Scient Files Chapter 11, Sells Assets
Long-term obligations and a cash crunch push the interactive agency into bankruptcy and an eventual asset sale to SBI and Company.
Interactive and digital services firm Scient has filed for Chapter 11 bankruptcy protection and announced the sale of some assets and operations to SBI and Company, a professional services firm based in Salt Lake City.
The New York-based Scient, which consolidated operations here when it merged with digital services firm iXL of Atlanta, also said SBI had agreed to debtor-in-possession financing of $4.9 million as part of the asset sale.
The news helped explain why Nasdaq suspended trading in Scient’s shares earlier this morning. Its price was 7 cents after tumbling from Tuesday’s close of 37 cents, a drop of 81 percent.
Faced with a collapse in dot-com clients and interactive engagements during the past two years, Scient, like other consultancy shops, has been struggling to survive by merging and holding down costs.
It also tried inputting a reverse stock split in order to boost its stock price and avoid a Nasdaq delisting. But cash burn was the biggest issue.
At the end of last year, for example, Scient listed about $62.3 million in cash and cash equivalents on hand. By the end of March of this year, that amount had dwindled to $10.9 million.
Revenues for the first quarter were about $21.7 million but short term liabilities, including accounts payable, were $33.8 million.
Long-term debt and obligations brought its liabilities to $46.1 million. The firm’s net loss for the quarter was $5.3 million.
The companies said they would present the proposed purchase to a U.S. Bankruptcy Court for approval as part of Scient’s plan to continue operations while it works out the asset sale with SBI. Once the sale is finalized, Scient will cease to operate as a separate company and the assets will be integrated into SBI and Company.
In discussing the announcement, Bob Howe, Scient’s chairman said: “If you take away the burden of our long-term financial obligations, Scient is a very experienced and extremely capable organization with enduring relationships with top-tier clients.” Both Scient and SBI have similar approaches to business, he said.
Added Ned Stringham, president and CEO of SBI and Company: “We welcome Scient’s people and clients to SBI.”
