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Tuesday, March 15, 2011

WorldGate CEO and CFO resign amid cash squeeze

Video-phone maker WorldGate Communications Inc. is once again facing a cash crunch and has responded by beginning to cut its workforce by 65 percent.

In addition, its chief executive officer and chief financial officer have both resigned as WorldGate’s board of directors considers a wide range of options, including a possible sale, financial reorganization, or even ceasing operations.

The Trevose company said it would lay off 28 employees as a result of its “previously announced liquidity issues,” according to a filing Monday with the Securities and Exchange Commission.

Those liquidity issues came to light only in a regulatory document filed before the stock market had opened Monday.

WorldGate said that it had made a request to its largest shareholder, WGI Investor L.L.C., for funds under a $7 million revolving-loan agreement between WorldGate and WGI. That request was turned down on March 8, the SEC filing states.

In addition, WorldGate’s biggest customer for its Ojo video phones, ACN Digital Phone Service L.L.C., told WorldGate that it intended to revise downward its original agreement to buy 300,000 phones. Concord, N.C.-based ACN, a direct seller of telecommunications services, had rescued WorldGate from a liquidity crisis back in 2009.

The privately held ACN has not specified how much it will reduce its purchase order, WorldGate said.

After closing Friday unchanged at 21 cents per share, WorldGate shares plunged Monday by 60 percent, or 12.5 cents, to close at 8.5 cents as 3.34 million shares traded hands — 23 times the average daily volume for the last year.

In a separate disclosure filed with the SEC after the market had closed, WorldGate said CEO George E. Daddis Jr. had resigned as of Friday. Daddis had run the company since Aug. 3, 2009, as the successor to founder Harold M. Krisbergh.

Also resigning was James G. Dole, the company’s chief financial officer, effective Sunday. Dole, a former executive with EarthLink Inc., had been CFO only since July 13.

Their departures leave general counsel Christopher V. Vitale in charge of a company that has overcome many technology hurdles since its founding in 1996. But the unprofitable WorldGate has been chronically short of cash for many of those years.

WorldGate, a survivor of the dot-com bubble a decade ago, has not released financial results for 2010. As of Sept. 30, the company had $1.1 million in cash on its balance sheet. It had lost $9.8 million on net revenues of $12.2 million for the first nine months of 2010.

Earnings

  • Tuesday: ProPhase Labs
  • Wednesday: StoneMor Partners
  • Thursday: Met-Pro
  • Friday: NuPathe.
Posted by Mike Armstrong @ 11:53 AM  Permalink | File Under: Small Business | | Technology | Post a comment
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About Mike Armstrong
Mike Armstrong, a business editor and writer for nearly two decades, is the Inquirer's business columnist and PhillyInc blog editor. Contact Mike via e-mail or at 215-854-2980
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