Editor’s Note: This is an update version of the story, which originally appeared online at noon Jan. 29. Comments Friday morning from Back9’s attorney have also been added.
Hartford’s Back9Network is trying to raise a “significant” amount of capital to keep its doors open and if a deal is reached it could mean a change in the company’s ownership, a source familiar with the golf-lifestyle network told Hartford Business Journal.
Back9’s board and management have been working tirelessly in recent weeks to develop a restructuring plan, which included laying off 41 percent of its workforce to cut costs. Now the company is searching for a significant capital infusion, the source said, which could come from individuals or business investors.
It’s not clear how much money the company needs, but Back9Network has already raised about $35 million to $37 million, which is a significant sum for a startup company. Back9Network is searching regionally and nationwide for new capital partners, said the source, who was not authorized by the company to speak on the record. The source would not say if a deal is likely or not, but any investment could result in a change in the company’s ownership, so a potential buyout is an option.
The money would help keep the operation running and try to get the network in front of more viewers, the source said. In June, Back9Network signed its first TV deal with DirecTV and their programming has been on-air since September. But to reach a wider audience and attract more advertising revenue, Back9Network has been trying to strike deals with other TV providers, which has proved challenging.
Meantime, the company has also scaled back production at its Constitution Plaza studio to save costs, the source said.
In recent weeks Back9 has faced multiple issues. It delayed some payroll payments in early January, and then announced a restructuring plan Monday that included laying off 35 full-time employees. The company still has 50 full-time staffers in Hartford.
On Monday, the golf lifestyle network’s CEO Charles Cox said the layoffs and restructuring plans were part of “a thoughtful strategy that will allow the network to remain competitive and produce engaging content while growing the golf lifestyle.”
The company has received loans from the state Department of Economic and Community Development totaling $5 million, as well as a $100,000 grant.
A $4.75 million manufacturing assistance act loan awarded in Aug. 2012 required that Back9 retain 10 jobs and create another 40 by the end of 2014.
Bosworth’s attorney responds harshly to Back9 suit
Back9Network this month also filed suit against its former CEO James Bosworth, accusing him of disparaging the company and disclosing financial secrets, in breach of his separation agreement. The suit, filed Dec. 22, alleges that Bosworth “wantonly” breached the terms of a July 30 agreement — under which he was paid an undisclosed separation payment and his salary through Sept. 15 — by disparaging the golf lifestyle network to existing and potential investors.
Bosworth, who founded the company, resigned suddenly in August.
The suit claims that Bosworth’s misconduct intensified in December, when he allegedly sent “a rash of text messages” to board members and existing and potential investors that disparaged the company’s management, programming, brand and creative plan.
Bosworth also told employees and investors that two Back9 department heads were dangerous and sent texts to management threatening to call the authorities if the department heads weren’t fired, according to the complaint, which described the texts as “unhinged.”
Late Thursday, Bosworth’s attorney fired back at the company, alleging that Back9’s lawsuit is a diversionary tactic to shift blame from the management failures of Chairman Sandy Cloud.
The filing from Hartford attorney Paul H. McConnell alleges that under Cloud’s leadership, the company failed to raise the amount of capital it had promised to investors, and now appears to not have enough money to pay Bosworth what he is owed under a separation agreement signed last year.
The memorandum alleges that Cloud seized leadership of the company after the board forced Bosworth last June to take a three-month medical leave, due to an Atrial Fibrillation diagnosis.
Bosworth alleges that 40 days into that leave, Cloud pressured him to resign, saying he had $10 million in capital lined up for Back9, conditioned on his departure.
Reeling from a recent divorce filing by his wife, Bosworth agreed, the document says, and signed a separation agreement in July that called for him to be paid $390,000 as soon as Back9 closed a $10 million investment round. But Bosworth alleges that the company was never able to raise that money.
Bosworth’s attorney is asking a judge to stay the lawsuit and refer it to arbitration.
“The debate about the direction of the company belongs in the boardroom – not a public courtroom,” the document says.
Cloud referred all comment to attorney Joshua Berman of New York firm Troutman Sanders.
Berman said Friday that he could not comment on the litigation or the confidential terms of Bosworth’s separation agreement.
But he characterized the statements about Cloud as “wholly inaccurate and incorrect.”
“In his capacity as chairman of Back9, Mr. Cloud has at all times guided the company with the utmost skill, professionalism and integrity,” Berman said. “Back9 continues to strive to provide outstanding programming to all of its viewers in Hartford and around the country.”
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