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SKS Consulting Interim Executives, Capital Stabilization, and Turnaround Management SKS Consulting Services List •Turnaround Management •Divestitures •Interim Executives •Board of Directors Assignments •Capital Stabilization Initiatives •Financial Analysis •Management Consulting •Onsite Business Assessment •Strategic Planning •Management & Board Review •FTE & Expense Reduction •Public Company CFO services Page 2 Our Business Philosophy • SKS Consulting focuses on aligning our interests with shareholders and the Board of Directors to maximize value. • Each client’s circumstances are unique. We ‘custom design’ the most cost effective utilization of our in house skill sets to deliver optimal results. • Our compensation structure is designed to: • Offer a competitive daily fee structure • Provide long term rewards by equity participation in the success of the enterprise based upon the work that we perform. • We do not only “write reports”. We roll up our sleeves and work side by side with our clients management teams. We prefer to share the risk and reward. Page 3 SKS Interim Executives SKS offers our consultants’ expertise for short-term assignments to help manage organizations on a temporary basis. Our consultants are qualified to fill all C level and senior management positions to provide flexibility and custom fit our clients’ strategic plans. Typical Assignments: •Board Director •CEO •President •COO •CFO •General Manager •Chief Restructuring Officer •Chief Marketing /Sales Officer •Controller Page 4 SKS’s Business Cycle SKS’s typical entry points Growth & Exit Performing Relative Value Corporate renewal/ Turnaround Underperformance Sale & Asset Recovery Viability and investment decision Relative Time Horizon Strategic & Operational Advisory Services Provide performing companies with guidance so as to increase financial and operational efficiency Page 5 Business Assessment Comprehensive assessment of a business to justify new/further investments. Focus on risk/return and exit strategy (mode & timing) Corporate Renewal Services Lead the implementation of turnaround efforts : • Crisis & interim mgmt • Operational & financial restructuring • Strategic planning & growth Exit/Asset Recovery Services Facilitate successful exit as a result of successful turnaround or quick sale of assets if decision not to invest further The Turnaround Process Situation Assessment Key Activities: • Financial Analysis • Conduct executive mgmt & board interviews • Report findings Deliverables: • Complete Assessment Report • “This is what I would do if it was my company…” Timeframe: • 2-4 days Page 6 Re-organization Key Activities: • Execute reorganization activities focused on stopping the burn rate and stabilizing the company: FTE and expense reductions Deliverables: • Successful organizational restructuring Timeframe: • 30 days Strategic Planning Key Activities: • Develop strategic plan • Develop execution plan • Structure Latent Intellectual Capital Assets Deliverables: • MYRNA session and outputs Timeframe: • 2 days Initial session • 1 day quarterly follow-ups Execute Strategic Plan Key Activities: • Execute focused initiatives outlined in strategic plan (growth/sale/merger etc.) Deliverables: • Acting C Level • Transactions – buy/sell • Capital stabilization • Hire full-time mgmt team • IP Portfolio / Strategy Timeframe: • 12-24 months The Assessment Product SKS offers a standalone assessment product to provide our clients an accurate understanding of an organization’s current operational and financial state by performing a thorough due diligence. Upon completion of our review, we provide our clients with an extensive analysis outlining the companies strategic position. Our assessment will provide a bottom line recommendation that helps our clients make better informed decisions. In all cases, we offer our professional opinion regarding the viability for future investment, whether or not we can help facilitate a re-organization, or if we can assist in executing a controlled exit strategy. • • • • Two week process (4 days on site) Interview of board members, senior management, & operational management Thorough review of financial statements, operational processes, sales strategy, business plan assessment, and capital spending review Examination of business practices and cultural conditions Page 7 Assessment – Key Work Flows Executive Interviews Objective: obtain key executives’ thoughts on “what immediate changes they would make if it were their company” • Private, individual interviews with leadership team and board members and other key executives • ABC analysis – best and worst performers; are individuals in the right positions? • Organizational structure analysis - gaps and redundancies • Performance and compensation structure Page 8 Financial Statement Analysis Objective: Understand current financial situation and identify opportunities for immediate improvements • Operating structure – burn rate • Key financial metrics • Capital structure • Balance sheet analysis Business Plan Assessment Objective: Review viability of business plans in the context of the market and competitive landscape. Develop valuation estimates of the investment opportunity • Sizing the market and competitive landscape • Key revenue and cost assumptions • SG&A assumptions • R&D assumptions • Business development initiatives • Valuation assumptions – comparable deals, DCF analysis Develop Recommendations Objective: Develop robust recommendations on areas for improvement and provide assessment and our recommendations • SWOT analysis to include: • Organizational restructuring • Recommended operational and financial restructuring initiatives • Sales & marketing recommendations • Valuation Scenarios based on comparables and DCF analysis • Investment recommendation MYRNA - Strategic Planning • SKS Consulting facilitates on site strategic planning seminars for its clients through the efforts of MYRNA Associates, Inc. • We enlist the expertise of John Myrna and his team of professional strategic planning experts to develop the overall planning process to drive all functions in the client company towards a cohesive, measurable, and accountable action plan. • Success flows from the executive team's consensus and commitment to achieving a small number of goals through specific action plans. Myrna Associates' Total Quality Planning (TQP) process facilitates this happening. Myrna Associates can take total