This week I started a new assignment at CEO at AtlasTG, a worldwide 24 by 7 applications support company with offices in New Zealand, Malta, and Redmond,WA.
See the Press Release.
If you need applications / IT support give me a call.
Ralph B. Muse
CEO
Atlas Technology Group, Inc.
2001- 152nd Ave. NE
Redmond, WA 98052
Cell: 972-352-3919
Office: 425-458-2360
Office: 866-285-7600
My son Alexander Muse is hosting a regular ’startup happy hour’ every other week (starting July 7th) The idea is fairly simple, get entrepreneurial people together on a regular basis to facilitate the creation of a vibrant ’startup community’ here in Dallas.
The event is completely free (i.e. no one is going to make money, EVER) and is being sponsored by SpringStage (the startup blog network that owns the Texas Startup Blog).
The first event was held at the Ritz last week (between 16-25 people attended), Alexander has decided to move the happy hour to The High Tech Bar in the INFOMART (I35 and Oaklawn). Here are the details:
Event: Startup Happy Hour
Place: High Tech Bar at the INFOMART (I-35 and Oaklawn)
Date: Monday, July 7, 2008
Time: 5PM - 8PM (drinks are free from 5PM-6PM)
Host: Alexander Muse, Scott Ryan and Brad Merritt
For more information or to RSVP:
http://www.texasstartupblog.com/2008/06/23/announcing-springstage-startup-happy-hour-dallas/
My newest client is Melmedtronics Inc. , a very exciting medical device company. Check out the full story on Texas Startup Blog.
Dr. Holmes the founder and Justin Farrelly check out the new transducer production.
Several months ago I accepted a Board of Directors position at Intelli-Pharma Services, Inc. (IPS). One of the most interesting aspects of IPS is the unique way of funding a startup. Instead of selling stock to investors, who then can only see a return if the company is purchased or has an IPO, they are offering interest in ISI Royalty Venture Investments I, LLC. This LLC will own the right to the IP in the Pharmaceutical market, and the LLC will be paid a royalty (monthly) of 25% of the revenue produced by these products until the investors have received 225% of their investment. The investors will start receiving monthly royalty checks starting in July. If IPS is acquired the investors will receive the full 225% at that time.
IPS, an emerging growth company, is essentially conducting a Series B round of financing to fund its entry into the marketplace. The equivalent of seed funding and A Round financing were provided by Intelli-Services, Inc. (ISI) (the parent company) in the form of direct financing and an exclusive OEM license to Intelli-Sys. IPS is an emerging growth company based on existing ISI processing and electronic content management (ECM) product technology.
If you would like to see the complete investment package please email me muse@museconsulting.com.
I had the great pleasure to work with my son, Alexander Muse and his team at Big in Japan, in an attempt to buy ATMDirect Inc. It is not that often that you get a chance to be a business partner with your son. Unfortunately we did not win (even though our bid was the highest). See my son’s Blog below.
Dissecting a Bankruptcy: ATMDirect
February 27, 2008
I thought it might be interesting to dissect a recent bankruptcy sale we were involved with. You might want to catch up by reading my post title, “Section 363 of the U.S. Bankruptcy Code“. Those of you who have been following Nicholas Carlson’s coverage of the Pay By Touch bankruptcy won’t be surprised that the company is running their Chapter 11 reorganization as well as they ran their business. Pay By Touch operated a business unit here in Dallas (Irving) called ATMDirect. Our team spent the past month conducting diligence on the business and ultimately participated in the auction to purchase ATMDirect last week.
The local ATMDirect people (both current and former employees) were very helpful and simply wanted to keep their business up and running. The Pay By Touch people (in general) were less than helpful and at every turn seemed to be erecting roadblocks. The creditors hired a company called FTI to sell off non-core assets like ATMDirect and to reorganize the core operations of the parent company Pay By Touch. FTI installed Thomas Lumsden as ‘Chief Restructuring Officer’ who, by looking at his CV, seems to be very qualified for the position.
After our first meeting with the local ATMDirect people I was certain we wanted to make an offer for the assets. Evidently Thomas had set a bid deadline, which failed attract even a single bid. I called him and offered to serve as the ‘stalking horse‘ so that an auction could be held. He suggested that he intended to draft his own asset purchase agreement (APA) and that he would be scheduling another auction in a couple of weeks. I suggested that it might be in the interest of the debtor to have one of the bidders (i.e. us) prepare the APA. Thomas didn’t agree and in a confusing twist became somewhat belligerent. Our subsequent communication was exclusively electronic, much of it rather silly.
Despite the fact that I was in contact with Thomas on a daily basis, we didn’t receive his APA until two business days prior to the deadline for bids. There simply wasn’t enough time to get our lawyers to review the document, circulate it to my team and complete it in time for submission to Pay By Touch. Some members of my team assumed this was by design (i.e. the conspiracy theorists in my group), while I simply assumed it was a matter of incompetence. This brings me to my thesis: ‘Bankruptcy is inherently chaotic and as a result creates real opportunity for anyone willing to endure the process’. Thomas’ sale process was broken and a result there was a good chance very few bidders would be willing to stay in the game resulting in a lower price.
