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Interim Management • Financial Consulting • Fiscal Stewardship

Interim Management • Financial Consulting • Fiscal Stewardship

Financial advisory and interim management for companies in transition
Startups – advising new media and drug discovery startups
Restart – advising imaging company in JV and financing negotiations

Realizing value for investors from distressed company assets

Liquidating Trustee for public company liquidation
Negotiated asset based financing for VC backed technology company


For a company in transition, whether poised for breakout growth or facing a breakdown of its business, we bring creativity and an advocate’s mindset as well as the objectivity and integrity essential to derive value for investors.  ARGYCE is organized as a consulting and interim management firm.  We primarily focus on early and late stages of a small company life cycle though we have transactional and restructuring experience in large company settings.  The experience base of the ARGYCE team and professional network includes life sciences, drug development, technology and entertainment.


Management Consulting and Interim Management
We bring not only a breadth of experience but the flexibility to address projects at multiple levels.   For example, we have significant practical experience with intellectual property in both business and litigation settings – to discern practical financial implications of complex legal relationships and work with patent counsel effectively.  Our experience includes work as basic as modeling, writing business plans and setting up financial functions and engagements as focused as decision support research and analysis on a proposed capital expenditure.  Or we can take a more direct role, e.g. negotiation assistance and advice in licensing or sale discussions; or provide support to manage internal efforts and outside counsel in litigation.  

We may be retained at the initiative of a lead investor, senior management or the Board of Directors. We can serve an interventionist role as interim CEO, CFO or a Chief Restructuring Officer in public or private company settings to stabilize deteriorating situations, preserve assets and salvage the potentially profitable and the saleable portions of a business.   


We seek impactful roles in difficult or distressed situations.  When inserted into a company by an investor or Board, we have the discretion to work with senior management and preserve key employee relationships AND we have the resolve to make and immediately act on fact based decisions.  For example, in a 60 day interim CFO engagement with new media/technology company we worked with line management and a part time interim CEO to improve planning and return credibility to the firm’s financial forecasting by restructuring business line performance metrics and cost allocation.  We did this and other CFO functions while redefining, negotiating and closing an urgently needed $5 million asset based credit facility.  


We also partner with other consulting organizations where appropriate, either providing interim management, consulting with them or playing a behind the scenes role.  We recently assisted a market strategy consulting group in forecasting the impact of the economic downturn on sales of a leading pharmaceutical product.


Managed Liquidations
• Overview
• Public Companies
• Private Companies
• Hibernation as an Option - VC Backed Tech and Life Sciences
•Human Risks in Liquidation 
• What ARGYCE Brings
• First Step


Overview
A “managed liquidation” may be appropriate if a company determines its business prospects do not justify continuing operations, but is solvent and not burdened by complex debt.  When commenced early enough, a managed liquidation avoids bankruptcy and other judicially imposed dispositions and improves prospects for stockholders to recover value.

By the time liquidation is a credible alternative, employees are typically stressed and their decisions, large and small, can be suboptimal at best and damaging at worst -- no employee joins a company planning to help liquidate it.  Of all the risks to realizing value in liquidation two categories are noteworthy, delay/denial of a need for action and devolution of corporate culture to a “new normal.”  [see Human Risks below]  

The goals and action steps are the same in public and private companies, though more complex at a number of levels for public companies.  In either case we calmly and systematically add order and stability by developing a company specific course of action following this general sequence:
• Prepare an overall assessment: prioritize issues by urgency and importance,   identify key assets, key transition employees and principal risks.
• Immediately prepare and implement a plan to protect assets, preserve employee   knowledge and manage the company’s financial situation – prepare a cash forecast with management and continuously update it thereafter.
• Implement a process to monetize assets and settle with creditors.
• Negotiate sales, settlements of contracts and final payments to creditors.
• Wrap up all remaining company affairs, e.g. regulatory notifications, building decommissioning, filings with the Secretary of State, SEC and NASDAQ filings, final tax returns etc.

Public Companies

Though simpler for private companies, the process for a public company addresses the same issues and includes very similar action steps.  In a public company, a formal sequence of actions must be followed starting with Board evaluation of options, a Board resolution to recommend liquidation to the stockholders and a special meeting of stockholders to approve a plan of liquidation.  SEC and filing requirements apply to all of these actions.  The proxy statement will include a proposed plan of liquidation and a number of situation specific disclosures.  The stockholder action will authorize the Board to dissolve the company, liquidate its assets, pay its creditors, settle its contracts and wind up its affairs – all in accordance with the plan of liquidation.  Once approved by stockholders at a special meeting, the Directors authorize filing of a Certificate of Dissolution. 

