Former Natural Convergence customer moves to delay sale

Published on the front page of the Ottawa Business Journal and on its website.
Sept. 8, 2009

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Sources say NCI’s last days included layoff announcement during forced vacation

A local former customer of insolvent telecom firm Natural Convergence Inc. has filed a notice of appeal to block the sale of NCI’s assets to Broadview Networks, according to receivership documents obtained by OBJ.

While there were no details as to the reasons for the notice of appeal, the first report of the receiver, PricewaterhouseCoopers, showed Ottawa-based BluArc Communications Inc. has asked that the receiving and vesting orders related to NCI’s sale of its flagship Silhouette voice-over-Internet protocol technology be stayed pending the outcome of BluArc’s appeal. BluArc did not return repeated calls.

Broadview had in early August agreed to buy NCI’s assets and intellectual property, including the Silhouette source and development code, following the announcement that NCI had gone into receivership. Broadview had said the acquisition would provide more control over the development of its Silhouette-based OfficeSuite solution, and noted the transaction would help the firm establish a local presence.

Terms of the agreement were not disclosed, but the documents said the sale would be “insufficient to cover the entire indebtedness” of roughly $1.87 million owed to NCI’s four secured creditors, all of whom had provided funding in three venture capital rounds.

MMV Financial Inc., NCI’s largest secured creditor, was listed as being owed $700,000, while BDC Capital Inc. was owed $550,000. As well, the document showed NCI owed Comerica Bank and Wesley Clover Corp. $315,000 and $300,000, respectively.

MMV and Wesley Clover did not return calls, while BDC and Comerica declined comment.

On top of those amounts, NCI was shown to be owing $606,654.07 to 90 unsecured creditors, with one of the largest being a $65,103.49 debt to Mitel Networks Corp.

The document also revealed that the assets related to Toronto-based Bell Canada spinoff NewStep Networks – which Natural Convergence just bought in June and which will also be transferred to Broadview should the sale go through – are worth approximately $1.03 million, while accounts receivable are valued at $621,539.

While the numbers are dismal, they may be just one part of several issues surrounding NCI’s demise: a source close to the company said the firm abruptly laid off 31 of its 40 staff on July 17, during a week when staff were supposed to be on mandatory vacation to help the company cut costs.

The source said during a company-wide meeting on that date, management informed staff that if they had not been called into a private meeting by that point, they should consider themselves immediately laid off with no prior notice, severance or commission cheques for those working on commission.

When contacted last week, NCI declined comment.

The company had previously refused to provide basic information to OBJ on the details of its receivership, including how many staff were affected, and had directed questions regarding the sale of its assets to Broadview.

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