OptiMight: Check's in the Mail
The company, which has pretty much run out of money, continues to negotiate with creditors to extend the terms of its bills so that it can gather new funding. In OptiMight's case, the company has raised $37.5 million to date. A balance sheet included in a letter to creditors, dated November 2001, shows that the company took on a $20 million bridge loan, hinting that its money troubles have been going on for a few months. The balance sheet listed only $1,012,000 in cash and $1,950,000 in "restricted cash."
OptiMight owes $10 million, and its secured debt -- debt that's been guaranteed by the pledge of assets and other collateral -- is $5.3 million, sources close to its creditors say. That leaves a $4.7 million funding gap.
Optimight has gone back to creditors to try to negotiate an agreement, saying they might have a better chance to pay off their bills if they can raise more funds. OptiMight's creditors include Arrow Electronics, Lightwave Microsystems Corp., Multiplex Inc., NEL America Inc., New Focus Inc. (Nasdaq: NUFO), [email protected], and several individuals, according to a source close to the negotiations.
In a meeting held with creditors last month, OptiMight told the group that it has four options:
1) Close the doors and liquidate assets;
2) File for bankruptcy protection, in which case only secured creditors would get paid;
3) Sell the company or pursue a merger; and
4) Reorganize the company through an informal workout with all parties.
The biggest barrier to new funding for the company is the current gap between its bills and debt. The new investors see the old, unsecured debt as excess baggage, and they're making it the main sticking point before they invest.
Also, the unsecured debt scares off potential buyers and decreases the likelihood that OptiMight could be saved by a larger equipment company that's interested in its technology.
Despite this sticky situation, the company still manages to put a positive spin on things. It says that its optical transport product, which was due out at the end of 2001, is nearing completion and continues to get positive reaction from potential customers. Company officials also say it has found a combination of new and old investors that are willing to fund it.
The company says it is seeking a much larger amount of funding to keep afloat, one near the size of its competitor, PhotonEx Corp., which recently let go a chunk of its workforce (see Photonex Scores Huge 3rd Round and PhotonEx Axes Staff ).
"We've just had a very important indication from one of our customers that they're going to move ahead with us," says Karl Ma, director of product marketing for OptiMight. "It turns out that the company is really just an intermediary between the two parties -- creditors and investors. We're almost like a referee."
Until the whole thing is resolved, OptiMight has to do business on a cash-only basis, something that's sure to slow product development as its funding diminishes.
OptiMight's unfolding story will likely be a familiar one in 2002, as there are fewer and fewer opportunities for a startup to go public or get bought in a recession.
"It's not just us, everyone who raises a round of financing these days has to go through this," says Ma.
Indeed, Germany's AIFOtec Fiberoptics AG recently wrote its creditors and tried to strike a deal so that it could put its past debts on hold while trying to raise a new funding round (see Is Aifotec in a Jam?). "Venture capitalists have to carry a company on through the late stages now, because buyers are only interested in companies that quickly contribute to earnings," says Robert Abbe, a managing director at Broadview, the technology M&A bank. "You will see them making fewer, larger bets."
— Phil Harvey, Senior Editor, Light Reading