We began digging into the business and we quickly realized that the asset value of the associated personal property (i.e. servers, networking equipment, computers and office equipment) was worth between $300,000 (quick and nasty sale) and $600,000 (current value based on recent ebay sales). Within two weeks we had a buyer willing to pay $475,000 for the equipment. With this information we began attempting to value the associated intellectual property (a lovely patent) ultimately finding an IP litigation boutique who suggested that (depending on the prosecution history) that they would buy litigation rights for the patent for $750,000 at a minimum. It wasn’t my intent to immediately liquidate the equipment or sell off the litigation rights of the patent, but these data points helped me understand the minimum value of the assets ($1.2MM). One interesting data point was that Pay By Touch had bought ATMDirect in 2006 for approximately $8MM ($4MM in cash and the remainder in debt/stock).
Working under my two assumptions a) the process was broken and b) the assets were worth $1.2MM I spent my weekend marking up the debtor provided APA. I settled on a total bid of $1MM ($250K in cash and $750K in a 24 month note). My business plan allowed us to attempt to execute on the underlying business (there were significant risk factors) for up-to 24 months and ensured that if the business failed we would break even (on a cash basis, obviously our time would be lost). We were prepared to bid as much as $750,000 cash plus up-to $500,000 in debt for a total bid of $1.5MM (risking around $700K in cash at this price).
The day of the auction arrived and two other bidders were present. After several hiccups on the teleconference Thomas explained to us that the prevailing bid was $1MM cash. This was more cash than I had wanted to bid and after a few moments of consideration I told him we weren’t interested in meeting the offer. I was disappointed, but I learned long ago not to bid on emotion. The two remaining bidders remained and Thomas terminate our connection to the conference bridge. To our shock and dismay on Monday we learned from the debtor that the prevailing bidder paid $600,000 cash for the business. The sale hearing had already occurred earlier in the day and as we had assumed Thomas had given us accurate information we had no reason to object to the sale. Had we known the sale went through at the $600K price we would have certainly objected to the sale.
This morning we discussed our options and instead of dragging the process out in court and objecting to the sale we have decided to move on as it is our understanding and belief that the prevailing buyer would have bid as much as $800,000 cash. This bid would have been higher than ours. The only damage seems to have been borne by the creditors. I am no expert, but within fourteen days I was able to secure buyers for key assets for a cash price of $1.2MM; however, after months of ‘marketing’ and tens of thousands of dollars in legal fees Thomas Lumsden was only able to recover half of that amount. What is wrong with this picture?
Everything, but at the end of the day the important thing to remember is that it is the very process that can create value for you as a buyer. Think about the motives of the parties involved. The seller (i.e. the debtor) is being run by employees who almost certainly don’t have a future with the company. How concerned are they going to be with their duty to obtain the highest and best price for the creditors? Not very. Ironically, according to insiders at Pay By Touch, in this case the creditors hired FTI to sell off assets and agreed to pay them a percentage of the sale price. Anyone would assume that Thomas Lumsden would be more than interested in getting the highest and best price for the assets. Again, in this case it was KEY that we understand the motives of everyone involved. For example, I couldn’t understand why Thomas wanted to draft the APA instead of having one of the bidders bear this cost. But it didn’t take long to figure out that, the costs associated with the process are not deducted from his firm’s commission. Secondly, by controlling the APA he was able to control the definitions, definitions that would dictate how much money he would make. Specifically, he defined the purchase price as not only the price paid by the buyer, but by the value of the ‘assumed liabilities’ (i.e. executory contracts such as the lease). Our fatal flaw was realizing this too late. In our APA we rejected almost all contracts of the seller (the most powerful feature of a 363 sale). We felt that we could negotiate new contracts on better terms. From Thomas’ point of view, $600,000 plus the assumed liabilities was more valuable to HIM than $1.5MM without the assuming liabilities. Of course, from the secured creditors perspective, the $1.5MM would have been far more valuable as the assumed liabilities would have never come into play (i.e. none of them were secured).
Turns out the creditors are VERY aware that their interests aren’t being protected. Just last week according to Nicholas Carlson, “On Friday, a party of creditors filed a restraining order with a court in Los Angeles to prevent management from “shutting down the operations of Pay By Touch Payment Solutions”– its main business.”
By Alexander Muse
In September I started an assignment as an Interim CEO (half time) for a small ($16 Million revenue) public company. Well half time running a small public company turned out to be full time work at half time pay. In addition, it is very clear to me that with SOX it does not make sense to be public unless the company has revenues of at least $200 to $300 million. See Press Release below.
