed by a leading Washington DC clean tech VC investor. Despite unique software and hardware solutions for commercial-grade solar installations and a growing customer base, the company ran out of money and failed to secure new investor support and follow-on financing.
In the face of its insolvency, GreenVolts elected to enter into an ABC (Assignment for the Benefit of Creditors) approved by its board and shareholders, and retained Armanino as Assignee to then wind down the corporate shell.
Per California statute, the ABC was executed in an orderly fashion, with Armanino successfully performing an auction of IP to two buyers, and subsequently managing the wind down of the corporate shell. The engagement was complicated only by the presence of a resident office in China, which local authorities made very difficult and expensive to shut down.
PartMiner Worldwide (PMWW) was a large global distributor of electronic components incorporated in New York and headquartered in Denver. The board and shareholders approved an asset sale to a competing distributor and retained Armanino to manage the asset sale transition, escrow, and to perform an orderly wind down.
The Armanino team took on officer and director roles, and became the Shareholder Rep. After the successful transition of assets and operations in which the company recovered 100% of the escrow amount, Armanino completed the wind down of the remaining corporate shell.
The process took several years as PMWW had legal entities in multiple U.S. and international jurisdictions, each requiring individual wind down attention. The long poles in the tent were India and China, where the company had WOFEs (wholly owned foreign entity), and their orderly shutdown proved extremely difficult due to the unpredictability of local authorities.
Tradenable was an Internet escrow provider focused on escrows for eBay transactions. This firm was turned over to Armanino for liquidation, with board and shareholder approval, after heavy losses and a lack of funding. Following the turnover, Armanino professionals assumed the roles of CEO, CFO and Controller respectively in the wind down company.
Tradenable had substantial physical assets, so an auction of these assets by Dovebid was arranged, resulting in a substantial cash recovery. A large number of unsettled escrow disputes were turned over to Armanino with the business termination. Funds for these escrows were held in a separate bank account awaiting settlement by the underlying parties to the transactions. Considerable effort was required to nudge these parties to settlement, including taking one escrow to arbitration.
Armanino was engaged by the board and shareholders to liquidate the assets of this software services company and manage the entity’s orderly wind down process to conclusion. One of the investors in the UK had an interest in acquiring the technology for a vertical integration of their business. To be sure that all shareholders were being fairly treated, a complete, transparent and arm’s length auction was managed to sell the company’s assets, including the intellectual property.
Once the prospective buyers were identified, the Armanino team managed the process of contacting them and getting bidders for the auction. From beginning to end, the process of the auction took about 90 days, and all shareholders were pleased with the outcome.
At the conclusion of the auction, Armanino managed the final settlement of all outstanding liabilities and distributed the remaining balance to shareholders. All the necessary dissolution documents and final tax returns were filed in CA and with the IRS, which completed the engagement.
“Armanino has been an excellent resource for our firm: with very strong people who are results-oriented and committed to delivering value.”–Brent Ahrens, General Partner, Canaan Partners