QPC on the brink as crunch bites

In between, QPC parted with its vice-president of finance, Blima Tuller, as well as vice-president of sales and marketing, Paul Rudy, and terminated the contracts of what the company described as "a majority of its employees".

When contacted by compoundsemiconductor.net on October 21, a spokesperson confirmed that QPC's workforce had been cut from 60 to approximately 20 employees in the past few days.

No further announcements from QPC are expected until October 23, at the earliest, the spokesperson added.

Amid the backdrop of the global financial crisis, QPC has desperately tried to raise more funding and restructure its hefty debt. It now appears to be running out of time, saying that unless it can secure a significant injection of capital within the next few days, it will enter so-called "Chapter 7" federal bankruptcy proceedings.

QPC's financial predicament appears both complex and damaging. And although the firm’s CEO, Jeffery Ungar, has stated publicly that QPC has an order pipeline showing more than $14 million in signed contracts, that does not appear to have been enough to convince potential investors to save the company – yet.

The firm posted sales of only $1.3 million in the quarter that ended June 30, while the high cost of research and development efforts contributed to an overall net loss of $4.7 million.

Servicing these ongoing losses has resulted in a tangle of financing deals that QPC has agreed since landing its first round of equity funding from fellow laser diode maker Finisar back in August 2001. Those loans are now maturing in a labyrinthine set of repayments secured on QPC's assets and intellectual property.

QPC currently owes more than $25 million, and is obliged to pay out nearly $6 million during 2009 to service that debt.

Among myriad debenture deals, note transactions and embedded derivative agreements signed over the past few years, QPC also has a number of more straightforward loans on its books, albeit with punitive interest repayments.

These include a $7 million loan accruing interest at 10% per annum, and whose balance is due to be paid in full in April 2009, plus a separate $9.8 million loan requiring settlement just a month later.

Back in February 2007, QPC also agreed a $0.5 million sale and leaseback deal on certain manufacturing equipment with a finance company in Boston, charged at an interest rate of 33.65% per annum.

Despite all that, QPC said in its latest filing to the US Securities and Exchange Commission (SEC), dated October 20, that it was engaged in discussions with customers and investors with a view to restructuring that debt, and it resumed limited operations the same day.

If these discussions are successful, QPC will live to fight another day. If not, the credit crunch looks certain to claim another victim.