NIR and Nacio, Part Two
Here's how Nacio figured into this picture. The engine group wanted to concentrate on engines and XBoards and obviously the data center group wanted to concentrate on the data center. Webber's group wanted to take the NIR burden off of Encompass so they agreed to sell Nacio to the data center group. The price would be basically taking over the NIR $4mil debt (which was primarily used for Nacio) and since Encompass having been the catalyst to grow Nacio into a nearly $5 million dollar annual gross income, wanted a small amount of equity in Nacio as well. Encompass' Nacio stock was placed in escrow with the Encompass attorney in anticipation of the NIR debt being either taken over or paid off by Nacio. Apparently Nacio did not have the backers it claimed and the sale was never consummated.
Once it was obvious that the Nacio group was not going to complete the transaction, Encompass asked for its Nacio stock back. . Since the data center was a fully secured SAS70 compliant building, it was easy for the data group to lock Encompass out of their own company. So, a legal battle began over the ownership of the data center. (Being that the Encompass attorney was also part of the data group (a conflict of interest) the court ended up barring him from representing Nacio against Encompass) In the meantime, they refused to provide any data center financials and Encompass was dropped to the “pink sheets” for “non-reporting.” Which, to me, pretty much indicates who the true owners were as the auditors would not complete filings without the Nacio financials (as they were part of the earlier Encompass SEC filings all along. So much for common sense!).
Just before the court action was to begin, the new “buyers” filed for bankruptcy protection. It took all this time in court to finally get back control of the data center by (get this) buying back their own company out of bankruptcy (forming a new company “Quadrant Data System, Inc”.) Of course in the meantime, the data center group basically raped Nacio for as much cash as they could (with some management salaries of as much as $20k per month.) Nacio went from more than $400K per month in revenue to about $200K per month. I guess like some tenants before being evicted, trashing the place before they are booted out must have seemed like a good idea. Maybe that's why Webber and Berardi aren't done with them yet.
While in bankruptcy, the “buyers” quit paying the data center lease, so the landlord went to State Court and the court ordered Encompass to pay just over $300K to the landlord, which they did (with some help from NIR, again). That paid the lease up until the end of this March. This was in addition to the $165K the landlord received as part of the down payment on the purchase. Since the landlord would not assign or renew the lease to Quadrant, they must relocate by the end of March. Then just last week the Federal Bankruptcy Trustee filed an injunction to prevent Quadrant from moving the data center assets claiming that they had not completed their initial down payment on the purchase agreement (the original $165K). I kid you not! The Federal Trustee has finally accepted that Quadrant (Encompass) did pay the payments as required and will now allow them to move (which is good since they have no lease and no right to stay past the paid up time frame.)
It gets better, the court that made up the payment figures miscalculated the amount of the lease and Encompass actually paid through the end of April. Last week, they went back to court to show that they had overpaid. The judge would make no ruling nor even admit the error. And of course the landlord will not return the $40K over-payment and took the legal position that it was the amount the court ordered Encompass (Quadrant) to pay.
In my opinion, it may not be worth the cost and effort to go back to a court systems that obviously doesn't care about fairness, responsibility or even simple math. Now you know the crap Webber and Berardi have had to put up with in our wonderful court system.
The last I heard, everything is moving forward, so hopefully we will see something about the move shortly.
Rotary Guy