Following filing of a Certificate of Dissolution, the corporation continues to exist for up to three years (Delaware General Corporation Law) for the purpose of winding up its affairs.  At this stage, the company may continue in a skeleton form with a minimal number of board members and one or two officers to sell assets, settle contracts and wind up the company’s affairs with the assistance of contractors.  Alternatively, upon dissolution, all assets, liabilities and contracts may be transferred to a liquidating trust.  Under Delaware Law and many other states, the liquidating trust is a “successor in interest” to the effect all contracts and agreements of the corporation are automatically transferred without requirement of any party’s consent.  The liquidating trust option is discussed more fully on the “Liquidating Trust” page

Private Companies
  
By contrast, in a private company the winding down process starts whenever it suits a majority of investors.  Legal formalities are required but the timing is flexible and formal requirements can be addressed by simple consent documents – with relatively low legal expense.

Hibernation as an Option

Occasionally a venture capital firm wishes to salvage a development program or technology from an otherwise failed company for a restart later.  We can conduct a managed liquidation without dissolution of the corporate shell, organize accumulated information, electronic media, patent rights or other filings while dispensing with other assets and liabilities.  The goal is to minimize and reliably forecast ongoing costs to preserve the asset until it can be absorbed into an appropriate new or existing investee company.

Human Issues in Liquidation

It is nearly impossible to predict which employees will perform professionally through their last day of work and which employees, however reliable they have been in the past will respond badly as the time for liquidation approaches.  While an extraordinarily broad of range of things can go wrong when managers and employees are under duress, two categories of risks loom largest in our experience.

First, it can be hard for even the most capable Board to draw a line between what constitutes the persistence needed to advance a new technology or a drug program and what amounts to collective denial of grim realities.  Boards and management can be tempted to delay action hoping to find a transaction or collaboration to save the day.  Layoffs and cost cuts may be delayed to “not look weak.”  Saving face and seductive hope too often leads sophisticated boards and executives to keep the cash burn too high for too long – turning what could be an orderly closure into a public crash and burn.

Second, as executives and employees internalize the reality of company closure company culture can sometimes devolve to an ethically impaired “new normal”.  Consider a simple example from a facility shutdown some time ago.  As one of our team took charge, he was surprised by a departed executive’s request for building access for his “buyer” to pick up equipment acquired from the employee. The “buyer” had bought corporate equipment from the employee for 40 times the price the employee had paid to “buy” the asset from the company weeks earlier.  An executive selling valuable company assets to favored employees at a nominal price is small scale bad behavior.  But when executives and employees believe such behavior is routine and acceptable a pernicious “new normal” can emerge.  Not only are stockholders shortchanged, but reputations and public images of honorable board members and employees may be diminished.

What ARGYCE Brings:

Objectivity and constructive passion.  It’s our job --- and it’s not a job any executive or employee of a client company sought or signed up for.  We have no face to save or past decisions to rectify.  

Practical financial, legal, transactional and operational experience.  Our services do not replace lawyers, investment bankers or accountants, but our involvement can make their work more cost effective.  For example, the mechanics of transitioning to a liquidating trust are straightforward, but are not standard fare for these high priced professionals.

We “get” start ups, technology and biotech.  In an industry where a “successful” company may not sell any products and a majority of programs fail, familiarity helps.  We understand how value is perceived in high risk programs but we “get” all the nuances of the term “biobucks” too.

First Step
When making the decision to proceed with a managed liquidation of your company, as with most difficult business decisions required of Board and Management teams, taking the first step can be the hardest.  ARGYCE makes the first step easier.  Simply contact our team to discuss your company’s situation.  We will develop a plan and timeline to efficiently and effectively manage, or help you
manage the liquidation of your company and, when necessary, transition your current company activities into a liquidating trust.


Liquidating Trusts
• Overview
• Liquidating Trust-Life Sciences

• Pros/Cons --What a Liquidating Trust Can and Can't Do
• What ARGYCE Brings
• First Step

Overview 
To many the words “liquidating trust” connote bankruptcy, but that need not always be the case.  In fact, a liquidating trust can be a cost effective, simplified structure to wind down a solvent company and realize some value for stockholders.  In the context of a managed liquidation it can be particularly effective as the final stage of a well planned wind down process.  Alternatively, the liquidating trust can be a backstop for a complete and relatively quick transfer of liquidation responsibilities to a third party trustee when a management team finds itself unable or unwilling to complete the liquidation effectively.  

