Updated: 9:58 p.m. Tuesday, Jan. 19, 2010 | Posted: 10:30 a.m. Tuesday, Jan. 19, 2010

Qbase to get $5 million investment, reorganize

Statement shows Qbase 'well beyond payment terms to more than 50' suppliers and subcontractors.

By Thomas Gnau

Staff Writer

At least part of the future of Qbase Inc. may lie in the nation’s capital, a proxy statement to Qbase shareholders says.

Shareholders of Qbase Inc. are planning a special meeting in Beavercreek Wednesday, Jan. 20, to discuss a reorganization of the company — and a $5 million investment into the company by a group of outside investors.

According to a company proxy statement obtained by the Dayton Daily News Tuesday, $1.3 million of that investment already has been advanced.

A proxy statement to Qbase shareholders outlining the meeting identifies Steve Baldwin — former chief executive of a Northern Virginia information technology company, Apptis Inc.— and his partners as new investors in the firm.

In three years, Qbase has built a base of more than 500 clients, the proxy says.

However, it adds, “Qbase has not had the capital to establish offices and attract the right kind of senior business development talent in Washington, D.C. Qbase needs executives based in the Washington D.C. area with the right experience, skills and relationships to leverage fully its technologies and to take advantage of testimonials and advocacy from its first government clients.”

The statement also shows that Qbase is suffering financially.

“Qbase is well beyond payment terms to more than 50 of its suppliers and subcontractors and several have threatened legal action due to non-payment,” the statement says.

Qbase, with offices in Beavercreek and Springfield, offers government and nonprofit customers services to help them make their data more useful or better organized. The firm also offers IT services.

The statement says revenues from nonprofits and commercial customers fell by a total of 78 percent between July and November 2008 compared to the same period in 2009. Also cited were delays in the start of major government contract awards and a seize-up in credit markets.

The statement also says Qbase cut monthly expenses by 70 percent from December 2008 until January 2010.

“The single largest area of expense reduction and change came from reductions in staff overall and by hiring new, different staff in order to fulfill government contracts,” the document says.

The proxy statement also identifies how investors will be regarded in the reorganized company.

• New investors will receive Series A ownership shares or units of holdings in the company, the proxy says.

• Beavercreek developers Bob Mills and Sam Morgan have together loaned about $5 million to Qbase, $3 million of which was expected to be repaid in a future capital raise, the proxy said. Instead, both investors shall convert the amount loaned into Series B shares.

•The Turner Foundation, of Springfield, will assume about $1.2 million of debt to Fifth Third Bank, in return for Series C shares of ownership.

• Since 2008, Qbase executives have deferred about $500,000 in compensation to reduce cash requirements, the document says. All such claims for back wages “shall be forgiven,” the proxy says. And another $443,420 loaned by executives to the company shall be converted to Series D shares, the proxy says.

The document also says Bill Pardue, Qbase chief executive and founder, and Tom Shoup, Qbase president, will enter into 12-month employment agreements with the company following the reorganization. Other senior executives to continue to work for the newly organized company for a year include Paul Kesaris, Scott Lightner and Franz Weckesser, the document says.

Baldwin was part of a team that bought Intellisys Technology Corp. in 1998. The firm’s name was changed to PlanetGov. In 2003, Baldwin expanded PlanetGov’s place within the IT and health care arenas and by 2005, the newly named Apptis was seeing gross revenues of $700 million, with 1,500 employees in 40 states and six global offices.

Apptis customers included the Department of Defense, Department of Homeland Security, State Department, Federal Aviation Administration and the Washington Redskins, the company said in 2004.

Baldwin left Apptis in March 2007, with the company saying little about the departure.

The proxy statement says Pardue approached Baldwin after discussions with institutional investors. Pardue has declined to comment publicly in recent months about the state of the company.

The statement said Baldwin and three of his business partners — former colleagues at Apptis — were exploring “acquisition of a platform firm” to reenter the federal government IT market.

The proxy statement recommends that Qbase shareholders vote for reorganization of the company. The vote is to be held at company offices on Commons Boulevard Wednesday morning, according to the statement.

Baldwin could not be immediately reached Tuesday morning. A message was left with an assistant of Mills, also a Qbase director.

Late last year, a former executive with the firm, Joanne Barnard, sued Qbase, alleging that it failed to abide by the terms of its shareholder agreement. The company filed its own counter claims against Barnard, who has declined to publicly comment.

After Qbase’s founding in 2005, the Turner Foundation of Springfield gave the company $4 million, Pardue has said. Springfield city government supported the new company with $500,000. Greene County was an early supporter with $60,000.

In June 2008, Ohio government loaned Qbase $2 million. The loan is to be repaid fully in six years, and as of Jan. 11, the company had repaid $483,038.29, according to the Ohio Department of Development.

The state has also given the company $1.3 million in job creation tax credits, and $200,000 for equipment and machinery as well as $100,000 for workforce training.

Contact this reporter at (937) 225-2390 or tgnau@DaytonDailyNews.com.


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