responsibility for pre-planning, meeting facilitation and the transcribing and printing of a company's plan. After completion of the intensive two-day meeting, managers will receive a final comprehensive plan for moving forward. • The deliverable from this session is a clear understanding of what each team member must accomplish in the next 30-60-90 days and how performance will be measured. Quarterly one day update meetings ensure we stay on target and allow for adjustments required by internal or external variants. Page 9 Board of Director Assignments • • SKS Consulting seeks to assist PIPE companies and Private Equity firms in managing their investments in an arms length fashion by assigning our consultants to the Board of Directors. Our consultants assist in managing firms from the Board of Directors level, while managing the interests of the investor so they can remain within SEC rules and regulations. Page 10 SKS’s Clients Include: • NeoGenomics – Bio Medical • Cellution – Telecom • Icoa - Telecom • Isonics – Semiconductor & Security • NeoMedia - Software • TelePlus World, Corp. - Telecom • • Southern Metal Products – Metal Fab • Mobil Pro Corp. – Telecom • PBMAI – Advertising Agency NS8 - Software • SmarTire - Automotive • Coroware – Robotics • FutureMedia – E-Learning and Exhibitions & Events • Falcon Natural Gas - Energy • ATSI - Telecom Page 11 • Naples Women’s Center – Physician Practice • BridgeLabs / eTeleNext – Medical Software • Ultra Life – Vitamin Manufacturer and Distributor The NeoGenomics Case Study Action Steps & Results Action Steps: Critical Issues • Approximately 500k in revenue • Poor leadership at the top • Management had unacceptable background for the genetics industry • 1.5 million LOC due in 6 months • Stock trading at $.10 per share 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Results: 1. 2. 3. 4. 5. 6. • Only 500 shares were trading a day Eliminated 8 out of 10 initial personnel Hired new President & management team Took interim positions as COO & CFO Restructured Board of Directors Raised $5 million through SEDA with investor Refinanced debt to eliminate call on LOC Started quarterly shareholder meetings Restructured balance sheet Bought out old investors at healthy profit Took seat on Board of Directors 7. 1st year growth – $500k to $2.5 million in rev. Total tenured growth – $500k to $20 million Stock price rose from $.10 to $2.10 per share Stock price currently $.75 per share Trading volume went from 500 to 125,000 per day Trading volume currently 25,000 shares per day Company is poised for strategic merger The Futuremedia Case Study Action Steps & Results Action Steps: Critical Issues Prior to SKS 1. 2. Sr. Mgmt. & Board chasing NASDAQ Listing Former CEO hired 5 finance directors in 18 months 3. Company overpaid for bad acquisitions 4. Revenues decreased 19% from prior year 5. Acquired company shut down after 6 months 6. Parent company treating newly acquired company poorly, creating un-repairable damage with clients and vendors 7. Clients, vendors, employees, & Investors expecting bankruptcy 8. Management used method of robbing one company to fund the other, weakening both 9. Management increased corporate over-head at a time when they were losing business 10. Management hired unqualified people externally, ignoring in-house talent that was more appropriate 11. Company had unclear & unbelievable strategy 1. Immediately eliminated CEO, and made 26 employees redundant to decrease burn rate 2. Took interim positions as President, CEO & Board Member 3. Initiated immediate 2 day strategic planning session 4. Separated business into two divisions, requiring them to stand on their own merits 5. Made two more rounds of redundancies to right size both divisions 6. Moved office locations& negotiated early termination of both leases 7. Focused sales efforts on “hero clients” 8. Company headcount reduced from 115 on 5/31/07 to 60 within 1 year right sizing the business 9. Eliminated old BOD and replaced with 3 new members 10. Moved from NASDAQ to OTCBB with seamless integration 11. Hired FD, Sales Managers & Strategic Development head 12. Sold underperforming division to focus on company’s core business and path to profitability Results: 1. Within three quarters achieved first EBITDA and cash flow positive quarter in over 5 years 2. EBITDA improvement of $10 million in 18 months 3. Reduced corporate overhead by $2.5 million 4. Move of offices created $500k per year in savings 5. Obtained shareholder approval for reverse split 6. Increased number of authorized shares to ensure company corrected default on covenants with institutional investors 7. After meeting milestones, secured $10 million in capital 8. Avoided bankruptcy, and finally stabilized stock price The NeoMedia Case Study Action Steps & Results Action Steps: Critical Issues Prior to SKS 1. Inability to commercialize patented technology 2. Flawed business plan, with no chance of success 3. Approximate burn rate of $800,000 per month 4. Sellers were promised cash top off if stock dropped below $.40 per share 5. Stock dropped to $.04 per share 6. Management had zero ability to execute or provide leadership or vision for the company 1. In first week, CEO, COO & Top Finance Consultant positions were eliminated 2. Immediately reduced corporate overhead by 50% 3. Terminated EVP of sales when it was determined he was working for another company concurrently 4. Negotiated that sellers take stock instead of cash top off and paid off remaining obligations 5. Focused strategic direction on core business 6. Divested three non-core business units 7. Focused on properly integrating IP technology 8. Started quarterly shareholder conference calls 9. Took COO, acting CEO, SVP of Sales and Board of Director seat s for first six months 10. After six months hired industry leader as CEO and replaced him within 12 months with more entrepreneurial CEO from a competitor in the business. Results: 1. 2. 3. 4. 5. Reduced burn rate from 800k to 400k per month Secured funding for new burn rate Augmented capital structure for optimal performance Raised $10 million for operations and seller obligations Divested business units and restructured debt for ROE of $8 million 6. Reduced full time employees from 92 to 40 7. Focused enterprise on core business and created U.S. Market 8. Completed new software product NEOREADER, and is currently being implemented in U.S. & Europe SKS Consulting Interim Executives, Capital Stabilization, and Turnaround Management