Executive Suite: UStel Inc. Reports Restructuring; Management and Board Changes – Company Operations
UStel Inc. announced Monday that it has undertaken a restructuring of its management and Board of Directors in connection with an aggressive program to reduce its overall cost of operations.
The Company reported that it will not meet its goal of achieving profitability in its quarter ending September 30, 1998 because the pace of implementation of the integration of the operations of the Company with Arcada Communications has not proceeded as quickly as planned and anticipated overhead reductions and line cost savings have yet to be realized.
Robert L. B. Diener, Chief Executive Officer, and Frank J. Bonadio, President and Chief Operating Officer, will no longer serve in those capacities, effective immediately. Both Diener and Bonadio will remain as members of the Company’s Board of Directors. Carl Jelovich has been named Interim Chief Operating Officer.
It is the Company’s intent to combine the offices of Chief Executive Officer and Chief Operating Officer and it has commenced a search for a candidate to serve in this capacity on a permanent basis.
Keith Leppaluoto has been removed from the Board of Directors and James S. Cassel has been appointed in his place.
The Company has been advised by Keith Leppaluoto that he believes that he was wrongfully removed from the Board of Directors and that the Company is in default of a promissory note obligation to him in the amount of approximately $520,000.
Cassel and Anne Ehringer, Ph.D., have formed an Independent Committee of the Board of Directors which has been granted a broad mandate to investigate the financial situation of the Company and oversee its restructuring. In addition, the Independent Committee has retained independent counsel and forensic auditors to carefully review all aspects of the Company’s acquisition of Arcada Communications.
In this regard, the Company will not be filing on a timely basis its amended Form 8-K containing financials reflecting the acquisition of Arcada Communications because it has not yet completed its review of the Arcada financial statements.
The Board of Directors of the Company, in conjunction with its financial and management consultants, is carefully evaluating the current operations of the Company with a view to implementing immediate cost reductions consistent with achieving profitability at the earliest possible time while maintaining the Company’s previously announced strategy.
In connection with this evaluation, the Company announced that it is undertaking a consolidation of its operations, closing of certain offices and a substantial reduction in force. While certain action has already been effected, this process will be ongoing.
Separately, the Company has advised its lenders that it is not in compliance with certain covenants of its lending agreements, principally relating to maintenance of specified levels of liquidity. The aforementioned actions of the Independent Committee are being carried out in close coordination with the Company’s lenders.
The Company also received notification from NASDAQ on Aug. 31, 1998 that it is not in compliance with NASDAQ’s requirements for continued listing on the NASDAQ SmallCap Market and that consequently it is necessary to review the Company’s eligibility for continued listing. The Company has been requested to provide NASDAQ with a proposal for achieving such compliance by Sept. 15, 1998.
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