For companies with certain types of illiquid but valuable intellectual property, the liquidating trust’s simplicity and lower cost can make it superior to other alternatives.   For example, for a small biotech with drug development programs
out licensed to third parties, the liquidating trust can be a cost effective way to collect milestones and royalties for a period of time while open issues are resolved and a transaction can be closed to monetize the licensor interest.

In the role of liquidating trustee, (beginning before the trust is formed) we administer and manage the liquidating trust to sell remaining assets, settle open contracts, pay creditors and distribute any available funds to the company’s former stockholders.  We are not bankruptcy trustees or receivers. On the contrary, we prefer to be retained early enough in the wind down process to avoid insolvency and transition smoothly from the public entity to the liquidating trust structure.   

A liquidating trust is a new legal entity that becomes a successor in interest to the liquidating company at the point the company dissolves and all its assets and liabilities move to the trust.  Stockholders in the company become unit holders a/k/a beneficiaries of the trust.  The trust units are not tradable but shares of stock in a company that has dissolved are typically are no longer tradable either.  The terms of the trust and governing principles are established in the trust agreement executed between the company and the trustee prior to dissolution of the company and include trustee duties, compensation and indemnification as well as beneficiary rights, governance, mechanics for notices and distributions and other administrative matters.

Liquidating Trustee Services – Life Sciences/Biotech Focus 

A liquidating trust may be appropriate for a biotech or drug development company if:
• Continuing research and development activities is not financeable or otherwise not in the stockholders’ best interests;
• The company is solvent on both balance sheet and liquidity bases: with sufficient liquidity to settle contracts, real estate leases and severance; and
• The Board and management begin the wind down process early enough to assure an orderly process and maximize the opportunity to realize value for stockholders.

What a Liquidating Trust Can Do:

• Lower burn rate versus costs of maintaining company infrastructure.
• Support a longer run off period to collect milestones or royalties from out-licensed assets – up to three years under Delaware law with ability to extend for longer lived assets.
• Provide a vehicle to wrap up loose ends when lower value or less liquid assets remain.
• “Liquidation” into trust can end officers’ deferral period for severance payments under IRC 409A, depending on specific company circumstances.
  •  Liquidation into a liquidating trust in accordance with Rev. Rul. 72-137, 1972-1 C.B. 101, can qualify as sale or exchange of shares for Federal Income Tax purposes allowing stockholders to recognize loss to the extent the cost basis of their shares exceeds the per share value of assets transferred to the liquidating trust.
• As the winding up process progresses, the trust is readily administered on an as needed basis, versus retaining a corporate officer trying to move on with his/her life.

What it can’t do:
• Continue active research participation in collaborations or other research activities  for long periods;
• Continue employee benefit programs for long indefinite periods;
• Provide a tradable security for unit-holders.  

What ARGYCE brings – emphasized in the Managed Liquidation section: 
Objectivity and constructive passion.  It’s our job --- and it’s not a job any executive or employee of a client company sought or signed up for.  

We “get” start ups, technology and biotech.  In an industry where a “successful” company may not sell any products and a majority of programs fail, familiarity helps.  We understand how value can be perceived in high risk programs but we are familiar with “biobucks.”

Practical financial, legal, transactional and operational experience.  Our services do not replace lawyers, investment bankers or accountants, but our involvement can make their work more cost effective.  The mechanics of transitioning to a liquidating trust are straightforward, but are not standard fare for these high priced professionals.

First Step

When making the decision to proceed with a managed liquidation of your company, as with most difficult business decisions required of Board and Management teams, taking the first step can be the hardest.  ARGYCE makes that first step manageable.  Simply contact our team to discuss your company’s situation.  We will develop a plan and timeline to efficiently and effectively manage, or help you manage the liquidation of your company and, when necessary, transition your current company activities into a liquidating trust.
Interim Management • Transition and Crisis Consulting • Managed Liquidation





Interim Management • Financial Consulting • Fiscal Stewardship

If you would like additional information on our services please contact:
Argyce LLC
610 Second Street Pike • Southampton, PA 18966
Email: Contact@Argyce.com
Phone: 267-988-4075
Or leave voice mail message at 215-862-0909
Fax: 267-988-4082


Our website is intended for general informational purposes and should not be regarded as accounting, legal or tax advice.