DALLAS—December 28, 2007 (BUSINESS WIRE)—Ralph Muse resigned as interim CEO of Safeguard Security Holdings, Inc. (OTC:SSHS - News), a security staffing acquisition holding. Mr. Muse, CEO of Muse Consulting an interim management and consulting firm in Dallas, TX was hired in Sept. to improve operational efficiencies and return the company to a positive level of net profit from operations. Mr. Muse said “The Company now has positive net profits from operations and revenues in the $15 to $18 million range, it is now time for a permanent CEO. Michael Lagow has been elected acting CEO”.
Mr. Muse has also resigned from the Board of Directors.
I have accepted a board position and the interim President and CEO role at Safeguard Security Holdings INC. in Dallas. The plan was for this assignment to take a bout 50% of my time, so far about 150%. See press release below.
DALLAS–(BUSINESS WIRE)–Safeguard Security Holdings, Inc. (OTC:SSHS), a security staffing acquisition holding company announces the election of Ralph B. Muse as the company’s Chief Executive Officer and Dr. Dean Cubley as Chairman of the Board of Directors.
Ralph Muse is a senior level executive with extensive technology management experience, expertise in general management, manufacturing, and multinational sales / marketing, and operations. Mr. Muse is a former Principal Consultant with Booz•Allen & Hamilton with extensive background in wireless data, networking, systems, electronics, energy, and consulting, with industry leaders including GE, ABB, Exxon and du Pont. In addition Mr. Muse has served as the CEO, COO, or GM of three high tech venture backed startup companies and two high tech manufacturing public companies. Mr. Muse has raised a total of over $1.1 billion in equity financing.
Dr. H. Dean Cubley has served as a Chairman of ERF Wireless, Inc. since 2004. In addition, he has served as CEO of ERF Wireless since 2006. Previous to ERF Wireless Dr. Cubley was the founder, Chairman and CEO of Eagle Broadband from 1996 until 2003. Dr. Cubley has also founded more than twenty companies since resigning from NASA in 1984 after twenty years as a NASA engineer and manager at the Johnson Space Center in Houston Texas. While at NASA, Dr. Cubley served as the Antenna Subsystem Manager for all manned spacecraft and worked on Gemini, Apollo, Space Station, and Shuttle Programs. Dr. Cubley holds a Ph.D. in electrical engineering from the University of Houston and B. S. and M. S. in electrical engineering from the University of Texas at Austin.
About Safeguard. (www.safeguardsecurityholdings.com)
We are an acquisition holding company, engaged in the business of acquiring privately-held security companies. We provide security staffing as well as sophisticated security systems to Fortune 500 and regional companies. We believe that by joining the Safeguard family of companies, these locally based companies will be better positioned to service larger clients. In addition, they will have an enhanced menu of security services to offer their customers. We do this by determining the right mix of technical systems and security personnel and integrating them under one security solution.
Forward Looking Statements:
Statements which are not historical facts contained in this release are forward looking statements, such as “immediately accretive” that involve risks and uncertainties, including but not limited to, the effect of economic conditions, the impact of competition, the results of financing efforts, changes in consumers’ preferences and trends. The words “estimate,” “possible,” and “seeking” and similar expressions identify forward-looking statements, which speak only to the date the statement was made. The Company undertakes no obligation to publicly update or revise any forward-looking statements, because of new information, future events, or otherwise. Future events and actual results may differ materially from those set forth herein, contemplated by, or underlying the forward looking statements.
© 2007 Safeguard Security Holdings, Inc. The information herein is subject to change without notice. Safeguard shall not be liable for technical or editorial errors or omissions contained herein.
I have just completed a little over two years at Input Output Inc. My last position at I/O was as SR VP and GM of the Land Imaging Systems Division (LISD), where we grew the business over 100% in about 18 months. While GM of LISD I completely replaced the management staff (VPs etc.), without having to let any employees go (nice for a change). They now have one of the strongest teams I have ever managed. I look for them to continue to increase market share and profit margins.
The best part is that I am no longer commuting to Houston each week from Dallas, and I get to take a break from globe hopping (for a while). I already have consulting projects underway in the DFW area and am talking to several companies in regard to board position.
Hopefully I can now find more time to keep up the Muse Consulting Blog.
Last stop Dubai
The Burj Dubai, 119 stories so far. Soon to be the worlds tallest building.
Dubai is a truly unusual place. There must be a hundred high-rise buildings under construction. The airport is first class and looks brand new (they are building a new one about ten time larger!).
Our operation in Dubai where we are doing final commissioning and customer inspections for our Indian customers.
What a trip! I am really glad to be home.
Yesterday we met with the Director of our largest customer to discuss the delivery and support for their $60+ Million order. Sorry no photos, just not appropriate.
Today we are meeting with our joint venture manufacturing partner here in New Delhi. Nothing like china, you notice several things right away. In China almost the entire workforce were young girl, in India almost entirely young men. In China machines made by the company (frequently copies of US or European machines), in India all purchased machines from the US or Europe.
Cable Manufacturing
Cable extuder
We did see several women out of a staff of over 200.
Laying out cable for measurements.
