There was something odd going on at SpatiaLight in Novato long before the company told all its creditors to pound sand by filing for Chapter 7 bankruptcy protection in January.
Founded in 1989, the company designed and manufactured high-resolution microdisplays for use in personal computers and high-definition televisions. Headquartered at Hangar 5 in Hamilton Landing, the firm had been on shaky financial footing for a while, despite an influx of capital last year.
Moreover, the company had a habit of firing its CEOs. The SEC is on the trail of former CEO, Robert Olins of Mill Valley, alleging he made $2.6 million on insider trades. Olins is not the only executive to be shown the door for playing fast and loose with stocks. And speaking of stock, NASDAQ had its own problems with the company. But we’re getting ahead of ourselves. The tale of SpatiaLight is good stuff, let’s not rush it.
The company was never a big money maker. It was almost losing money as a rule. From 1998 to 2001, it had revenues of only $167,400. In 2001, it announced a trio of deals that had the potential to make $70 million that year and $400 million by 2005. Stock analysts swooned, predicting the price per share could climb as high as $100 over a two-year period. This would have been a neat trick, since the share price was running between $1 and $8.45. But that potential remained unfulfilled, as SpatiaLight lost a collective $27 million on revenues of less than $3 million from 2002 to 2004.
The good news should have been that consumer electronic giant LG Electronics became a customer in 2005. But that same year, SpatiaLight posted revenues of just $238,000 while bleeding red to the tune of $14 million. The following year, things got worse with losses of $19 million against $474,000 in revenues. Clearly, the company’s business strategy left plenty to be desired. It seems SpatiaLight had only one customer, LG Electronics. Granted, it was one big customer, but still, all those eggs were in one basket. And when LG decided it no longer needed SpatiaLight’s product in March of last year, the basket of eggs fell off the table—along with the revenues.
While the company books were a mess, its roster also had its challenges. In November 2006, Olins resigned. He’d been with the company since 1998 and became acting CEO in 2000. In 2003, the title was made permanent, though at different times he was also corporate secretary, treasurer, principal financial and accounting officer and, occasionally, coffee maker. When Olins left, the press release announcing his resignation praised his accomplishments during his tenure with SpatiaLight. The normal read-between-the-lines dismissal of an executive that has been caught with a hand in the cookie jar is to announce the departure in two sentences with the ubiquitous phrase “he’s leaving to pursue other opportunities.” But the company had to know something of his insider trading, failure to register stock and use of forged audit materials; after all, it was the company’s stock. For the record, SpatiaLight denies any wrongdoing.
The SEC maintains Olins was assigned the stock from Argyle Capital Management, a company that he owned. Argyle received several thousand shares of stock as a result of loans made to SpatiaLight. The trouble, as the SEC sees it, is that Olins allegedly sold stock based on inside information, as well as other violations of securities regulations. The federal agency also cited the company for its complicity, a charge the company denies.
When Olins left, the company elevated Don Suh from senior VP of marketing and sales to CEO. At the same time, the company appointed David Hakala as the chairman of the board, replacing Lawrence Matteson.
But Suh’s stay in the executive suite was short-lived—39 days to be exact. It seems Suh and the board of directors had different ideas on how to run the company. This is particularly interesting, since this was the same board that had hired him only a month before. Said a company spokesperson at the time, “It became clear there were differences between the board of directors and Mr. Suh regarding the implementation of corporate policy and procedure. For this reason, the board elected to replace him.”
If George Bush were here, he might say it was “the vision thing.” Hakala assumed the reins in time for the company Christmas party.
In March of last year, Director Herbert Ehrenthal was kicked to the curb after he sold shares of stock in violation of company policy. Seems Ehrenthal placed an order to sell his shares of stock on March 14. On March 16, shares of SpatiaLight dropped 27 percent after the company reported that LG had flown the coop and that the company had “serious liquidity concerns.” For Ehrenthal, it was the second time he’d gotten in trouble over selling company stock; the year before, he’d failed to report a sale.
By March, the value of the company’s stock had dropped below $1, and NASDAQ was threatening to drop its listing. This isn’t the kind of information a company wants when its fiscal standing is as deep as a mud puddle. But the company had a happy announcement on that very same day, as six different institutional investors agreed to pour $15.4 million into the troubled company.
Timing really is everything.
But the New Year brought a new turn of events for SpatiaLight. On January 3, the company filed for Chapter 7 protection as Hakala, Chief Technology Officer Michael Jin and board members Volkan Ozguz and Kathy Barnett all resigned. The SEC filing pertaining to the bankruptcy filing blamed the SEC lawsuit against SpatiaLight and Olins for the company’s failure. SpatiaLight maintains the government lawsuit is without merit and says it’s been unable to restructure its debt or obtain operating funding.
The thing is, $15.4 million doesn’t go as far as it used to. In a Sept. 2007 SEC filing, the company’s fiscal snapshot was all too clear. Its balance sheet showed almost $19 million in liabilities and just $5.4 million is assets.
On the upside, some very attractive office space is open at Hamilton Landing.
